May 21, 2001 — Past mismanagement and outright fraud have earned the V.I. Lottery a $3 million-plus debt to the V.I. government while the Education Department has its payroll system under control, according to just-released federal audits.
The Lottery audit, conducted by the U.S. Interior Department’s Inspector General, covered fiscal years 1998 and 1999 and other years deemed appropriate by inspectors. During fiscal years 1998 and 1999, the Lottery’s revenues totaled $27.7 million while expenditures were $28.1 million. Losses were recorded at $120,062 and $268,904 for 1998 and 1999 respectively.
Those deficits, combined with the loss of hundreds of thousands of dollars in stolen funds, uncollected receivables and shoddy management, meant that the Lottery didn’t transfer any revenues to the government’s General Fund, as required by the V.I. Code.
"Consequently," the audit says, "as of September 30, 1999, the Lottery had reported an accumulated account payable to the . . . General Fund totaling $3.3 million."
If not for a guilty plea entered last month in federal court by former Lottery Director Alec Dizon, the most startling finding in the audit would have been that he misappropriated what auditors initially said was $100,000 in government money. Dizon, 36, the Lottery director in the Schneider administration, was arraigned and entered a guilty plea in April to federal wire fraud charges. According to the U.S. attorney, Dizon admitted that from February 1996 through Feb. 1, 1999, he made $82,000 worth of expenditures on an unauthorized credit card that were paid for with government funds.
In addition to Dizon’s use of Lottery funds for personal items, the audit found that collections totaling almost $12,000 were not deposited into the Lottery’s account and may have been misused; a bank deposit for about $40,000 was not credited to the Lottery’s bank account and may have also been misused; accounts receivable of about $88,000 were not collected from dealers and agents for unpaid returned checks and for instant lottery tickets delivered to dealers; and $916,000 in instant lottery funds were transferred to the traditional lottery to "absorb" operating expenses.
The audit also found that another $51,000 was used for non-Lottery activities, including $30,000 to sponsor a golf tournament and $21,000 to fund the cost of 30 students who attended youth games on the mainland.
Despite the glaring mismanagement within the agency, the audit said that the Lottery’s internal controls over the payment of prizes were adequate.
In a Feb. 15 letter to the Interior Department’s Arnold Van Beverhoudt Jr., Gov. Charles Turnbull concurred with all of the 16 recommendations made in the audit, including "actively pursuing the reimbursement of funds from former employees."
In an audit of the V.I. Education Department’s payroll operations, the inspector general found that the department received $118.5 million in fiscal year 1999 and $120.2 million in 2000 from the government’s General Fund. Of those amounts, 91 percent and 88 percent, respectively, went to pay salaries and fringe benefits for 2,700 teachers, administrators and support personnel.
Additionally, Education received $29.7 million in fiscal year 1999 and $20.3 million in fiscal year 2000 in federal funds. For fiscal year 1999, some 39 percent went to pay salaries for employees while the figure was 45 percent in 2000.
Overall, the audit found that Education had adequate controls over its time and attendance records and the distribution of payroll checks, and that the department generally paid employees from the correct government accounts.

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