One employee's death exposed a lottery's $18.5M problem

Following the discovery of mistakes in their financial records by state auditors, the Montana Lottery is receiving criticism. As a result, during the last few years, the records have been inaccurate by almost $18.5 million. It wasn't until a longtime financial director passed away unexpectedly that these mistakes were discovered.

One bright spot: According to auditors, no money was missing or taken. Rather, the audit report said that the lottery had inflated and underestimated various accounts throughout time as a result of poor internal controls, accounting mistakes, and the necessity of depending only on the expertise of one employee. Stronger monitoring is being demanded as a result of this audit, and it may spark future discussions among state legislators in the coming weeks.

Years of errors missed

Montana's Legislative Audit Division claims that the state lottery had trouble maintaining correct financial records. They also had trouble finishing the necessary financial reporting.

Auditors found that accounting errors had been occurring for years. Additionally, the lottery's revenue transfer to state finances was delayed.

An example of this occurred during fiscal year 2023. State law requires that the Montana Lottery complete revenue transfers on a quarterly basis. They only finished three of the four quarterly moves in 2023.

What caused them to overlook a transfer? Lottery officials claim that the agency's Financial Services Director was unable to compute revenues and submit the financial documents required for approval, which is why it was delayed.

A single point of failure

Director of Financial Services Armond Sergeant passed away suddenly in March 2024. At that point, things started to get more complicated.

Since 2017, Sergeant had been in that position. He seemed to be the main point of contact for many of the lottery's accounting procedures.

Auditors claim that the state lottery mostly depended on procedures created years ago and Sergeant's familiarity with the organization's finances.

Lottery staff found it difficult to finish financial statements, explain account balances, provide supporting documentation, and complete the required revenue transfers following his sudden passing. According to auditors, this demonstrated a serious internal control flaw that essentially created a single point of failure inside the company.

Red flags were raised

In addition, auditors found issues with employee access and oversight. 

Auditors said that three of the lottery’s five accounting employees could both enter and approve accounting transactions. This violated state policies designed to separate duties and reduce the risk of errors going undetected.

Auditors also stated that there were significant delays in obtaining financial information needed to complete the review.

As a result of this, the Legislative Audit Division issued a “disclaimer of opinion,” which means auditors couldn’t confidently verify the completeness and accuracy of the lottery’s financial reporting.

What happens next?

After the results of the audit were completed, the Montana Lottery agreed with their recommendations and said corrective actions are underway. The Governor’s office states they are reviewing the report, and they support efforts to address these problems.

In addition, members of Montana's Legislative Audit Committee will discuss the findings of this audit at an upcoming meeting.

For lottery players in Montana, the audit does not suggest that prizes were affected in any way or that lottery funds disappeared. Instead, it serves as a reminder that even successful lottery operations depend on strong financial controls working behind the scenes.

For Montana, auditors say that years of accounting mistakes remained hidden until the loss of one key employee exposed just how much of the system depended on a single person.

Enjoy playing the Montana Lottery, and please remember to play responsibly.