AUDIT REPORT
OF THE
NEBRASKA LOTTERY
FOR THE FISCAL YEAR ENDED JUNE 30, 2022
This document is an official public record of the State of Nebraska, issued by
the Auditor of Public Accounts.
Modification of this document may change the accuracy of the original
document and may be prohibited by law.
Issued on October 4, 2022
NEBRASKA LOTTERY
TABLE OF CONTENTS
Page
Background Information Section
Background 1 - 2
Mission Statement 2
Organizational Chart 3
Key Officials and Agency Contact Information 4
Financial Section
Independent Auditor’s Report 5 - 7
Management’s Discussion and Analysis 8 - 11
Basic Financial Statements:
Statement of Net Position 12
Statement of Revenues, Expenses, and Changes in Net Position 13
Statement of Cash Flows 14
Notes to the Financial Statements 15 - 23
Government Auditing Standards Section
Independent Auditor’s Report on Internal Control over Financial Reporting and
on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards 24 - 25
Statistical Section
Lottery Ticket Sales 26
Total Operating Transfers to Beneficiary Funds 27
Cumulative Operating Transfers to Beneficiary Funds 28
Operating Transfers to Beneficiary Funds 29
Operating Expenses 30
Current Ratio 31
Quick Ratio 31
Percentage of Operating Expenses to Revenues 32
Net Income Before Transfers Compared to Operating Revenue 32
Prize Percentage of Sales 33
NEBRASKA LOTTERY
- 1 -
BACKGROUND
The Legislature created the Lottery Division of the Nebraska Department of Revenue (Nebraska Lottery) in 1991.
Nebraska voters passed a constitutional amendment allowing the creation of a State lottery in November 1992, and
the Legislature established the State lottery in 1993. As the 37
th
lottery in the nation, the Nebraska Lottery began
scratch ticket sales on September 11, 1993. Sales of on-line products began on July 21, 1994.
The Nebraska Lottery is responsible for contracting for scratch ticket production, on-line equipment, advertising,
security, and related services. In addition, the Nebraska Lottery recruits and screens Nebraska Lottery retailers,
develops Nebraska Lottery products, and collects Nebraska Lottery revenues.
Currently, the Nebraska Lottery offers Powerball®, Nebraska Pick 5®, Nebraska Pick 3®, 2by2®, MyDaY®, Mega
Millions®, Lucky for Life®, and instant games.
Article III, § 24, of the Nebraska Constitution sets out the basic requirements for the transfer of lottery proceeds to
certain beneficiary funds, specifying that a portion of those revenues are to “be used for education as the Legislature
may direct[.]”
Neb. Rev. Stat. § 9-812(2) (Supp. 2021) offers the following legislative directive for the transfer of lottery proceeds:
A portion of the dollar amount of the lottery tickets which have been sold on an annualized basis shall be transferred
from the State Lottery Operation Trust Fund to the Education Innovation Fund, the Nebraska Opportunity Grant
Fund, the Nebraska Education Improvement Fund, the Nebraska Environmental Trust Fund, the Nebraska State Fair
Board, and the Compulsive Gamblers Assistance Fund as provided in subsection (3) of this section. The dollar amount
transferred pursuant to this subsection shall equal the greater of (a) the dollar amount transferred to the funds in
fiscal year 2002-03 or (b) any amount which constitutes at least twenty-two percent and no more than twenty-five
percent of the dollar amount of the lottery tickets which have been sold on an annualized basis. To the extent that
funds are available, the Tax Commissioner and director may authorize a transfer exceeding twenty-five percent of the
dollar amount of the lottery tickets sold on an annualized basis.
Additionally, § 9-812(3) provides these further instructions:
Of the money available to be transferred to the Education Innovation Fund, the Nebraska Opportunity Grant Fund,
the Nebraska Education Improvement Fund, the Nebraska Environmental Trust Fund, the Nebraska State Fair Board,
and the Compulsive Gamblers Assistance Fund:
(a) The first five hundred thousand dollars shall be transferred to the Compulsive Gamblers Assistance Fund to
be used as provided in section 9-1006;
(b) Beginning July 1, 2016, forty-four and one-half percent of the money remaining after the payment of prizes
and operating expenses and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred
to the Nebraska Education Improvement Fund;
(c) Forty-four and one-half percent of the money remaining after the payment of prizes and operating expenses
and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the Nebraska
Environmental Trust Fund to be used as provided in the Nebraska Environmental Trust Act;
(d) Ten percent of the money remaining after the payment of prizes and operating expenses and the initial transfer
to the Compulsive Gamblers Assistance Fund shall be transferred to the Nebraska State Fair Board if the most
populous city within the county in which the fair is located provides matching funds equivalent to ten percent of
the funds available for transfer. Such matching funds may be obtained from the city and any other private or
public entity, except that no portion of such matching funds shall be provided by the state. If the Nebraska State
Fair ceases operations, ten percent of the money remaining after the payment of prizes and operating expenses
and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the General Fund;
and
NEBRASKA LOTTERY
- 2 -
BACKGROUND
(Concluded)
(e) One percent of the money remaining after the payment of prizes and operating expenses and the initial transfer
to the Compulsive Gamblers Assistance Fund shall be transferred to the Compulsive Gamblers Assistance Fund
to be used as provided in section 9-1006.
MISSION STATEMENT
The Nebraska Lottery’s webpage (https://nelottery.com/homeapp/about/main) contains the following mission
statement:
The mission of the Nebraska Lottery is to generate proceeds for good causes as determined by the voters and the
Legislature, while providing quality entertainment options to Nebraskans.
FINANCE
FINANCE MANAGER
G19750
LINCOLN
01630100 Dennis Nelson
LOTTERY & CHARITABLE GAMING DIRECTOR
N00260
01630000 Brian Rockey
MARKETING
MARKETING MANAGER
G33790
LINCOLN
01630200 Jill Marshall
ADMINISTRATION
ADMINISTRATIVE PROGRAMS OFFICER I
V09011
LINCOLN
01601002 Bonnie Amgwert
BUDGET OFFICER III
V19313
LINCOLN
01630101 Kim Vu
INVESTIGATIONS, SECURITY
& INSPECTIONS
REV INVEST & SECURITY SUPV
V62724
LINCOLN
01601800 Steve Anderson
LICENSING
Senior Gaming Analyst
X29223
LINCOLN
01613223 Carri Fitzgerald
ACCOUNTANT II
A19012
LINCOLN
01630102 Victoria Brininstool
ACCOUNTANT I
A19011
LINCOLN
01630107 Ginger Lippold
01630105 Rebecca Davis
INFRASTRUCTURE SUPPORT
ANALYST SR
A07073
LINCOLN
01630152 Barry Jelinek
IT APPLICATIONS DEVELOPER/SR
A07012
LINCOLN
60002640 Eric McHargue
PRODUCTS MANAGER
A33740
LINCOLN
01630203 Brian Griesenbrock
KEY ACCOUNTS MANAGER*
A33760
LINCOLN
60002642 Eric Souders
MARKETING & COMMUNICATIONS
SPECIALIST III
A33013
LINCOLN
01630195 Tom Bash
01630202 Neil Watson
MARKETING & COMMUNICATIONS
SPECIALIST II
A33012
LINCOLN
01630201 Tate Schneider
REVENUE OPERATIONS CLERK II
S29112
LINCOLN
01605005 Katherine Clinch
01630003 Teresa Schuttler
60002562 VACANT
INFORMATION TECHNOLOGY
IT SUPERVISOR
V07091
LINCOLN
01630150 Shawn Fotinos
NEBRASKA DEPARTMENT OF REVENUE
LOTTERY & CHARITABLE GAMING DIVISIONS
January 2022
*Working Title
Updated 1/5/2022
ADMINISTRATION, LICENSING, &
FINANCIAL COMPLIANCE/REVIEW
ADMINISTRATION & COMPLIANCE
MANAGER*, G29330
LINCOLN
01613002 Gail Ross
LOTTERY PROCESSING MONITOR*
S01011
LINCOLN
01630156 Chad Shoemaker
60000821 Susan McKee-Neil
LEGAL
ATTORNEY III
G31113
LINCOLN
01613211 Jordan Mruz
MARKETING & COMMUNICATIONS
SPECIALIST I
A33011
LINCOLN
60005381 Sam Craig
27 Total Positions
26 Filled
1 Vacant
Revenue Tax Specialist
S29621
Lincoln
60002909 Brett Long
Revenue Operations Clerk II
S29112
Lincoln
60005219 Jenny Grop
ACCOUNTANT III
A19013
LINCOLN
60013026 Andrew Littrell
ORGANIZATIONAL CHART
NEBRASKA LOTTERY
- 3 -
NEBRASKA LOTTERY
- 4 -
KEY OFFICIALS AND AGENCY CONTACT INFORMATION
Nebraska Lottery Executive Management
Name Title
Tony Fulton
Tax Commissioner
Brian Rockey
Lottery Director
Dennis Nelson
Lottery Finance Manager
The Nebraska Lottery
137 N.W. 17
th
Street
Lincoln, NE 68528-1204
402-471-6100
- 5 -
NEBRASKA AUDITOR OF PUBLIC ACCOUNTS
State Auditor PO Box 98917
State Capitol, Suite 2303
Lincoln, Nebraska 68509
402-471-2111, FAX 402-471-3301
auditors.nebraska.gov
NEBRASKA LOTTERY
INDEPENDENT AUDITOR’S REPORT
State Tax Commissioner
Nebraska Department of Revenue, Lottery Division
Lincoln, Nebraska
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the business-type activities of the Nebraska Department of Revenue,
Lottery Division (Nebraska Lottery), as of and for the year ended June 30, 2022, and the related notes to the financial
statements, which collectively comprise the Nebraska Lottery’s basic financial statements as listed in the Table of
Contents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the
respective financial position of the business-type activities of the Nebraska Lottery, as of June 30, 2022, and the
respective changes in financial position, and cash flows thereof for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
(GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by
the Comptroller General of the United States. Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to
be independent of the Nebraska Lottery and to meet our other ethical responsibilities, in accordance with the relevant
ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinions.
Emphasis of Matter
As discussed in Note 1, the financial statements of the Nebraska Lottery are intended to present the financial position
and the changes in financial position of only that portion of the business activities of the State that is attributable to
the transactions of the Nebraska Lottery. They do not purport to, and do not, present fairly the financial position of
the State of Nebraska as of June 30, 2022, and the changes in its financial position, or its cash flows thereof, for the
year then ended in conformity with accounting principles generally accepted in the United States of America. Our
opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America, and for the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error.
- 6 -
In preparing the financial statements, management is required to evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the Nebraska Lottery’s ability to continue as a going
concern for 12 months beyond the financial statement date, including any currently known information that may
raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee
that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material
misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control. Misstatements are considered material if there is a substantial likelihood that,
individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial
statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, and design and perform audit procedures responsive to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Nebraska Lottery’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluate the overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise
substantial doubt about the Nebraska Lottery’s ability to continue as a going concern for a reasonable period
of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit, significant audit findings, and certain internal control-related matters that we
identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion
and Analysis, on pages 8-11 herein, be presented to supplement the basic financial statements. Such information is
the responsibility of management and, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of management about the methods
of preparing the information and comparing the information for consistency with management’s responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
- 7 -
Other Information
Management is responsible for the other information included in the annual report. The other information comprises
the statistical section but does not include the basic financial statements and our auditor’s report thereon. Our
opinion on the basic financial statements does not cover the other information, and we do not express an opinion or
any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other information and
consider whether a material inconsistency exists between the other information and the basic financial statements,
or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude
that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2022 on
our consideration of the Nebraska Lottery’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The
purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Nebraska
Lottery’s internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the Nebraska Lottery’s internal
control over financial reporting and compliance.
September 29, 2022 Matt Schochenmaier, CPA
Audit Manager
Lincoln, Nebraska
NEBRASKA LOTTERY
MANAGEMENT’S DISCUSSION AND ANALYSIS
- 8 -
This section of the Nebraska Lottery annual audit presents management’s discussion and analysis of the financial
performance of the Nebraska Lottery for the fiscal period ended June 30, 2022. This discussion should be read in
conjunction with the accompanying financial statements and related notes. The financial statements, notes, and this
discussion are the responsibility of the Nebraska Lottery’s management.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Nebraska Legislature established the Nebraska Lottery (Lottery) on February 24, 1993. The Lottery is to
provide instant win games and on-line random number selection games. The Lottery began selling instant (scratch)
tickets on September 11, 1993, and began selling on-line (lotto) tickets on July 21, 1994. The Lottery is a division
of the Nebraska Department of Revenue and as such, the financial summaries presented here and the related
comments are for the Lottery’s activities only and do not include the Department of Revenue’s activities or
statements.
The Lottery accounts for its financial transactions as an enterprise fund. Enterprise funds are used to account for
governmental operations that are financed and operated in a manner similar to private business. The Lottery uses
the accrual basis of accounting. In the annual report issued by the Lottery, there are three financial reports.
1) Statement of Net Position
This report will show the assets, liabilities, and net position (“equity”) of the Lottery as of June 30, 2022.
This report is basically the balance sheet for a private business.
2) Statement of Revenues, Expenses, and Changes in Net Position
This report will show the revenue, expenses, transfers to other funds, and changes in net position for the
Lottery for the fiscal year. This report would be similar to an income statement or a profit-loss statement
for a private business.
3) Statement of Cash Flows
This report is an analysis of the sources of cash flows into the Lottery and out of the Lottery for the fiscal
year.
DISCUSSION OF NET POSITION
While reviewing the Summary of Net Position, it must be compared to the prior year’s Summary to see the changes
in the various classifications (see Table A). The largest asset change was Cash and Cash Equivalents which
increased about $800,000. In May 2022, there was a Lucky for Life second-tier winner. The Multi-State Lottery
Association (MUSL) sent the Lottery the cash option amount of $390,000 prior to the winner claiming the prize in
late June. The Lottery had to make an electronic payment to the player and so at year-end, the cash was still in the
account. The actual transfer took place in July. The remainder of the difference can be attributed to the increase in
Accounts Payable, which was about $380,000, that allowed for more cash to be held at the end of the year.
On the Liability side, the Prizes Payable increased about $600,000. A majority of the increase is related to the lotto
game Lucky for Life. As noted earlier, the Lottery still had $390,000 of cash that had not been transferred to the
winner at year-end. This caused the Prizes Payable to be higher.
In the Net Position section, the Restricted for Future Prizes decreased about $150,000, while the Unrestricted Assets
increased about $180,000. As the Restricted amount went down due to the rebalancing of prize reserves by MUSL,
the effect of the rebalancing appears in the Unrestricted.
NEBRASKA LOTTERY
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Continued)
- 9 -
Table A
Summary of Net Position
FY
2022
FY 2021
Change
CURRENT ASSETS
Cash and Cash Equivalents
$
8,941,960
$
8,131,659
$
810,301
Accounts Receivable and Reserves
on Deposit
6,863,617
6,497,450
366,167
Prepaid Prizes and Costs
162,628
-
162,628
TOTAL CURRENT ASSETS
15,968,205
14,629,109
1,339,096
NONCURRENT ASSETS
Reserves on Deposit
2,540,702
2,689,721
(149,019)
Furniture, Fixtures, Equipment (Net)
114,246
148,491
(34,245)
TOTAL NONCURRENT ASSETS
2,654,948
2,838,212
(183,264)
TOTAL ASSETS
$
18,623,153
$
17,467,321
$
1,155,832
CURRENT LIABILITIES
Accounts Payable
$
1,957,871
$
1,576,958
$
380,913
Compensated Absences and
Accrued Payroll Payable
92,095
80,399
11,696
Prizes Payable
7,908,466
7,293,102
615,364
Other Accrued Liabilities
514,367
372,234
142,133
TOTAL CURRENT LIABILITIES
10,472,799
9,322,693
1,150,106
NONCURRENT LIABILITIES
Compensated Absences Payable
273,852
265,915
7,937
TOTAL NONCURRENT LIABILITIES
273,852
265,915
7,937
TOTAL LIABILITIES
$
10,746,651
$
9,588,608
$
1,158,043
NET POSITION
Net Investment in Capital Assets
$
114,246
$
148,491
$
(34,245)
Restricted for Future Prizes
2,540,702
2,689,721
(149,019)
Unrestricted Assets
5,221,554
5,040,501
181,053
TOTAL NET POSITION
$
7,876,502
$
7,878,713
$
(2,211)
DISCUSSION OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
After experiencing record sales for fiscal year 2021, the sales for this year showed a slight decrease of $3.0 million
(see Table B). The Lottery saw scratch sales decrease by $6.1 million (-5.0%) and lotto sales increase by $3.1
million (+3.8%). The overall decrease was 1.5%.
On the scratch side, the only price point with an increase was in the $20 price point ($1.6 million). All the other
price points saw a decrease with the $3 price point suffering the largest decrease ($2.9 million). At this time, we
do not know the specific reason for the sales decrease but suspect that alterations in consumer behavior previously
caused by COVID-19 restrictions may have led to the sales change.
NEBRASKA LOTTERY
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Continued)
- 10 -
On the lotto side, $3.8 million of the increase was due to Lucky for Life and $5.7 million was from Powerball.
During this fiscal year, Lucky for Life went to seven draws a week which led to the increase. For Powerball, the
increase was attributed to higher jackpots. The size and run of jackpots materially affect weekly lotto sales for
jackpot games and during fiscal year 2022, there were four Powerball jackpot runs that went over $300 million
whereas fiscal year 2021 had only one. All the other lotto games had decreased sales with Mega Millions having
the largest decrease ($5.7 million). For Mega Millions, there were two jackpot runs for both fiscal year 2021 and
fiscal year 2022, but the fiscal year 2021 runs went longer and for higher jackpots.
The Prize Expense went down about $2.8 million. This can be attributed to both sales products. The lower scratch
sales produced lower prize expense, and even though the lotto sales went up, the prize payout for those games are
typically lower than scratch games. Contractual Services (costs related to our lottery services provider which are
based on a percentage of sales) went down about $2.4 million due to the lower sales and due to lower contract rates.
The Lottery previously issued and evaluated an RFP that resulted in a contract that had lower rates which became
effective at the beginning of fiscal year 2022. The Marketing Expense went up about $1.3 million. This is the
result of substantially reduced advertising and promotional spending in fiscal year 2021 (due to COVID-19). The
expenses for fiscal year 2022 returned to a more regular pattern for the year.
The Transfers to Other Funds had an increase of almost $1.2 million. With the better contract rates and reduced
prize expense, the Lottery had more profits and was able to transfer more to the beneficiary trust funds this year.
(Continued on Next Page)
NEBRASKA LOTTERY
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Concluded)
- 11 -
Table B
Summary of Revenues, Expenses, and Changes in Net Position
FY 2022
FY 2021
Change
REVENUES
Sales
$
205,336,790
$
208,146,715
$
(
2,809,925)
Sales Returns
(3,
071,602)
(2,864,025)
(207,577)
OPERATING REVENUE
202,265,188
205,282,690
(3,017,502)
Interest Income
217,641
238,229
(20,588)
Other Income
6,780
11,163
(4,383)
Multi
-
State Lottery Assoc. Income
1,659
2,381
(722)
NON-OPERATING REVENUE
226,080
251,773
(25,693)
TOTAL REVENUES
$
202,491,268
$
205,534,463
$
(
3,043,195)
EXPENSES
Prize Expense
$
119,566,977
$
122,341,140
$
(
2,774,163)
Retailer Commissions
13,177,840
13,509,332
(331,492)
Contractual Services
11,864,922
14,266,599
(2,401,677)
Marketing Expense
6,141,963
4,816,529
1,325,434
Lottery Operating Expense
2,311,839
2,212,728
99,111
TOTAL EXPENSES
$
153,063,541
$
157,146,328
$
(
4,082,787)
NET INCOME BEFORE
TRANSFERS
$
49,427,727
$
48,388,135
$
1,039,592
TRANSFERS TO OTHER FUNDS
$
49,429,938
$
48,178,938
$
1,251,000
CHANGE IN NET POSITION
$
(
2,211)
$
209,197
$
(
211,408)
BEGINNING NET POSITION
$
7,878,713
$
7,669,516
$
209,197
ENDING NET POSITION
$
7,876,502
$
7,878,713
$
(
2,211)
OTHER ITEMS OF NOTE
The unpredictability of Powerball, Mega Millions, and Pick 5 jackpots along with external forces that affect player
purchases of both scratch and lotto products (fuel prices, economic situations, international tensions, other
entertainment options, casino gaming, pandemics, etc.) could have a material effect on future sales and future
transfers to the beneficiary trust funds.
CONTACTING LOTTERY MANAGEMENT
This financial report is required as part of Governmental Accounting Standards Board (GASB) Statement 34 and is
prepared to provide the readers such as the Legislature, the public, and other interested parties with an overview of
the financial results of the Nebraska Lottery’s activities. If you have any questions about this report, please contact
the Nebraska Lottery at P.O. Box 98901, Lincoln, NE 68509-8901.
NEBRASKA LOTTERY
STATEMENT OF NET POSITION
As of June 30, 2022
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents 8,941,960$
Accounts Receivable, Net of Allowance (Note 5) 6,458,660
Prepaid Prizes 162,628
Reserves on Deposit (Note 7) 404,957
TOTAL CURRENT ASSETS 15,968,205
NONCURRENT ASSETS:
Reserves on Deposit (Note 7) 2,540,702
Capital Assets:
Furniture, Fixtures, and Equipment (Note 6) 660,573
Less: Accumulated Depreciation 546,327
Total Capital Assets, Net 114,246
TOTAL NONCURRENT ASSETS 2,654,948
TOTAL ASSETS
18,623,153
$
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable 746,663$
Vendors Payable 1,211,208
Compensated Absences Payable (Note 8) 37,344
Accrued Payroll Payable 54,751
Withheld Taxes on Prizes Paid 42,034
Prizes Payable 7,908,466
Due to Other Funds 26,342
Other Accrued Liabilities 445,991
TOTAL CURRENT LIABILITIES 10,472,799
NONCURRENT LIABILITIES:
Compensated Absences Payable (Note 8) 273,852
TOTAL NONCURRENT LIABILITIES 273,852
TOTAL LIABILITIES 10,746,651
NET POSITION
Net Investment in Capital Assets 114,246
Restricted for Future Prizes (Note 7) 2,540,702
Unrestricted (Note 10) 5,221,554
TOTAL NET POSITION 7,876,502
TOTAL LIABILITIES AND NET POSITION
18,623,153
$
The accompanying Notes to the Financial Statements are an integral part of this statement.
- 12 -
NEBRASKA LOTTERY
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
For the Year Ended June 30, 2022
OPERATING REVENUE:
Sales 205,336,790$
Less: Sales Returns 3,071,602
TOTAL OPERATING REVENUE 202,265,188
OPERATING EXPENSES:
Prize Expense, Net of Unclaimed Prizes (Note 1c) 119,566,977
Retailer Commissions 13,177,840
Contractual Services Expense 11,864,922
Marketing 6,141,963
Lottery Operating 2,311,839
TOTAL OPERATING EXPENSES 153,063,541
OPERATING INCOME 49,201,647
NONOPERATING REVENUE:
Interest Income 217,641
Other Income 6,780
Multi-State Lottery Association Income 1,659
TOTAL NONOPERATING REVENUE 226,080
INCOME BEFORE OPERATING TRANSFERS 49,427,727
TRANSFERS TO OTHER FUNDS (Note 9) (49,429,938)
CHANGE IN NET POSITION (2,211)
TOTAL NET POSITION, BEGINNING OF YEAR 7,878,713
TOTAL NET POSITION, END OF YEAR
7,876,502
$
The accompaning Notes to the Financial Statements are an integral part of this statement.
- 13 -
NEBRASKA LOTTERY
STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Ticket Sales 202,163,785$
Prizes Paid to Winners (118,753,677)
Commissions Paid to Retailers (13,186,987)
Paid to Contractors for Goods and Services (17,855,353)
Paid to Employees (1,772,297)
Other Operating Expenses (498,608)
Net Cash Provided by Operating Activities 50,096,863
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Paid to Compulsive Gamblers Assistance Fund (989,300)
Paid to Nebraska Environmental Trust Fund (21,773,822)
Paid to Nebraska Education Improvement Fund (21,773,822)
Paid to Nebraska State Fair Support and Improvement Cash Fund (4,892,994)
Net Cash Used in NonCapital Financing Activities (49,429,938)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Purchase of Property and Equipment (75,924)
CASH FLOWS FROM INVESTING ACTIVITIES:
Interest on Cash 217,641
Multi-State Lottery Association Income 1,659
Net Cash Provided by Investing Activities 219,300
NET INCREASE IN CASH AND CASH EQUIVALENTS 810,301
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,131,659
CASH AND CASH EQUIVALENTS AT END OF YEAR
8,941,960
$
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Operating Income 49,201,647$
Adjustments to Reconcile Operating Income
to Net Cash Provided by Operating Activities:
Depreciation Expense 116,949
Changes in Assets (Increase) Decrease in:
Reserves on Deposit 53,371
Prepaid Prizes (162,628)
Accounts Receivable - Net (270,519)
Changes in Liabilities Increase (Decrease) in:
Other Accrued Liabilities 157,165
Accounts Payable and Due to Other Funds 280,531
Prizes Payable 615,364
Compensated Absences and Accrued Payroll Payable 19,633
Withheld Taxes on Prizes Paid (15,515)
Vendors Payable 100,865
Total Adjustments 895,216
Net Cash Provided by Operating Activities
50,096,863
$
The accompanying Notes to the Financial Statements are an integral part of this statement.
- 14 -
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
- 15 -
For the Fiscal Year Ended June 30, 2022
1. Summary of Significant Accounting Policies
A. Basis of Presentation
The accompanying basic financial statements of the Nebraska Department of Revenue, Lottery Division,
(Nebraska Lottery) have been prepared in conformity with accounting principles generally accepted in the
United States of America (GAAP), as applied to governmental units. As the Nebraska Lottery is a business-
type activity, the financial statements presented are the financial statements required by Governmental
Accounting Standards Board (GASB) Statement Number 34 for an enterprise fund. GASB is the accepted
standard-setting body for establishing governmental accounting and financial reporting principles.
The basic financial statements have been prepared primarily from data maintained by the Nebraska Lottery
on computer systems provided by the lottery-services vendor and from accounts maintained by the State
Accounting Administrator of the Department of Administrative Services.
B. Reporting Entity
The Nebraska Lottery was created on February 24, 1993, by the Nebraska Legislature as a division of the
Nebraska Department of Revenue (Department), established under and governed by the laws of the State
of Nebraska. As such, the Nebraska Lottery is exempt from State and Federal income taxes. The financial
statements include all funds of the Nebraska Lottery. The Nebraska Lottery is to provide an instant win
and a random number selection on-line lottery. The net proceeds, as outlined in Neb. Rev. Stat. § 9-812
(Supp. 2021), are to be transferred to the Compulsive Gamblers Assistance Fund, the Nebraska Education
Improvement Fund, the Nebraska Environmental Trust Fund, and the Nebraska State Fair Support and
Improvement Cash Fund, a fund of the State Fair Board. The financial statements include only the Nebraska
Lottery and are not intended to present the financial position of the Department or the results of operations
and changes in net positions of the Department as a whole. The Department is part of the primary
government for the State of Nebraska’s reporting entity.
The Nebraska Lottery has also considered all potential component units for which it is financially
accountable, including other organizations that are fiscally dependent on the Nebraska Lottery or whose
relationship with the Nebraska Lottery is so significant that exclusion would be misleading or incomplete.
GASB has set forth criteria to be considered in determining financial accountability. These criteria include
appointing a voting majority of an organization’s governing body, and (1) the ability of the Nebraska
Lottery to impose its will on that organization, or (2) the potential for the organization to provide specific
financial benefits to, or impose specific financial burdens on, the Nebraska Lottery. The Nebraska Lottery
is also considered financially accountable if an organization is fiscally dependent on it, and there is potential
for the organization to provide specific financial benefits to, or impose specific financial burdens on, the
Nebraska Lottery, regardless of whether the organization has (1) a separately elected governing board, (2)
a governing board appointed by a higher level of government, or (3) a jointly appointed board.
These financial statements present the Nebraska Lottery. No component units were identified. The
Nebraska Lottery is part of the primary government for the State of Nebraska’s reporting entity.
C. Measurement Focus, Basis of Accounting
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus
and basis of accounting. Basis of accounting refers to when revenues and expenses are recognized in the
accounts and reported in the financial statements. Basis of accounting relates to the timing of the
measurements made, regardless of the measurement focus applied.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 16 -
1. Summary of Significant Accounting Policies (Continued)
The Nebraska Lottery’s financial statements were reported using the economic resources measurement
focus and the accrual basis of accounting. With the economic resources measurement focus, all assets and
all liabilities associated with the operations are included on the Statement of Net Position. Revenues are
recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of
related cash flows. Net Position is segregated into restricted and unrestricted. The Nebraska Lottery’s
operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net position.
It is the policy of the State to spend restricted resources only when unrestricted resources are insufficient
or unavailable. When both restricted and unrestricted resources are available for use, it is the Nebraska
Lottery’s policy to use unrestricted resources first, then restricted resources, as they are needed.
Revenues generated from the sale of lottery tickets are reported as operating revenues. Transactions that
are capital financing, non-capital financing, or investing related are reported as non-operating revenues.
All expenses related to operating the Nebraska Lottery are reported as operating expenses. All other
expenses are reported as non-operating expenses.
Instant ticket revenue is recognized when tickets are sold to the retailer, and on-line revenue is recognized
after the drawing is completed for the respective wagers. A 5.0% - 6.0% retailer commission and a prize
expense are recognized at the same time. Revenues from the sale of on-line tickets for future drawings and
the related agent commission and prize expense are deferred until the drawings are held.
Prize expense is recognized in the same period ticket revenue is recognized based on the predetermined
prize structure for each game. Because the instant prize-winning tickets are randomly distributed
throughout the tickets, and some winning tickets will be lost, destroyed, or unredeemed for other reasons,
there will be differences between amounts accrued and the amounts actually paid. These differences,
denoted as unclaimed prizes, are recognized as a reduction of prize expense 181 days after the close of each
instant game and 181 days after each draw for on-line games, as prizes unclaimed for 180 days expire.
Unclaimed prizes for the fiscal year ended June 30, 2022, totaled $3,766,397.
The activities of the Nebraska Lottery are accounted for as an enterprise fund. Enterprise funds are used to
account for governmental operations that are financed and operated in a manner similar to private business
enterprises and where the governing body has decided that periodic determination of revenues earned,
expenses incurred, and net position is appropriate.
D. Cash and Cash Equivalents
In addition to bank accounts and petty cash, this classification includes all short-term investments, such as
certificates of deposit, repurchase agreements, and U.S. treasury bills. These short-term investments may
have original maturities (remaining time to maturity at acquisition) greater than three months; however,
cash is available and is considered cash and cash equivalents for reporting purposes. These investments
are stated at cost, which at June 30, 2022, approximates market. Banks pledge collateral, as required by
law, to guarantee State funds held in time and demand deposits.
Cash and cash equivalents are under the control of the State Treasurer or other administrative bodies, as
determined by law. All cash deposited with the State Treasurer is initially maintained in a pooled cash
account. On a daily basis, the State Treasurer invests cash not needed for current operations with the State’s
Investment Council, which maintains an operating investment pool for such investments. Interest earned
on these investments is allocated to funds based on their percentage of the investment pool.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 17 -
1. Summary of Significant Accounting Policies (Continued)
E. Budgetary Process
The State’s biennial budget cycle ends on June 30 of the odd-numbered years. By September 15, prior to
a biennium, the Nebraska Lottery and all other State agencies must submit their budget requests for the
biennium beginning the following July 1. The requests are submitted on forms that show estimated funding
requirements by programs, sub-programs, and activities. The Executive Branch reviews the requests,
establishes priorities, and balances the budget within the estimated resources available during the upcoming
biennium.
The Governor’s budget bill is submitted to the Legislature in January. The Legislature considers revisions
to the bill and presents the appropriations bill to the Governor for signature. The Governor may: a) approve
the appropriations bill in its entirety; b) veto the bill; or c) line item veto certain sections of the bill. Any
vetoed bill or line item can be overridden by a three-fifths vote of the Legislature.
The approved appropriations will generally set spending limits for a particular program within the agency.
Within the agency or program, the Legislature may provide funding from one to five budgetary fund types.
Thus, the control is by fund type, within a program, within an agency.
Appropriations are usually made for each year of the biennium, with unexpended balances being
reappropriated at the end of the first year of the biennium. For most appropriations, balances lapse at the
end of the biennium.
All State budgetary expenditures for the enterprise fund type are made pursuant to the appropriations, which
may be amended by the Legislature, upon approval by the Governor. State agencies may reallocate the
appropriations between major objects of expenditure accounts, except that the Legislature’s approval is
required to exceed the personal service limitations contained in the appropriations bill. Increases in total
appropriations must also be approved by the Legislature as a deficit appropriations bill.
Revenues are not budgeted.
F. Receivables
Receivables are reported net of estimated allowances for uncollectible amounts, which are estimated based
upon past collection experience and current economic conditions.
G. Capital Assets
Capital assets include equipment that is valued at cost when historical records are available and at estimated
historical cost when no historical records exist. Donated capital assets are valued at their estimated fair
market value on the date received. Generally, equipment that has a cost in excess of $5,000 at the date of
acquisition and has an expected useful life of more than one year is capitalized. Computers are an exception
to this policy and are capitalized if they have a cost in excess of $1,500 and a useful life of more than one
year.
Equipment is depreciated using the straight-line method over the estimated useful life of three to seven
years.
H. Compensated Absences
All permanent employees working for the Nebraska Lottery earn sick and annual leave and are allowed to
accumulate compensatory leave rather than being paid overtime. Temporary and intermittent employees
are not eligible for paid leave. The liability has been calculated using the vesting method, in which leave
amounts, for both employees currently eligible to receive termination payments and other employees
expected to become eligible in the future to receive such payments upon termination, are included.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 18 -
1. Summary of Significant Accounting Policies (Concluded)
Nebraska Lottery employees accrue vested annual leave at a variable rate based on years of service.
Generally, accrued annual leave cannot exceed 35 days at the end of a calendar year.
Employees accrue sick leave at a variable rate based on years of service. In general, accrued sick leave
cannot exceed 180 days. There is no maximum limit on the accumulation of sick leave days for employees
under certain labor contracts. Sick leave is not vested except upon either death or reaching the retirement
eligibility age of 55, at which time the State is liable for 25 percent of the employee’s accumulated sick
leave. Employees under certain labor contracts can only be paid a maximum of 50 or 60 days.
The Nebraska Lottery’s financial statements recognize the expense and accrued liability when vacation and
compensatory leave is earned or when sick leave is expected to be paid as termination payments.
I. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at June 30, 2022, and revenues and expenditures during the reporting
period. Actual results could differ from those estimates.
2. Deposits and Investments
Investment of all available cash is made by the State Investment Officer on a daily basis, based on total
bank balances. These funds are held in the State of Nebraska Operating Investment Pool (OIP), an internal
investment pool. Additional information on the deposits and investments portfolio, including investment
policies, risks, and types of investments, can be found in the State of Nebraska’s Annual Comprehensive
Financial Report (ACFR).
3. Contingencies and Commitments
Risk Management. The Nebraska Lottery is exposed to various risks of loss related to torts, theft of,
damage to, or destruction of assets, errors or omissions, injuries to employees, and natural disasters. The
Nebraska Lottery, as part of the primary government for the State, participates in the State’s risk
management program. The Nebraska Department of Administrative Services is responsible for maintaining
the insurance and self-insurance programs for the State. The State generally self-insures for general
liability, employee health care, employee indemnification, and workers’ compensation. The State has
chosen to purchase insurance for:
A. Motor vehicle liability, which includes $4,700,000 with a self-insured retention of $300,000
(coverage includes hot pursuit). There is an additional one-time corridor retention of $300,000.
Insurance is also purchased, with various limits and deductibles, for physical damage and uninsured
and underinsured motorists. State agencies have the option to purchase coverage for physical
damage to vehicles. There is a $1,000 deductible for this coverage.
B. Life insurance for eligible employees.
C. Crime coverage, with a limit of $10,975,000 for each loss and a $25,000 self-insured retention per
incident subject to specific conditions, limits, and exclusions.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 19 -
3. Contingencies and Commitments (Concluded)
D. Real and personal property on a blanket basis for losses up to $200,700,000, with a self-insured
retention of $300,000 per loss occurrence. Newly acquired properties are covered up to $5 million
for 30 days and $1 million for 90 days, if the property has not been reported. If not reported after
90 days, the property is not covered. The perils of flood, earthquake, and acts of terrorism have
various coverage, sub-limits, and self-insurance. State agencies have the option to purchase
building contents and inland marine coverage.
Details of the various insurance coverages are available from the Nebraska Department of Administrative
Services – Risk Management Division.
No settlements exceeded commercial insurance coverage in any of the past three fiscal years. Workers’
compensation is funded in the Workers’ Compensation Internal Service Fund through assessments on each
agency based on total agency payroll and past experience. Tort claims, theft of, damage to, or destruction
of assets, errors or omissions, and natural disasters would be funded through the State General Fund or by
individual agency assessments, as directed by the Legislature, unless covered by purchased insurance. No
amounts for estimated claims have been reported in the Nebraska Lottery’s financial statements. Health
care insurance is funded in the Insurance Trust Funds through a combination of employee and State
contributions.
Litigation. The potential amount of liability involved in litigation pending against the Nebraska Lottery,
if any, could not be determined at this time. However, it is the Nebraska Lottery’s opinion that final
settlement of those matters should not have an adverse effect on the Nebraska Lottery’s ability to administer
current programs. Any judgment against the Nebraska Lottery would have to be processed through the
State Claims Board and be approved by the Legislature.
4. State Employees Retirement Plan (Plan)
The single-employer Plan became effective by statute on January 1, 1964. The Plan consists of a defined
contribution option and a cash balance benefit and is administered by the Nebraska Public Employees
Retirement Systems. The cash balance benefit is a type of defined benefit plan. Each member employed
and participating in the retirement system prior to January 1, 2003, elected either to continue participation
in the defined contribution option or to begin participation in the cash balance benefit. The defined
contribution option is closed to new entrants. All new members of the Plan on and after January 1, 2003,
become members of the cash balance benefit. The benefits and funding policy of the Plan is established
and can only be amended by the Nebraska Legislature.
All permanent full-time employees are required to begin participation in the retirement system upon
employment. All permanent part-time employees, who have attained the age of 18 years, may exercise the
option to begin participation in the retirement system.
Contribution. Per statute, each member contributes 4.8% of his or her monthly compensation. The
Nebraska Lottery matches the member’s contribution at a rate of 156%. The employee’s and employer’s
contributions are kept in separate accounts.
The employee’s account is fully vested. The employer’s account is fully vested after a total of three years
of participation in the system, including credit for participation in another Nebraska governmental plan
prior to actual contribution to the Plan.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 20 -
4. State Employees Retirement Plan (Plan) (Concluded)
Defined Contribution Option. Upon attainment of age 55, regardless of service, the retirement allowance
is to be equal to the sum of the employee and employer accounts. Members have several forms of payment
available, including withdrawals, deferrals, annuities, or a combination of these.
Cash Balance Benefit. Upon attainment of age 55, regardless of service, the retirement allowance shall be
equal to the accumulated employee and employer cash balance accounts, including interest credits,
annuitized for payment in the normal form. The normal form of payment is single life annuity with five-
year certain, payable monthly. Members have the option to convert their member cash balance account to
a monthly annuity with built in cost-of-living adjustments of 2.5% annually. Also available are additional
forms of payment allowed under the State Plan that are actuarially equivalent to the normal form, including
the option of lump-sum or partial lump-sum.
For the fiscal year ended June 30, 2022, employees contributed $63,585, and the Nebraska Lottery
contributed $99,193. A separate plan report is issued by and can be obtained from the Nebraska Public
Employees Retirement System. This report contains full pension-related disclosures.
The State of Nebraska Annual Comprehensive Financial Report (ACFR) also includes pension-related
disclosures. The ACFR report is available from the Nebraska Department of Administrative Services –
Accounting Division or on the Nebraska Auditor of Public Accounts’ website at auditors.nebraska.gov.
5. Receivables
Retailers comprised principally of grocery stores, convenience stores, and off-sale liquor stores serve as the
primary distribution channel for lottery sales to the general public. Retailers must pay for instant lottery
tickets 45 days after activation or when the pack is 70% validated, whichever comes first. Retailers pay for
on-line tickets each Wednesday for balances due through the previous Saturday. The retailers’ accounts
receivable is net of allowance for uncollectible in the amount of $43,493.
Accounts Receivable
Retailers (net) $ 6,454,532
Other
4,128
Total
$ 6,458,660
6. Capital Assets
Capital asset activity for the year ended June 30, 2022, was as follows:
Beginning
Balance
Increases
Decreases
Ending
Balance
Capital Assets: Furniture,
Fixtures, and Equipment
$
577,869
$
82,70
4
$
-
$
660,57
3
Less: Accumulated
Depreciation
429,378
116,949 - 546,327
Total Capital Assets, Net
$ 148,491
$ (34,245)
$ - $ 114,246
Depreciation expense for the fiscal year ended June 30, 2022, was $116,949.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 21 -
7. On-Line Games
During the fiscal year ended June 30, 2022, the Nebraska Lottery offered a variety of on-line games, as
described below.
Game Name
Administered by
Nebraska’s Share
of Prize Reserves
Powerball®
MUSL
$
1,518,169
Nebraska Pick 5®
Nebraska Lottery
N/A
Nebraska Pick 3®
Nebraska Lottery
N/A
MyDaY®
Nebraska Lottery
N/A
Mega Millions®
MUSL
911,261
2by2®
MUSL
111,272
Lucky for
Life®
MUSL
N/A
Total
$
2,540,702
The Nebraska Lottery is a member of the Multi-State Lottery Association (MUSL), which operates games
on behalf of participating state lotteries. Each MUSL member sells on-line game tickets through its agents
and makes weekly payments to MUSL in an amount equal to each game’s prize structure, less amounts
retained for prizes paid directly to the winners by each member lottery. MUSL maintains prize reserve
funds on some of the games to serve as a contingency reserve to protect from unforeseen prize liabilities.
The money in these reserve funds is to be used at the discretion of the MUSL Board of Directors. The prize
reserve funds are refundable to MUSL members if MUSL disbands or if a member leaves MUSL. Members
leaving MUSL must wait at least one year before receiving their remaining share of the prize reserve funds.
In addition, the Nebraska Lottery has $404,957 held by MUSL, reported on the Statement of Net Position
as Reserves on Deposit (Current), which can be used to pay the Nebraska Lottery’s portion of MUSL’s
operating budget, any MUSL legal expenses, and other expenses incurred by MUSL. These funds are not
tied directly to any MUSL game.
The Powerball® and Mega Millions® grand prizes can be paid either as annual installments or as a lump
sum cash payment, depending on the selection of the winner when claiming the prize. If the winner selects
annual installments, MUSL purchases bonds, which are held in trust to fund the future installments.
Maturities are staggered in order to provide adequate cash flow for each installment. MUSL is responsible
for paying amounts owed to the grand prize winners. The assets and related liabilities are reflected in
MUSL’s financial statements and, therefore, are not reflected in the Nebraska Lottery’s financial
statements.
The Lucky for Life® top two prize levels can be paid either through annuity payments for the life of the
winner or as a lump sum cash payment, depending on the selection of the winner when claiming the prize.
If a Nebraska winner selects the annuity, the Nebraska Lottery has a contract with MUSL so that MUSL
will secure bids from financial services companies to provide the annual payments directly to the winner.
Each participating jurisdiction contributes a proportionate share to fund the annuity or lump sum payment.
During this fiscal year, there were three second-tier winners. One winner took the annuity option, and the
other two winners took the cash option. For the winner who chose the annuity, per the noted contract,
MUSL requested, evaluated, and arranged the purchase of the annuity.
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
- 22 -
8. Noncurrent Liabilities
Changes in noncurrent liabilities for the year ended June 30, 2022, are summarized as follows:
Beginning
Balance
Increases
Decreases
Ending Balance
Amounts
Due Within
One Year
Compensated
Absences
$ 302,176 $ 45,281 $ 36,261 $ 311,196 $ 37,344
9. Significant Compliance Requirements
Article III, § 24, of the Nebraska Constitution sets out the basic requirements for the transfer of lottery
proceeds to certain beneficiary funds, specifying that a portion of those revenues are to “be used for
education as the Legislature may direct[.]”
Neb. Rev. Stat. § 9-812(2) (Supp. 2021) offers the following legislative directive for the transfer of lottery
proceeds:
A portion of the dollar amount of the lottery tickets which have been sold on an annualized basis shall be
transferred from the State Lottery Operation Trust Fund to the Education Innovation Fund, the Nebraska
Opportunity Grant Fund, the Nebraska Education Improvement Fund, the Nebraska Environmental Trust
Fund, the Nebraska State Fair Board, and the Compulsive Gamblers Assistance Fund as provided in
subsection (3) of this section. The dollar amount transferred pursuant to this subsection shall equal the
greater of (a) the dollar amount transferred to the funds in fiscal year 2002-03 or (b) any amount which
constitutes at least twenty-two percent and no more than twenty-five percent of the dollar amount of the
lottery tickets which have been sold on an annualized basis. To the extent that funds are available, the Tax
Commissioner and director may authorize a transfer exceeding twenty-five percent of the dollar amount of
the lottery tickets sold on an annualized basis.
Additionally, § 9-812(3) provides these further instructions:
Of the money available to be transferred to the Education Innovation Fund, the Nebraska Opportunity Grant
Fund, the Nebraska Education Improvement Fund, the Nebraska Environmental Trust Fund, the Nebraska
State Fair Board, and the Compulsive Gamblers Assistance Fund:
(a) The first five hundred thousand dollars shall be transferred to the Compulsive Gamblers Assistance
Fund to be used as provided in section 9-1006;
(b) Beginning July 1, 2016, forty-four and one-half percent of the money remaining after the payment of
prizes and operating expenses and the initial transfer to the Compulsive Gamblers Assistance Fund shall
be transferred to the Nebraska Education Improvement Fund;
(c) Forty-four and one-half percent of the money remaining after the payment of prizes and operating
expenses and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to
the Nebraska Environmental Trust Fund to be used as provided in the Nebraska Environmental Trust
Act;
(d) Ten percent of the money remaining after the payment of prizes and operating expenses and the
initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the Nebraska State
Fair Board if the most populous city within the county in which the fair is located provides matching
funds equivalent to ten percent of the funds available for transfer. Such matching funds may be obtained
from the city and any other private or public entity, except that no portion of such matching funds shall
be provided by the state. If the Nebraska State Fair ceases operations, ten percent of the money
remaining after the payment of prizes and operating expenses and the initial transfer to the Compulsive
Gamblers Assistance Fund shall be transferred to the General Fund; and
NEBRASKA LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
(Concluded)
- 23 -
9. Significant Compliance Requirements (Concluded)
(e) One percent of the money remaining after the payment of prizes and operating expenses and the
initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the Compulsive
Gamblers Assistance Fund to be used as provided in section 9-1006.
As required under its enabling legislation, transfers of $49,429,938 were made to other funds during the
fiscal year.
The Nebraska Lottery develops game structures to comply with the minimum prize provision of its enabling
legislation, which requires a minimum of 40 percent to be paid in prizes.
The Nebraska Lottery compares the social security number of each winner who has a per-wager prize in
excess of $500 against a list of social security numbers having an outstanding State tax liability or
delinquent child support payments. Any delinquent payments are withheld from winnings and forwarded
to the appropriate State agency. During the fiscal year, the Nebraska Lottery collected $18,411 in
delinquent State taxes and $18,275 in delinquent child support payments.
Operating Transfers In/Out will not balance, and Due To/From Other Funds will not balance, within the
Nebraska Lottery’s financial statements, as the Nebraska Lottery represents only part of the State’s primary
government.
10. Net Position
The Nebraska Lottery’s unrestricted net position represents funds not legally restricted for any specific
purpose; however, the funds may be used only to fund additional prize pay-outs, transfers to the beneficiary
funds, or additional operating expenses of the Nebraska Lottery. Management’s intention is to use the
unrestricted net position to fund additional prize pay-outs, retailer incentives, and other game
enhancements.
- 24 -
NEBRASKA AUDITOR OF PUBLIC ACCOUNTS
State Auditor PO Box 98917
State Capitol, Suite 2303
Lincoln, Nebraska 68509
402-471-2111, FAX 402-471-3301
auditors.nebraska.gov
NEBRASKA LOTTERY
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR’S REPORT
State Tax Commissioner
Nebraska Department of Revenue, Lottery Division
Lincoln, Nebraska
We have audited, in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States, the financial statements of the business-type activities of the Nebraska Department of
Revenue, Lottery Division, (Nebraska Lottery) as of and for the year ended June 30, 2022, and the related notes to
the financial statements, which collectively comprise the Nebraska Lottery’s basic financial statements, and have
issued our report thereon dated September 29, 2022. The report was modified to emphasize that the financial
statements present only the funds of the Nebraska Lottery.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Nebraska Lottery’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Nebraska Lottery’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the Nebraska Lottery’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the Nebraska Lottery’s financial
statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and
was not designed to identify all deficiencies in internal control that might be material weaknesses or significant
deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that
we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
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Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Nebraska Lottery’s financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts,
and grant agreements, noncompliance with which could have a direct and material effect on the determination of
financial statement amounts. However, providing an opinion on compliance with those provisions was not an
objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
result of that testing, not to provide an opinion on the effectiveness of the Nebraska Lottery’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the Nebraska Lottery’s internal control and compliance. Accordingly, this communication
is not suitable for any other purpose.
September 29, 2022 Matt Schochenmaier, CPA
Audit Manager
Lincoln, Nebraska
NEBRASKA LOTTERY
LOTTERY TICKET SALES
For the Fiscal Years 2018 through 2022
Note: These sales are shown on an accrual basis.
$183,368,092
$192,181,990
$183,075,525
$205,282,690
$202,265,188
$150,000,000
$160,000,000
$170,000,000
$180,000,000
$190,000,000
$200,000,000
$210,000,000
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
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NEBRASKA LOTTERY
TOTAL OPERATING TRANSFERS TO BENEFICIARY FUNDS
For the Fiscal Years 2018 through 2022
$45,250,114
$46,567,592
$42,405,635
$48,178,938
$49,429,938
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
$55,000,000
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
Note: The Total Operating Transfers include transfers to the Nebraska Environmental Trust Fund, the Compulsive Gamblers Assistance Fund,
Nebraska Education Improvement Fund, and the Nebraska State Fair Support and Improvement Cash Fund. These transfers are shown on a cash basis.
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NEBRASKA LOTTERY
CUMULATIVE OPERATING TRANSFERS
TO BENEFICIARY FUNDS
For the Fiscal Years 1994 through 2022
Fiscal Year Transfer Amount
1994 10,931,811
1995 19,308,170
1996 20,486,304
1997 23,363,387
1998 18,740,463
1999 17,581,026
2000 17,887,538
2001 16,596,397
2002 18,235,952
2003 20,098,664
2004 20,807,945
2005 27,195,478
2006 27,601,895
2007 29,266,219
2008 31,008,281
2009 30,245,118
2010 32,000,274
2011 32,055,328
2012 36,075,064
2013 40,014,701
2014 38,000,092
2015 37,106,983
2016 42,782,923
2017 41,277,657
2018 45,250,114
2019 46,567,592
2020 42,405,635
2021 48,178,938
2022 49,429,938
Total Cumulative Transfers 880,499,887$
Note: Total Cumulative Transfers includes transfers to the Solid Waste Landfill Closure Fund (final
allocation made in July 1997), the Nebraska Environmental Trust Fund, the Education Innovation
Fund, the Nebraska Opportunity Grant Fund (beginning October 1, 2003) (LB 956 (2010) changed
the Nebraska Scholarship Fund to the Nebraska Opportunity Grant Fund as of July 1, 2010),
the
Compulsive Gamblers Assistance Fund, and the Nebraska State Fair Support and Improvement
Cash Fund (beginning January 1, 2005). These transfers are shown on a cash basis except for an
adjustment of $2,342,407 increasing the Fiscal Year 2000 transfer amount and decreasing the
Fiscal Year 2001 transfer amount to better reflect the transfer in the year it relates to. The 2005
transfer amount includes a $5,000,000 transfer from the State Lottery Operation Trust Fund to the
General Fund in July 2004, as required by LB 1091 (2004). Effective July 1, 2016, the Nebraska
Lottery no longer transferred funds to the Education Innovation Fund and the Nebraska Opportunity
Grant Fund. Instead, the Nebraska Lottery was to transfer 44.5% of funds available to be
transferred to the Nebraska Education Improvement Fund (LB 497 (2013)).
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NEBRASKA LOTTERY
OPERATING TRANSFERS TO BENEFICIARY FUNDS
For the Fiscal Years 2018 through 2022
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
Nebraska Environmental Trust Fund
$19,913,801 $20,500,078 $18,648,007 $21,217,127 $21,773,822
Nebraska State Fair Support and Improvement
Cash Fund
$4,475,011 $4,606,759 $4,190,564 $4,767,895 $4,892,994
Compulsive Gamblers Assistance Fund
$947,501 $960,677 $919,057 $976,789 $989,300
Nebraska Education Improvement Fund
$19,913,801 $20,500,078 $18,648,007 $21,217,127 $21,773,822
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
Note: Article III, § 24, of the Nebraska Constitution sets out the basic requirements for the transfer of lottery proceeds to certain beneficiary funds, specifying that a portion
of those revenues are to “be used for education as the Legislature may direct.” Neb. Rev. Stat. § 9-812(2) Supp. 2021) provides the following legislative directive for the
transfer of lottery proceeds: “A portion of the dollar amount of the lottery tickets which have been sold on an annualized basis shall be transferred from the State Lottery
Operation Trust Fund to the Education Innovation Fund, the Nebraska Opportunity Grant Fund, the Nebraska Education Improvement Fund, the Nebraska Environmental
Trust Fund, the Nebraska State Fair Board, and the Compulsive Gamblers Assistance Fund as provided in subsection (3) of this section. The dollar amount transferred
pursuant to this subsection shall equal the greater of (a) the dollar amount transferred to the funds in fiscal year 2002-03 or (b) any amount which constitutes at least twenty-
two percent and no more than twenty-five percent of the dollar amount of the lottery tickets which have been sold on an annualized basis. To the extent that funds are
available, the Tax Commissioner and director may authorize a transfer exceeding twenty-five percent of the dollar amount of the lottery tickets sold on an annualized
basis.” Additionally, § 9-812(3) sets out these further instructions: “Of the money available to be transferred to the Education Innovation Fund, the Nebraska Opportunity
Grant Fund, the Nebraska Education Improvement Fund, the Nebraska Environmental Trust Fund, the Nebraska State Fair Board, and the Compulsive Gamblers Assistance
Fund: (a) The first five hundred thousand dollars shall be transferred to the Compulsive Gamblers Assistance Fund to be used as provided in section 9-1006; (b) Beginning
July 1, 2016, forty-four and one-half percent of the money remaining after the payment of prizes and operating expenses and the initial transfer to the Compulsive Gamblers
Assistance Fund shall be transferred to the Nebraska Education Improvement Fund; (c) Forty-four and one-half percent of the money remaining after the payment of prizes
and operating expenses and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the Nebraska Environmental Trust Fund to be used as
provided in the Nebraska Environmental Trust Act; (d) Ten percent of the money remaining after the payment of prizes and operating expenses and the initial transfer to the
Compulsive Gamblers Assistance Fund shall be transferred to the Nebraska State Fair Board if the most populous city within the county in which the fair is located provides
matching funds equivalent to ten percent of the funds available for transfer. Such matching funds may be obtained from the city and any other private or public entity,
except that no portion of such matching funds shall be provided by the state. If the Nebraska State Fair ceases operations, ten percent of the money remaining after the
payment of prizes and operating expenses and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the General Fund; and (e) One percent
of the money remaining after the payment of prizes and operating expenses and the initial transfer to the Compulsive Gamblers Assistance Fund shall be transferred to the
Compulsive Gamblers Assistance Fund to be used as provided in section 9-1006.”
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NEBRASKA LOTTERY
OPERATING EXPENSES
For the Fiscal Year Ended June 30, 2022
Prize Expense:
Instant Prize Expense 77,933,822$
On-Line Prize Expense 45,399,552$
Unclaimed Prizes (3,766,397)$
Total 119,566,977$
Retailer Commissions:
Instant Commissions 8,239,787$
On-line Commissions 4,921,535$
Misc. Retailer Expense 16,518$
Total 13,177,840$
Contractual Services:
Lottery Service Provider 11,240,654$
Other Contractors 624,268$
Total 11,864,922$
Marketing Expense:
Advertising Expense 5,659,758$
Promotions Expense 482,205$
Total 6,141,963$
Lottery Operations:
Payroll Expense 1,791,930$
Other Operating Expense 519,909$
Total 2,311,839$
Breakdown of Expenses
Prize Expense,
$119,566,977
Retailer
Commissions,
$13,177,840
Contractual Services,
$11,864,922
Marketing,
$6,141,963
Lottery Operations,
$2,311,839
Total Operating Expenses $153,063,541
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NEBRASKA LOTTERY
Fiscal Year
2018
Fiscal Year
2019
Fiscal Year
2020
Fiscal Year
2021
Fiscal Year
2022
Current Assets 15,434,712$ 14,238,734$ 16,654,248$ 14,629,109$ 15,968,205$
Current Liabilities 10,361,738$ 9,634,227$ 11,724,702$ 9,322,693$ 10,472,799$
Note: The Current Ratio is an assessment of the Nebraska Lottery's current assets in excess of current liabilities.
Fiscal Year
2018
Fiscal Year
2019
Fiscal Year
2020
Fiscal Year
2021
Fiscal Year
2022
Cash & Cash Equivalents 8,408,369$ 7,544,574$ 8,875,150$ 8,131,659$ 8,941,960$
Current Liabilities 10,361,738$ 9,634,227$ 11,724,702$ 9,322,693$ 10,472,799$
Note: The Quick Ratio is an assessment of the Nebraska Lottery's cash in excess of current liabilities.
1.49
1.48
1.42
1.57
1.52
1.25
1.30
1.35
1.40
1.45
1.50
1.55
1.60
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
CURRENT RATIO
For the Fiscal Years 2018 through 2022
0.8
0.8
0.8
0.9
0.9
0.0
0.5
1.0
1.5
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
QUICK RATIO
For the Fiscal Years 2018 through 2022
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NEBRASKA LOTTERY
Fiscal Year
2018
Fiscal Year
2019
Fiscal Year
2020
Fiscal Year
2021
Fiscal Year
2022
Total Operating Expense 138,483,276$ 146,030,702$ 140,676,558$ 157,146,328$ 153,063,541$
Total Operating Revenue 183,368,092$ 192,181,990$ 183,075,525$ 205,282,690$ 202,265,188$
Note: The graph represents the percentage of operating expenses to revenues.
Fiscal Year
2018
Fiscal Year
2019
Fiscal Year
2020
Fiscal Year
2021
Fiscal Year
2022
Net Income Before Transfers 45,250,761$ 46,511,618$ 42,790,938$ 48,388,135$ 49,427,727$
Total Operating Revenue 183,368,092$ 192,181,990$ 183,075,525$ 205,282,690$ 202,265,188$
Note: The graph represents the percentage of net income before operating transfers compared to total operating
revenue.
75.52%
75.99%
76.84%
76.55%
75.67%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
PERCENTAGE OF OPERATING EXPENSES TO REVENUES
For the Fiscal Year 2018 through 2022
24.68%
24.20%
23.37%
23.57%
24.44%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
NET INCOME BEFORE TRANSFERS COMPARED TO OPERATING
REVENUE
For the Fiscal Years 2018 through 2022
- 32 -
NEBRASKA LOTTERY
PRIZE PERCENTAGE OF SALES
For the Fiscal Years 2018 through 2022
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
Prize Expense 106,634,524$ 112,456,626$ 108,269,685$ 122,341,140$ 119,566,977$
Total Operating Revenue 183,368,092$ 192,181,990$ 183,075,525$ 205,282,690$ 202,265,188$
Note: The graph represents the percentage of net sales paid out in prizes.
58.15%
58.52%
59.14%
59.60%
59.11%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Fiscal Year 2018 Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022
- 33 -
