Lottery Authority Limited in Iowa

The state auditor David Vaudt is giving the recommendation that the governor and Legislature bring in some of the Iowa Lottery’s authority, noting that the salaries are very different compared to the other areas of the state government when the state run gambling enterprise became its own independent entity in 2004. He stated that switching the Lottery over to a state authority in September of 2003 had a significant benefit for those employees of the lottery but less for the state itself. He also went on to caution against granting too much independence to the other state entities, such as the Economic Development Authority, to operate under any different financial accountability standards then most of the other state agencies and departments.

The officials of the lottery stated that they operate a free standing enterprise much like a private business that receives no direct state funding while being able to turn a profit that has generated over $1 billion in deposits to the state treasury since 1985. Vaudt’s audit consisted of 44 pages and stated that the key Iowa Lottery officials receive large salary increases and overall higher salaries than their counterparts in other state entities once they are converted to an authority. Vaudt continued on in an interview and said it was “impossible to know” if the pay increases were excessive because the Iowa Lottery Board “inappropriately delegated the compensation review to lottery officials who would be financially impacted by the results of the review” – a delegation which “caused flawed compensation review results and inadequately justified key personnel salaries. Because of that, it appeared the board failed to properly exercise its fiduciary responsibilities in determining and approving appropriate key personnel salaries.

“In addition, a majority of state department directors included in the review did not receive any salary increases in fiscal years 2004 and 2005 while Iowa Lottery salaries increased substantially,” Vaudt’s report indicated. “A majority of the state division directors included in the review recognized salary increases ranging from 6.12 percent to 13.38 percent. During this two-year period, the prior Iowa Lottery CEO’s salary increased 68.55 percent and other key personnel received salary increases ranging from 13.86 percent to 27.55 percent.” Lottery officials went on to issue a response to this audit, noting that their current lottery CEO is paid $180,300 annually. This is a salary that was set by the governor. They also went on to state that the lottery had a lot of challenges to overcome during the past year but they are continuing to do exceptional service all the same.

“Here’s the bottom line: Any business has to be concerned about budgeting and spending, and, it would be one thing if lottery sales and proceeds had gone down since the lottery became an authority,” Lottery spokesman Mary Neubauer said in a statement. “But our numbers are up – way up. That kind of success doesn’t happen by itself. It takes a strong team to get there that is able to make good business decisions quickly, something the authority status has allowed the lottery to do.”