News
Auditor General exposes serious flaws in airport lotteries
Lottery draws conducted at the Bandaranaike International Airport (BIA), particularly the 32nd ‘Colombo Airport Super Draw Lottery’, were loss-making, riddled with irregularities and deprived the Government of revenue, a special inquiry carried out by the Auditor General’s Department has found.
It has identified multiple drawbacks including failure to formulate and gazette rules relating to these draws; poor implementation of Treasury circulars and instructions; and improper contributions to the consolidated fund and other institutions. It also found that the lottery was launched and the price of each ticket determined without market research.
There were shortfalls in supervision, a decline in financial discipline and loss of income through the conduct of lotteries, the audit said. Therefore, the objectives of the National Lotteries Board (NLB)–which did the draws–were not met and “it was also apparent that the trust of the public towards the Board was lost”.
The Auditor General conducted an inquiry into the 32nd ‘Colombo Airport Super Draw Lottery’, the ‘Dollar Fortune Lottery’, and ‘New Airport Lotteries’. The report is published on the Department’s website.
The NLB introduced the Airport Super Draw in 1992 to generate funds for the Airport and Aviation Authority of Sri Lanka (AASL). A ticket now costs US$ 30 or its equivalent in any convertible currency. The prize is a luxury car valued at 47 percent of the gross proceeds of the lottery. The draw is meant to be held each time the specified number of tickets is sold.
The New Airport Lottery was launched in 2007 to aid the construction of the Weerawila Airport (which was subsequently shifted to Mattala). A ticket was US$ 10. The Dollar Fortune Lottery was started in 2016 and was also priced at US$ 10 each.
In January 1993, the Treasury notified the NLB that 16.5 percent of proceeds from all its lotteries must go towards the consolidated fund; 15 percent as commission to the sales agent; 47 percent to the prizes reserve fund; and 21 percent to the Board fund.
The first Airport Super Draw was conducted in 1993. By January 2018, thirty-two draws had been carried out. In September 2014, however, the NLB Chairman wrote to the Finance Ministry Secretary about difficulties and profitability issues related to the draw. The Secretary did not oppose its discontinuation and called for a Cabinet paper to be presented outlining reasons for stopping the lottery.
But another draw was held. And it was particularly riddled with shortcomings, the audit observes. Only 5,810 out of 15,000 tickets were sold (priced at US$ 30 each). An income of Rs 69.7mn was anticipated but just Rs 27mn was earned. The value of the car to be awarded was to be 12.69mn. But the cost of the car offered was Rs 18mn, or 67 percent of the proceeds of the lottery.
A private company was selected without tender for publicity and ticket sales. The agreement said it would receive 7,500 tickets but it got only 355. The contract was cancelled as the company did not provide a marketing plan. By then, it had sold 352 tickets.
A new deal was signed with another company but it received only 4,199 tickets out of a promised 12,000. Of these, just 3,652 were sold. Another 2,742 tickets were issued to three new NLB officers. They sold 1,447 of them. Of 500 tickets to be vended over the internet, 359 were sold.
Some vended tickets were not printed with their serial numbers in order. When draws were conducted, therefore, these were not taken into consideration. A large number of tickets also remained unsold. More than 150 were misplaced while some crumpled tickets were withdrawn.
The Auditor General observes that the 32nd Airport Super Draw was held despite permission having been granted to stop it. The NLB had lowered the price of a ticket to US$ 30 and increased the expected number of tickets to 15,000 without Finance Ministry approval.
Commission was not paid to sales agents over the past 31 draws. In this round, alone, it was granted to the three new NLB employees–a share of 15 percent amounting to Rs 3.426mn.
The draw was scheduled for December 24, 2017. It was cancelled on the afternoon of the same day as the police inquiry into 157 lost tickets (valued at Rs 730,000) was incomplete; the relevant private company had failed to return sold stubs and unsold tickets to the NLB; and the auditors had not been provided with required information. This shattered domestic and international customer confidence in the NLB.
The draw was eventually carried out in January 2018 after just 38.73 percent of printed tickets were sold. Furthermore, 9,190 of the printed tickets were withdrawn. This left the system open to abuse (owing to the significantly lower number of tickets in the draw), further eroding trust.
The Auditor General also says that an income of Rs 429.744mn was earned from 31 other Airport Super Draws. While Rs 70.907mn should have been remitted to the consolidated fund, only Rs 16.177mn had been done so. The NLB and the AASL did not implement a marketing plan, resulting in a net loss of Rs 44.629mn to the Board for all the Airport Super Draws it conducted.
Other observations were also made regarding the New Airport and Dollar Fortune Lotteries.