By Matthew Young, RealWV
CHARLESTON, W.Va. – The West Virginia Legislature’s Subcommittee on Audits heard an audit presentation Tuesday of the WV Lottery Commission’s limited inspection process for video lottery retailers.
Adam Fridley of the West Virginia Post Audit Division was on site for the presentation.
“For some background, the Lottery Commission was created by the Legislature to manage and oversee a range of gaming activities throughout the state,” Fridley explained. “This includes everything from traditional lottery games, scratch cards, table games, sports betting, and the limited video lottery or LVL gaming activities.”
“According to the Lottery’s annual report, LVL gambling has accounted for a significant portion of total lottery revenues over the past five fiscal years,” Fridley continued. “Total LVL revenues accounted for approximately 34% to 39% of total annual lottery revenues each year from 2019 to 2023.”
According to Fridley, current state regulations allow up to 9,000 LVL terminals to be located in licensed retail stores in West Virginia. The Lottery Commission’s most recent annual report shows that about 1,200 individual retail establishments currently operate about 8,600 LVL terminals in approved locations.
“To oversee these licensees, the Lottery has established an inspection function that is tasked with conducting on-site inspections of each licensed retailer to assess compliance with various requirements,” Fridley added. “The Lottery has divided the state into four different regions for inspection purposes and distributes its human resources across the various regions.”
“Given that LVL-based gambling represents such a large portion of total annual lottery revenues and occurs on a statewide level (…), our office conducted this review of the Lottery’s inspection function at LVL retailers with two primary objectives,” Fridley noted.
The first goal of the Post Audit Division, Fridley explained, is to determine the extent to which the Lottery Commission conducts routine inspections of LVL retailers. The second goal is to evaluate the overall effectiveness of the inspections.
“In terms of the frequency of inspections conducted, the results of our analysis show that the Lottery is doing a good job of ensuring inspections are conducted in accordance with its twice-yearly policy,” Fridley said. “While a number of retailers have had at least one period of more than six months between inspections, we have only found 24 cases out of nearly 5,000 inspections where a retailer was not inspected for more than 12 months.”
Regarding the effectiveness of the Lottery Commission’s inspection process, Fridley identified several areas that would benefit from “some modest improvements.”
“Consistent with best practices, a comprehensive set of policies for the inspection process would probably be more appropriate,” Fridley noted. “And with respect to other inspection and enforcement aspects of the Lottery – such as casino and table game inspections – the Lottery has a much more thorough and comprehensive set of policies.”
The Post-Audit Subcommittee will meet again during next month’s interim session, scheduled for September 8-10.
