Auditors look at lottery director travel expenses - Forbes

LITTLE ROCK, Ark. -- Arkansas lottery director Ernie Passailaigue won praise for his work during his final meeting with legislators Thursday, but the agency's internal auditor said Passailaigue still needs to explain how he documented some of his travel.

Passailaigue announced last week that Oct. 7 would be his last day, almost 2 1/2 years after his arrival in 2009 to launch the voter-approved Arkansas lottery. The gambling venture has pulled in $200 million for college scholarships to 33,000 state students, and members of the Lottery Oversight Committee thanked Passailaigue on Thursday for getting the lottery up to speed so quickly.

The lottery's internal auditor, Mike Hyde, told legislators that problems found in a state audit last year had all been cleared, except for changes to the annual financial statement, which will have to be done once that report is compiled.

Hyde also said he found a fresh issue that he forwarded to state auditors to evaluate. After the meeting, Hyde said the problem was with travel documentation for Passailaigue and one of his top deputies, David Barden.

Barden said after the meeting that he didn't know there was a problem. Passailaigue later said through a spokesman he hadn't been made aware there was a travel issue.

Passailaigue, who was dogged by criticism throughout his tenure, told reporters he wouldn't do a lot differently.

"You can always learn from your mistakes," he said. "I wouldn't have changed coming out here, I wouldn't have changed my perspective on things."

Passailaigue also said he hadn't been asked to resign or pressured to leave his job, which paid him $324,000 per year. He cited his age, 64, as a reason to quit, saying he wants to have more time to spend with his "children and grandchildren, my dog and my wife." But he also wouldn't rule out taking another job.

He noted the lottery was running four months after he was hired and a second class of students has received scholarships.

"It's been a pretty good thing, I think," he said.

Passailaigue is a former legislator from South Carolina, where he went on to run that state's lottery. He left the South Carolina lottery job to come to Arkansas.

Passailaigue was initially criticized because of his high salary and that of his deputies drew fire, though members of the Arkansas Lottery Commission said they had to pay a premium to get an able leader to quickly get the lottery running.

Then in April 2010, the Lottery Commission had to revise its budget because it didn't take into account a change in allocation of money from unclaimed prizes that had been made by the Legislature. Passailaigue acknowledged he didn't know the lottery law had changed, which drew barbs from legislators and Gov. Mike Beebe.

Passailaigue had to reverse course last year on a plan to give compensatory time to executive-level staff, including him, for long hours worked in bringing the lottery on line. Soon after, two board members tried to fire Passailaigue, but didn't have the votes.

Last year's legislative audit revealed that the lottery was unable to provide year-end financial statements in accordance with generally accepted accounting principles and that the agency did not complete required employee background checks before hiring.

The agency also could not provide documentation for excessive lodging costs and other travel. Hyde wouldn't go into detail Thursday about the latest travel discrepancy. He said he saw documents that raised questions and forwarded the material to legislative auditors.

Passailaigue is a former legislator from South Carolina, where he went on to run that state's lottery. He left the South Carolina lottery job to come to Arkansas.

Commission members have since criticized Passailaigue for not creating enough of a profit margin in the games, but he countered by saying that lowering payouts would ultimately bring down profits because people won't be as likely to buy tickets.

The first class of scholarship recipients received $5,000 for attending a four-year school and $2,500 for community college. This year, the amounts were reduced to $4,500 and $2,250 because of a bad estimate on the part of organizers.

Officials underestimated the proportion of university-bound applicants, which strained the budget. Amounts for the 2012-2013 class will be decided by the Legislature later.

When he arrived, Passailaigue said he would stay on the job for five years. By last November, he backed away from that claim, saying he had a heart murmur. He mentioned that and other health problems Thursday, saying he feels lucky to wake up every morning.

At one point after the meeting, he stopped reporters' questions to say he appreciated how warmly the public treated him.

"I've become a public figure, and I didn't want to be," Passailaigue said.

He said strangers often recognize his face and ask him to talk about the lottery.

"Every one of them ... says the same thing. They want the best for their kids, grandchildren, nieces, nephews," Passailaigue said.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

30 Sep, 2011

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