finance and operations procedures for mega

FINANCE AND OPERATIONS PROCEDURES
FOR MEGA MILLIONS
Effective March 1, 2012
TABLE OF CONTENTS
_______________________________________________________________________________
Section 1
Administrative Requirements
2
Section 2
Grand/Jackpot Prize Liability and Settlement
2
Section 3
Transfer of Cash Equivalent
3
Section 4
Purchase of Securities to Fund an Annuity Guarantee
Grand/Jackpot Prize
3
Section 5
Type of Investment
4
Section 6
Funding of Grand/Jackpot Prize
5
Section 7
Number and Length of Grand/Jackpot Prize Payments
6
Section 8
Prize Liability
7
Section 9
Payment of Prizes at Prize Levels Two through Nine
7
Section 10
Reporting and Reconciliation of Prize Liability
7
Section 11
Pari-Mutuel Treatment of Prizes Two through Five
9
Section 12
Claim Periods
10
Section 13
Unclaimed Prizes
10
Section 14
Grand/Jackpot Prize Estimation
11
Section 15
Ticket Validation
12
Section 16
Data Operations Processing Requirements
12
Party Lottery Approval and Signature
Appendices
2
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
I. Administrative Requirements
1.1
Operating Budget - An annual operating budget will be prepared by the Mega
Millions Finance Committee and approved by the member Directors for the payment
for goods and services connected with the multi-state lottery game commonly known
as Mega Millions. Such goods and services shall be shared equally by each of the
state lotteries participating in Mega Millions, (hereinafter referred to as "Party
Lotteries"), excluding the Multi-State Lottery Association (MUSL) members
participating in Mega Millions pursuant to the Cross Sell Agreement. Unless
otherwise specifically agreed to, shared expenses shall be paid by the Party Lottery
responsible for the oversight of the related goods and/or services, and then submitted
to the Designated Expense Processing State Lottery for inclusion in the operating
expense report and funds re-distribution. The Designated Expense Processing State
Lottery will be determined by a majority of the Party Lotteries including the
Designated Expense Processing State Lottery.
1.2
Audit Requirements - Mega Millions transactions, accounts and processes for each
respective Party Lottery and MUSL members participating in Mega Millions
pursuant to the Cross Sell Agreement will be verified, according to agreed upon
attestation standards established by the American Institute of Certified Public
Accountants, on an annual basis by an independent certified public accountant or the
State Auditor General or comparable office within each Lottery's jurisdiction. Each
Lottery is independently responsible for the cost of the reviews.
1.2.1. Party Lotteries that fully participate in the liability for all prize levels shall
perform full Agreed Upon Procedures reviews based on the procedures
endorsed by the Mega Millions Lead Director.
1.2.2. The California Lottery and members of the Multi-State Lottery Association
(MUSL) shall perform limited Agreed Upon Procedures reviews related to the
sharing of jackpot prize expense and related procedures endorsed by the
Mega Millions Lead Director.
1.3
Schedules - Reporting and investment deadlines set forth in this document refer to
Monday through Friday business operations. In the event that a Party Lottery or the
MUSL central administrative office is officially closed, during this period, deadlines
shall be appropriately extended. Except as otherwise provided herein, any reference
to "local time" refers to the local time of the MUSL central administrative office and
the Party Lottery responsible for performing any Mega Millions function, including,
but not limited to, providing prize liability and settlement information and winner
reports, and transferring funds for the purchase of securities and/or payment of
prizes. In the event that any cash transfer is scheduled to occur on a Saturday/Sunday
or a federal bank holiday, such transfer shall occur on the next business day.
2. Grand/Jackpot Prize Liability and Settlement
2.1
The liability to the group for all Grand/Jackpot Prizes will be determined on the first
business day following a drawing for which a Grand/Jackpot Prize winning ticket
was sold, and may be modified to reflect the results of a securities purchase pursuant
to Section 5. Settlement for the Grand/Jackpot Prize(s) will occur fourteen (14)
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
calendar days from the date of the drawing that produced the Grand/Jackpot Prize(s),
through the transfer of the cash equivalent of the annuitized Grand/Jackpot Prize
and/or through the purchase of United States Treasury securities as detailed in
Section 5 to fund the annuitized Grand/Jackpot Prize (hereinafter referred to as the
"Settlement Options"). After final settlement for a particular jackpot, no additional
funds related to the Grand/Jackpot Prize will be due from the Party Lotteries
(including MUSL, who will consolidate and distribute funds for its members
participating in Mega Millions pursuant to the Cross Sell Agreement) to the Party
Lottery(ies) (including MUSL, who will receive and subsequently distribute funds
for its members participating in Mega Millions pursuant to the Cross Sell Agreement)
which sold the Grand/Jackpot Prize winning Mega Millions Ticket(s).
2.2
Except for a $12 million (annuity value) jackpot drawing for which the annuity prize
is guaranteed, the liability to the group for any Grand/Jackpot prize winning ticket(s)
will be the cash equivalent of the estimated annuity jackpot. The cash equivalent will
be determined based on total cumulative sales for the jackpot roll and the final
annuity factor established by the Mega Millions Finance Committee for the drawing.
The cash equivalent amount will be based on the highest funded full million dollar
annuity value, determined by utilizing 31.80% of the cumulative sales for the jackpot
and the final annuity factor established by the Mega Millions Finance Committee for
the draw date.
3. Transfer of Cash Equivalent
Except for a $12 million (annuity value) jackpot drawing for which the annuity prize
is guaranteed, the Virginia Lottery will transfer the jackpot cash equivalent amount to
the selling Party Lottery(ies) fourteen (14) calendar days from the date of the
drawing that produced the winning Grand/Jackpot ticket(s), in full and final
settlement of the group's Grand/Jackpot Prize liability.
4. Purchase of Securities to Fund an Annuity Guarantee Grand/Jackpot Prize
4.1
The annuity guarantee only applies to the $12 million starting jackpot level. If only
one winning ticket is sold for the $12 million starting jackpot, the selling Party
Lottery (including MUSL members participating in Mega Millions pursuant to the
Cross Sell Agreement) may elect to purchase an annuity to support the guaranteed
annuity jackpot. Such election shall be communicated to the Virginia Lottery no later
than 10:30 a.m. local time on the first business day following the drawing that
produced the Annuity Guarantee Grand/Jackpot Prize. That Party Lottery (including
MUSL, on behalf of its members participating in Mega Millions pursuant to the
Cross Sell Agreement) shall have the first option of purchasing the government
securities, but may defer the purchase to another Party Lottery of its choice. The
Multi-State Lottery Association (MUSL) shall make the election on behalf of their
member lotteries. If the selling Party Lottery elects to receive the jackpot cash
equivalent for the $12 million starting jackpot, based on the annuity factor
established for the drawing, that Lottery accepts full financial responsibility in the
event that the winner elects to receive the guaranteed annuity prize.
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
4.2
In the event there are multiple Grand/Jackpot Prize winners for a $12 million starting
jackpot, from different states, and more than one Party Lottery (including MUSL
members participating in Mega Millions pursuant to the Cross Sell Agreement) elects
to purchase an annuity to support the guaranteed annuity jackpot, the Virginia
Lottery shall purchase the securities to fund the Grand/Jackpot Prizes, with separate
delivery instructions for each entity. In this situation, an entity electing an annuity
settlement may request an alternative purchasing arrangement, and the parties
involved will determine an agreeable arrangement for the purchase of securities at
that time.
4.3
For annuity Grand/Jackpot prize elections to support an annuity guarantee, a
preliminary settlement will be issued on the first business day following the drawing,
and a final settlement will be issued after the securities are purchased on a schedule
as described in Section 5.3.
5. Type of Investment
5.1
All Mega Millions annuitized Grand/Jackpot Prizes shall be funded solely through
the purchase of 100% U.S. Government STRIP bonds, noncallable principal and zero
coupons. This requirement is for both the annuity guarantee for the $12 million
jackpot level, and for any other jackpot level where the Grand/Jackpot prize claimant
elects to receive the Grand/Jackpot prize payable over time.
5.2
The Purchasing entity shall be responsible for procuring adequate securities to fund
the annuitized Grand/Jackpot Prize(s). The Purchasing entity shall conduct a
competitive bidding process involving a minimum of three primary brokerage firms
of its choice. Each entity having an annuity option Grand/Jackpot Prize winner shall
be responsible for placing the instruments in bank custody and distributing proceeds
to those winners in their state on their anniversary dates. The anniversary payments
shall coincide with federal bond auction dates and each annual payment shall be
made within seven (7) days of the auction date. The auction dates and payment dates
are as follows:
Draw Dates
January 1 - March 31
April 1 -June 30
July 1 - September 30
October 1 -December 31
5.3
Auction Dates
February 15
May 15
August 15
November 15
Payment Dates
February 22
May 22
August 22
November 22
If a Party Lottery selects the annuity Settlement Option pursuant to Section 4 hereof,
the purchase of securities shall take place prior to 10:30 a.m. local time, three
business days before the fourteenth calendar day after the date of the winning
drawing. Prior to 11:00 a.m. local time on that same day, the Purchasing Party
Lottery shall provide the results of said purchase to each of the other Party Lotteries,
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
including, but not limited to, i) the amount of securities purchased, ii) total prize
(securities plus first payment), iii) net cost of securities, iv) identity of winning
brokerage firm, and v) identity of the state(s) of securities delivery. The purchase
shall be made based on a T+3 settlement. (For example, for a Friday jackpot, the
purchase would be made on the 2nd Tuesday following a jackpot win with a T+3
settlement; for a Tuesday jackpot, the purchase would be made on the 2nd Thursday
following a jackpot win with a T+3 settlement.) Funds will be available in the
purchasing state or sales entity on T+3, in time to fully settle the bond purchase.
5.4
If a Grand/Jackpot prize winner in any Party Lottery (including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement) elects to
receive the grand/jackpot prize payable over time, then the Party Lottery shall
purchase securities specified in section 5.1, through a competitive purchase with a
minimum of three primary brokerage firms of its choice. The purchase shall be made
in accordance with the draw dates and auction dates as outlined in Section 5.2, and
with a T+3 settlement or shorter. The full cash equivalent prize shall be used to
purchase securities such that the total cost of securities purchased plus the first cash
payment total the full cash equivalent prize. Payments shall be as outlined in Section
7.
6. Funding of Grand/Jackpot Prize
6.1
(a) A central calculation will be performed, identifying each Party Lottery's share
(including MUSL, for consolidated results reported on behalf of its members
participating in Mega Millions pursuant to the Cross Sell Agreement) of the
Grand/Jackpot Prize based upon sales. Proceeds will then be forwarded to the
Virginia Lottery for consolidation of funds for purchase of securities or transfer of
the cash equivalent of the annuitized Grand/Jackpot Prize. All Party Lotteries
(including MUSL, on behalf of its members participating in Mega Millions pursuant
to the Cross Sell Agreement), except the entities with a share of the winning jackpot,
shall initiate a transfer of the necessary funds to the financial institution designated
by the Virginia Lottery by 12:00 p.m. Eastern Standard Time on the business day
falling thirteen (13) calendar days after the winning draw date.
(b)
The Virginia Lottery shall consolidate all funds and disburse to the bank(s) of the
entity(ies) (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) which sold the winning
Grand/Jackpot Prize Ticket(s) as soon as practicable on the business day falling
fourteen (14) calendar days after the date of the winning drawing. Delivery shall be
made based upon the instructions provided by each entity. For multiple winners, the
Virginia Lottery shall provide these instructions to the broker for the entity(ies)
affected by any purchase.
(c)
The entity(ies) (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) with a share of the winning jackpot
shall transfer its share of the Grand/Jackpot Prize amount directly to its account prior
to 3:00 p.m. Eastern Standard Time on the business day falling fourteen (14) calendar
days after the date of the winning drawing, in preparation for settlement. In multiple
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
winner situations, any share due another Party Lottery(ies) shall be forwarded to the
Virginia Lottery in accordance with 6.1(a) above.
(d) Securities delivery instructions shall be the responsibility of the Purchasing entity.
6.2
(a) Any Party Lottery (including MUSL, on behalf of its members participating in
Mega Millions pursuant to the Cross Sell Agreement) causing a shortfall in funds by
failing to meet the deadlines for transfers in 6.1.(c) above is obligated to advance its
share to the Virginia Lottery as soon as possible. The entity(ies) (including MUSL,
on behalf of its members participating in Mega Millions pursuant to the Cross Sell
Agreement) causing the shortfall will be liable for the following costs:
(1) The cost of funds and other charges charged to the entity(ies) (including
MUSL, on behalf of its members participating in Mega Millions pursuant to the
Cross Sell Agreement) who may authorize their custodian bank to honor an overdraft
to cover the delivery of securities.
(2) The cost of funds and other charges charged to the entity(ies) (including
MUSL, on behalf of its members participating in Mega Millions pursuant to the
Cross Sell Agreement) by the winning securities broker for delayed delivery.
(3) The additional cost to the Virginia Lottery in processing additional wires of late
funds.
(4) Any other out of pocket or miscellaneous costs incurred by the Virginia Lottery
or charged to The Mega Millions Cash bank account.
(b) Any service fees, not including any fees or cost of funds associated with
delayed delivery per 6.1.(c) above, incurred by the Virginia Lottery on the Virginia
Lottery clearing account may be offset by compensating balance credits. Excess
service fees shall be reported to the Designated Expense Processing State Lottery by
June 30 for inclusion in the operating expense reimbursement.
(c) The Virginia Lottery may invest funds in its Virginia clearing account in
overnight bank investments, if the funds are not disbursed immediately. Any Party
Lottery(ies) (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) delaying delivery of funds per 6.1.(c)
above will be charged the cost of funds equal to the rate of return on the received
funds for that specific funding requirement. Income from invested overnight funds
will be reported as of June 30 each year and transferred when all funds are received,
including those funds due from Party Lotteries (including MUSL, on behalf of its
members participating in Mega Millions pursuant to the Cross Sell Agreement) who
do not advance their funds pursuant to 6.1.(c) above.
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
7. Number and Length of Grand/Jackpot Prize Payments
7.1
Pursuant to rules in effect in any Party Lottery (including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement), a
Grand/Jackpot prize winner may elect to receive the grand/jackpot prize payable over
time. In this event, the Party Lottery (including MUSL, on behalf of its members
participating in Mega Millions pursuant to the Cross Sell Agreement) shall purchase
securities specified in section 5.1, through a competitive purchase with a minimum of
three primary brokerage firms of its choice. The purchase shall be made in
accordance with the draw dates and auction dates as outlined in Section 5.2, and with
a T+3 settlement or shorter. Except for a Guaranteed Annuity Grand/Jackpot Prize as
outlined in Section 4, in no event shall a Party Lottery (including MUSL members
and MUSL, on behalf of its members participating in Mega Millions) purchase
investments for an annuity option prize before both (i) a winning ticket is validated as
outlined in Section 15 and (ii) the winner completes the claim process and
irrevocably elects to receive the Grand/Jackpot Prize payable over time.
7.2
Annuitized Grand/Jackpot Prize amounts shall be paid in twenty-six (26) annual
installments, with the first payment being made as soon as reasonably possible
following the election by the player. The first payment shall be at least equal to each
of the remaining twenty-five (25) payments. All of the twenty-five (25) remaining
payments shall be equal and must be in $1,000 denominations to facilitate the
securities purchase. The full cash equivalent prize shall be awarded to the player,
such that the player receives equal payments in $1,000 increments for installments 2
through 26, and any residual cash shall be added to the first annual payment. In no
event shall the first cash payment exceed the remaining equal installments by more
than $25,000. The total of the first payment, plus the cost of investments purchased
for installments 2 through 26, shall equal the total cash equivalent established and
received in accordance with Section 2 of these procedures.
7.3
A Party Lottery (including MUSL members participating in Mega Millions pursuant
to the Cross Sell Agreement) may elect to offer a lump sum (Cash Option)
Grand/Jackpot Prize as an alternative to the Annuitized Grand/Jackpot Prize. Except
for the $12 million guaranteed annuity jackpot, this Cash Option shall be the Cash
Equivalent Grand/Jackpot Prize established pursuant to Section 2. For the $12
million guaranteed annuity jackpot, the Cash Option may be either the Cash
Equivalent Grand/Jackpot prize established pursuant to Section 4, or the proceeds
from the sale of securities purchased to fund the annuitized Grand/Jackpot Prize.
7.4
No Party Lottery (including MUSL members participating in Mega Millions pursuant
to the Cross Sell Agreement) shall accept any claim for the Grand/Jackpot Prize for
tickets that were not purchased in its state.
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
8. Prize Liability
The total Grand/Jackpot prize liability for each Mega Millions drawing shall be shared
by each Party Lottery (including MUSL, on behalf of its members participating in
Mega Millions pursuant to the Cross Sell Agreement) as follows: each Party Lottery
(including MUSL, on behalf of its members participating in Mega Millions pursuant to
the Cross Sell Agreement) shall be responsible for an amount equal to a percentage of
that entity's Mega Millions sales, said percentage being the proportion of the total
Grand/Jackpot prize liability to total Mega Millions sales. The California State Lottery
is prohibited by state law from paying fixed prizes and participating in the liability
calculation for Prize Levels two (2) through nine (9). The remaining party lotteries,
with the exception of California and members of the Multi-State Lottery Association
(MUSL) that sell Mega Millions, will be responsible for the prize liability for prize
levels two (2) through nine (9) as follow: each Party Lottery shall be responsible for an
amount equal to a percentage of that Party Lottery's Mega Millions sales, said
percentage being the proportion of total Mega Millions prize liability to total Mega
Millions sales, exclusive of the total of California State Lottery sales and prizes and the
collective MUSL members' sales and prizes. The California State Lottery and MUSL
members shall be solely responsible for its own prize liability for prize levels two (2)
through nine (9).
9. Payment of Prizes at Prize Levels Two (2) through Nine (9)
9.1
Each Party Lottery (including MUSL members participating in Mega Millions
pursuant to the Cross Sell Agreement) shall always be responsible for the payment
and initial funding of all prizes won at prize levels two (2) through nine (9)
purchased in its state.
9.2
No Party Lottery (including MUSL members participating in Mega Millions pursuant
to the Cross Sell Agreement) shall accept any claim for prizes at levels two (2)
through nine (9) for tickets that were not purchased in its state.
10. Reporting and Reconciliation of Prize Liability
10.1 Each Party Lottery (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) is required to report its draw sales
and prize winners by tier levels for each drawing via the “Winner Count Report". For
each drawing, each entity must receive a report indicating that the draw sales and
prize counts at each prize level are in agreement between the On-line Gaming System
and the Internal Control System (ICS) data, or, for the collective MUSL members, a
consolidated report from the Draw Reporting System.
Each entity (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) is responsible for developing Out-ofBalance escalation procedures that provide for timely notification of senior
operations management personnel within that state as well as the Virginia Lottery
and Ohio Lottery data center contacts, or alternate contacts as may be determined
based on current assignments of responsibilities. In the event that an incident impacts
the reporting of prize liability, an "Incident Log" should be provided by the affected
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
lottery to all members of the Mega Millions Operations Committee no later than
12:00 p.m. local time the next business day. The "Incident Log" should detail the
problem and resolution or provide an update status on the incident as appropriate.
Sales and/or prize counts not in agreement will be handled according to the following
criteria:
A. Grand/Jackpot Prize Level: Both systems must be in balance before the "Winner
Count Report" can be released. Announcements of the number of winners via the
"Merged Winner Count Report" or any payment of jackpot level prizes by all
entities will be deferred until the out-of-balance condition is resolved. In the
event that the out-of-balance condition cannot be resolved within six (6) hours,
the affected entity may elect to report draw results based on its best available
data, provided that all the other Party Lottery Directors have been contacted and a
majority have consented. In this instance, the affected entity will be liable for any
additional cost or prize liability resulting from inaccuracies or deficiencies in
reported data.
B. Prize Levels Two (2) through Nine (9): With the exception of the California State
Lottery and members of the Multi-State Lottery Association (MUSL) that sell
Mega Millions as described in section 8, if the systems are not in balance at any
of these prize levels, the affected state may elect to report draw results at its own
risk, and will be solely liable for any prize paid but not reported via the "Winner
Count Report". If, upon later reconciliation, the state determines that prize
liability was overstated then draw reports will be corrected so that prize expenses
are properly allocated. States in balance may proceed with winner
announcements and payment of prizes.
10.2 The Virginia Lottery shall prepare, and distribute to the Party Lotteries' Finance
Committee representatives and to MUSL, on behalf of its members participating in
Mega Millions pursuant to the Cross Sell Agreement, a "Mega Millions Prize
Settlement Report" for each Mega Millions drawing. This report will contain drawing
sales, prizes won, and allocations and balances of prize expenses and liabilities by a
Party Lottery (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement). The settlement report will be
prepared using the data submitted and approved by each Party Lottery (including
MUSL, on behalf of its members participating in Mega Millions pursuant to the
Cross Sell Agreement) as reported on the "Winner Count Report", and consolidated
by the Virginia and Ohio Lotteries via the "Merged Winner Count Report". Each
"Mega Millions Prize Settlement Report" must be reviewed and confirmed by each
Party Lottery (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) with a signature of approval and sent
to the Virginia Lottery within four (4) business days after each drawing. The Virginia
Lottery is not responsible for obtaining delayed approved reports; however, once
each quarter, the Virginia Lottery will prepare and distribute a report of delayed
approvals for the Party Lotteries' convenience.
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
10.3 With the exception of the California State Lottery and members of the Multi-State
Lottery Association (MUSL) that sell Mega Millions, there shall be an annual
reconciliation among the remaining Party Lotteries of prize liabilities as of June 30 of
each year for prize levels two (2) through (9), provided, however, that in the event
that any one of the Party Lotteries shall, at any time, vary from its projected prize
liabilities by One Million Five Hundred Thousand Dollars ($1,500,000), then there
shall be a special reconciliation. In either event, transfer of prize liabilities shall occur
within one (1) month after the financial reconciliation. Notwithstanding the
foregoing, any state in a receivable position which meets the $1,500,000 threshold,
may defer reconciliation. Additionally, the transfer may be delayed by one (1) week
if a winning jackpot transfer is occurring at the same time.
11. Pari-Mutuel Treatment of Prize Levels Two (2) through Five (5) with the Exception
of The California State Lottery's and members of the Multi-State Lottery Association
(MUSL) Sales and Prizes which are excluded from the Liability Cap.
11.1 The expected payout percentage for any Mega Millions drawing is 50% of Mega
Millions sales. However, because Mega Millions pays out fixed prizes, the total prize
liability will be above or below 50% of sales based on the number of winners at each
prize level. A maximum prize liability for any Mega Millions drawing shall be the
lesser of 300% of draw sales or 50% of Mega Millions draw sales plus Fifty Million
Dollars ($50,000,000) (both hereinafter referred to as the "Liability Cap"). The
maximum prize liability calculation shall not include jackpot prize liability from
prior drawings within the sequence. In the event that the total Mega Millions prize
liability for any drawing shall exceed the Liability Cap, then prize levels two (2)
through (5) shall become pari-mutuel as set forth in Section 11.3.
11.2 After every Mega Millions drawing, the Ohio Lottery, together with the Virginia
Lottery acting as a check and a backup, shall enter the number of winners in each
prize category into a spreadsheet that will determine whether the Liability Cap has
been reached.
11.3 In the event the Liability Cap is met, by either: the group of Mega Millions Member
states that share prize levels two (2) through nine (9), or another group of related
parties selling the Mega Millions game; then the amount to fund the Grand/Jackpot
Prize together with the amounts to fund prize levels six (6) through nine (9) shall be
first paid from the Liability Cap amount. The balance of the Liability Cap, after
deducting the Grand/Jackpot Prize and payment for prize levels six (6) through nine
(9) (hereinafter referred to as the "Liability Cap Balance"), shall be applied to prize
levels two (2) through five (5) on a pari-mutuel basis in accordance with the
following formula:
Prize Level two (2) (normally $250,000) shall be an amount equal to 64.53% of
the Liability Cap Balance divided by the number of winners in Prize Level two
(2);
Prize Level three (3) (normally $10,000) shall be an amount equal to 14.63% of
the Liability Cap Balance divided by the number of winners in Prize Level
three (3); and
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
Prize Levels four (4) and five (5) (normally $150) shall be an amount equal to
20.84% of the Liability Cap Balance divided by the number of combined
winners in Prize Levels four (4) and five (5).
11.4 In the event the formula set forth in 11.3 above produces a prize amount for any prize
level above that prize level's normal fixed amount, then that prize shall be paid at its
normal fixed amount rather than the pari-mutuel determined prize amount. In this
event, the amount exceeding the normal fixed amount shall then be redistributed
among the other pari-mutuel prizes according to the formula contained in Mega
Millions Liability Cap Analysis attached hereto and by this reference, made a part
hereof.
11.5 All prize amounts provided for in this Section shall be rounded down to the nearest
dollar and all breakage (cents remaining from each prize) shall be applied to offset
prize expense. All Party Lotteries (including MUSL members participating in Mega
Millions pursuant to the Cross Sell Agreement) selling Mega Millions tickets for any
drawing, with the exception of the California Lottery, shall pay the lowest parimutuel prize value(s) calculated for any drawing under Liability Cap provisions. Parimutuel prizes for prize levels two (2) through five (5) may be established for a
drawing by either (i) the Party Lotteries defined in Section 11, (ii) by the MUSL
members selling Mega Millions pursuant to the Cross Sell Agreement and where the
calculation of the liability cap provisions is made in accordance with the MUSL rules,
or (iii) both groups individually.
12. Claim Periods
Subject to each Party Lottery's (including MUSL members participating in Mega Millions
pursuant to the Cross Sell Agreement) state laws, rules, and regulations, all prizes shall be
redeemed or claimed only in the jurisdiction where the Mega Millions Ticket was
purchased, effective upon determination of prize amounts, for the legal prize claim period
in effect in the Party Lottery (including MUSL members participating in Mega Millions
pursuant to the Cross Sell Agreement) at the time the winning draw was conducted. Claim
periods are shown below for reference, but legal requirements in each state will prevail.
Party Lottery
California
Georgia
Illinois
Maryland
Massachusetts
Michigan
New Jersey
New York
Ohio
Texas
Virginia
Washington
Claim Period
1 year from date of drawing for a Mega Millions
Jackpot prize
180 days from date of drawing
one (1) year from date of drawing
182 days from date of drawing
one (1) year from date of drawing
one (1) year from date of drawing
one (1) year from date of drawing
one (1) year from date of drawing
180 days from date of drawing
180 days from date of drawing
180 days from date of drawing
180 days from date of drawing
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Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
MUSL Members
Claim Period applicable for the specific
state selling a winning ticket, at the
time of the drawing that produced any
winning ticket
13. Unclaimed Prizes
13.1 All unclaimed prizes will be reported by the Party Lotteries (including MUSL, on
behalf of its members participating in Mega Millions pursuant to the Cross Sell
Agreement) to the Virginia Lottery within one (1) week of the end of each month.
The report will identify expired prizes for each drawing date within the previous
month.
13.2 All unclaimed prize moneys will be returned to the Party Lotteries (including MUSL,
on behalf of its members participating in Mega Millions pursuant to the Cross Sell
Agreement) in the same ratio that each Party Lottery (including MUSL, on behalf of
its members participating in Mega Millions pursuant to the Cross Sell Agreement)
contributed to such prize. The determination of such amount to be returned to each
Party Lottery (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement) and the method of such return shall
be included in the reconciliation process described in Section 10 above. The
California State Lottery and members of the Multi-State Lottery Association (MUSL)
will be excluded from the settlement of unclaimed prize moneys from prize levels
two (2) through (9) nine.
13.3 The return of unclaimed Grand/Jackpot Prize fund shall occur promptly upon the
termination of the relevant claim period for the Party Lottery (including MUSL
members participating in Mega Millions pursuant to the Cross Sell Agreement) in
which the unclaimed Grand/Jackpot Prize Mega Millions Ticket was purchased.
Interest accretion on any securities purchased to fund the unclaimed Grand/Jackpot
Prize will be reflected in market rates at the time of liquidation by the Purchasing
Party Lottery (including MUSL, on behalf of its members participating in Mega
Millions pursuant to the Cross Sell Agreement). The Party Lottery (including MUSL,
on behalf of its members participating in Mega Millions pursuant to the Cross Sell
Agreement) shall return interest earned on unclaimed cash Grand/Jackpot Prizes
based on the interest yields realized on such funds during the claim period.
13.4 An annual report of unclaimed prizes for Level two (2) through nine (9) shall be
forwarded by the Virginia Lottery in conjunction with the June 30 reconciliation of
prize liability, regardless of the relevant claim period for each Party Lottery. Both
reports will then be combined to determine the amount of the year-end transfer.
14. Grand/Jackpot Prize Estimation
14.1 The Grand/Jackpot Prize amount shall be manually forecasted on each drawing day
by the Party Lotteries. A recommendation for the subsequent jackpot shall be made
by the Finance Committee of the Party Lotteries at 11:30 a.m. EST on Tuesday and
Friday of each week or at any other time as deemed necessary. The Party Lottery
13
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
Directors or their designees shall be involved in a conference call at 11:30 a.m. EST
on Tuesday and Friday of each week with a designee from the Party Lotteries'
Finance Committee to discuss the Committee's recommendation. Additionally, the
Party Lotteries may compare sales forecasts at any time as agreed to by the Party
Lotteries for possible increases in the Grand/Jackpot Prize amount. A minimum of
four (4) Party Lottery Directors or their designees shall be required to approve the
advertised jackpot.
14.1.1 If the sales support a jackpot that is at least $1 million higher than the
advertised jackpot, the resulting jackpot to be paid will be the cash equivalent
of the highest fully funded million, based on actual sales and the annuity
factor established for the draw date. If the sales support a jackpot that is lower
than the advertised jackpot, the resulting jackpot to be paid will be the cash
equivalent of the highest fully funded million, based on actual sales and the
annuity factor established for the draw date. In no event, however, shall the
jackpot paid be less than the advertised jackpot of the immediately prior
drawing.
14.2 A Cash Equivalent Grand/Jackpot Prize amount will be estimated prior to each
drawing by dividing the annuitized Grand/Jackpot Prize amount by an established
annuity factor derived from the current market rates for U.S. Government STRIP
bonds. The current market information will be determined during the regular
Grand/Jackpot Setting conference call each Tuesday and Friday.
15. Ticket Validation
15.1 All Party Lotteries (including MUSL members participating in Mega Millions
pursuant to the Cross Sell Agreement) shall validate any apparent winning Mega
Millions Ticket sold on that Party Lottery's respective system using the Mega
Millions Ticket Validation numbers. In addition, each Party Lottery (including
MUSL members participating in Mega Millions pursuant to the Cross Sell
Agreement) shall use a minimum of three (3) of the following methods to ensure all
validation of claims for Mega Millions Tickets winning i) the Grand/Jackpot Prize, or
ii) a second tier prize.
A. Ticket Stock Distribution. Each Party Lottery (including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement) shall develop a
method to confirm the Mega Millions Ticket Stock serial numbers that are delivered
to the retailers/agents. This tracking shall be done in such a manner that the Party
Lottery's (including MUSL members participating in Mega Millions pursuant to the
Cross Sell Agreement) data processing center personnel will not have access to such
information. When there is a Mega Millions Ticket requiring validation as described
above, the Party Lottery (including MUSL members participating in Mega Millions
pursuant to the Cross Sell Agreement) shall obtain the Mega Millions Ticket Stock
serial numbers that were delivered to that retailer/agent. Said number shall be used to
confirm that the winning Mega Millions Ticket Stock number was issued by the
selling retailer/agent.
B.
Ticket Stock Sample. When there is a Mega Millions Ticket requiring
14
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
validation as described above, on the morning following each drawing, the Party
Lottery (including MUSL members participating in Mega Millions pursuant to the
Cross Sell Agreement) shall retrieve a sample of the Mega Millions Ticket Stock
from any retailer/agent's terminal selling the winning Mega Millions Ticket. This
Mega Millions Ticket stock shall be used for comparison with the winning Mega
Millions Ticket to determine if the winning Mega Millions Ticket was produced at
the retailer/agent in question.
C. Transaction Record. Winning Mega Millions Tickets requiring validation shall
be checked by confirming the information contained on that Mega Millions Ticket is
identical to the information from the TMIR or TRAN file for the winning
retailer/agent terminal where that Mega Millions Ticket was produced.
D. Dual Security. Validation of winning Mega Millions Tickets by any of the
methods described within this section must be performed by a Party Lottery's
(including MUSL members participating in Mega Millions pursuant to the Cross Sell
Agreement) security division or other Party Lottery (including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement) employees not
under the supervision or control of the data processing division.
E. Sign-on Ticket Verification using GGUARD, AMGUARD or Similar Program.
The terminal information shall be obtained from the retailer/agent selling the
apparent winning Mega Millions Ticket. This information shall be used with a
GGUARD program to confirm the security code on the Mega Millions Ticket. The
sign-on ticket information may be obtained from the actual Mega Millions Ticket or
by use of automated sign-on ticket programs provided by the vendor or the Party
Lottery. The use of AMGUARD or similar program shall be acceptable to satisfy this
validation requirement.
15.2 When there is a Mega Millions Ticket requiring validation as described in Section
15.1, and the wager was from a subscription purchase where a physical ticket may
not be generated, the Party Lottery (including MUSL members participating in Mega
Millions pursuant to the Cross Sell Agreement) shall, at a minimum, use the
following three (3) methods to validate the claims:
A.
Transaction Record. Winning Mega Millions subscription wagers requiring
validation shall be checked by confirming that the information contained in the
Mega Millions subscription wager is identical to the information from the
TMIR or TRAN file for the terminal where that Mega Millions wager was
produced. In addition to confirming the wager details, the transaction record
should be used to verify the wager was generated on the online gaming system
on a date and at a time consistent with the Party Lottery's (including MUSL
members participating in Mega Millions pursuant to the Cross Sell
Agreement) established subscriptions processing protocols and procedures.
B.
Dual Security. Validation of winning Mega Millions subscriptions must be
performed by a Party Lottery's (including MUSL members participating in
Mega Millions pursuant to the Cross Sell Agreement) security division or
other Party Lottery (including MUSL members participating in Mega Millions
15
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
pursuant to the Cross Sell Agreement) employees not under the supervision or
control of the data processing division.
C.
Subscription Confirmation. Winning Mega Millions subscription wagers
requiring validation shall be checked by confirming the subscription
information contained in the Party Lottery's (including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement)
subscription database is identical to the information contained on the player's
subscription application (or the Party Lottery's, including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement,
application equivalent). At a minimum, this confirmation should include
verification that the purchaser's personally identifiable information (e.g. name,
address, DOB) and subscription request (e.g. numbers played; personal vs easy
pick; length/duration of subscription) match in both data sources. In addition,
the subscription database history should verify the subscription creation date
and first draw date precede the winning Mega Millions draw date, and that no
alterations, modifications, or other changes were made to the subscription
between the winning Mega Millions draw date and the date the claim is
validated.
15.3 When there is a Mega Millions Ticket requiring validation as described in Section
15.1, and the wager was from an internet purchase where a physical ticket may not be
generated, the ticket must meet the ticket validation requirements of the Party Lottery
that issued the ticket.
16. Data Operations Processing Requirements
16.1 Internal Control System. Each Party Lottery (including MUSL members participating
in Mega Millions pursuant to the Cross Sell Agreement) is required to maintain
minimum Internal Control System (ICS) requirements for processing of Mega
Millions transactions. The ICS system must run independently of the production
gaming system application and be controlled by lottery employees. The ICS
programmers must not have physical or logical access to the production gaming
system. All Mega Millions draw information reported to member lotteries must be
verified and confirmed via the ICS system.
16.2 Disaster Recovery. Each Party Lottery (including MUSL members participating in
Mega Millions pursuant to the Cross Sell Agreement) must maintain a primary data
center and a Hot Backup data center site. Ideally, the Hot Backup site should not be
within the same local vicinity as the primary data center for improved disaster
recovery capabilities. The Hot Backup site must be capable of processing Mega
Millions draw sales, winner selections, and prize calculations and ensure no loss of
draw transactions if a catastrophic event occurs at the primary processing site.
16.3 Draw Operations. Each Party Lottery and the representative for the collective MUSL
member entities is required to conduct draw-related data center operations in
accordance with the On-line Drawing Procedures for Mega Millions. In addition,
each entity (including MUSL members participating in Mega Millions pursuant to
the Cross Sell Agreement) must have procedures in place to ensure the prize winners
16
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
and related prize amounts are updated in the On-line Gaming System for validation
and payment in a timely manner.
17
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
16.4 Operations Internal Control Reviews. Each entity’s (including MUSL members
participating in Mega Millions pursuant to the Cross Sell Agreement) data processing
operations are subject to an operational review of procedures and controls as a
condition of membership or licensure, or at periodic intervals upon request and/or
approval of the member directors. Members of the Mega Millions Operations
Committee will agree upon the review criteria.
18
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
Approved by the Party Lotteries:
GEORGIA LOTTERY CORPORATION
STATE OF NEW JERSEY DIVISION OF STATE
LOTTERY
By: ______________________________
Margaret R. DeFrancisco
President & CEO
By: ______________________________
Carole Hedinger, Executive Director
THE ILLINOIS LOTTERY
NEW YORK STATE DIVISION OF THE
LOTTERY
By: ______________________________
Michael Jones, Superintendent
By: ______________________________
Gordon Medenica, Director
MARYLAND STATE LOTTERY AGENCY
OHIO LOTTERY COMMISSION
By: ______________________________
Stephen Martino, Director
By: ______________________________
Dennis R. Berg, Director
MASSACHUSETTS STATE LOTTERY
COMMISSION
VIRGINIA LOTTERY
By: ______________________________
Paul R. Sternburg, Executive Director
By: ______________________________
Paula I. Otto, Executive Director
MICHIGAN BUREAUOF STATE LOTTERY
WASHINGTON STATE LOTTERY
By: ______________________________
M. Scott Bowen, Commissioner
By: ______________________________
Harold W. Hanson, Director
TEXAS LOTTERY COMMISSION
CALIFORNIA STATE LOTTERY
By: ______________________________
Gary Grief, Executive Director
By: ______________________________
Robert O’Neill, Director
Revision History:
The Big Game Procedures
Effective August 31 , 1996
Revised January 13, 1999
Mega Millions Procedures
Effective May 15, 2002
Effective September 14, 2003
Effective June 22, 2005
Effective January 31, 2010
Effective August 31, 2010
Effective March 1, 2012
19
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012
Liability Cap Analysis
Tier
#
Pool
Pool
A
B
2
5
0
64.53%
3
4
1
14.63%
4
4
0
5
3
1
Total
Scenario
A
20.84%
100.00%
If apportioning the remaining liability cap monies according to scenario A creates one prize
level with a prize amount greater than its usual fixed prize, pay winners of that prize the fixed
prize and use Scenario B, C or D to apportion remaining monies between the two remaining
prize levels.
If apportioning the remaining liability cap monies according to scenario A creates two prize levels with
a prize amount greater than their usual fixed prizes, pay winners of those prize the fixed prizes and use
Scenario E, F or G to apportion 100% of the remaining monies to the remaining prize level.
Tier #
Pool
Pool
Scenario B
Scenario C (Tier
3 too large)
Scenario D
(Tiers 4&5 too
large)
A
B
(Tier 2 too large)
2
5
0
3
Pay Tier 2 Fixed
75.59%
81.52%
4
1
41 .24%
Pay Tier 3 Fixed
18.48%
4
4
0
5
3
1
58.76%
24.41%
Pay Tiers
4 and 5 Fixed
Total
100.00%
100.00%
100.00%
If apportioning the remaining liability cap monies according to scenario B, C or D above, creates
another prize level with a prize amount greater than their corresponding fixed prize, pay winners of
both prizes the fixed prizes and use Scenario E, F or G to apportion 100% of the remaining monies to
the remaining prize level.
Pool
Pool
Tier #
A
B
Scenario E
(Tiers 2&3 too large)
Scenario F
(Tiers 2,4&5 too large)
Scenario G
(Tiers 3,4&5 too large)
2
5
0
Pay Tier 2 Fixed
3
Pay Tier 2 Fixed
100.00%
4
1
Pay Tier 3 Fixed
100.00%
Pay Tier 3 Fixed
4
4
0
5
3
1
100.00%
Pay Tiers
4 and 5 fixed
Pay Tiers
4 and 5 Fixed
Total
100.00%
100.00%
100.00%
20
Finance and Operations Procedures
For Mega Millions
Effective March 1, 2012