NORTH CAROLINA EDUCATION LOTTERY
POPULAR ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2015
ABOUT THE POPULAR ANNUAL FINANCIAL REPORT
The North Carolina Educa􀆟􉽯on Lo􀆩􊥥ery (NCEL) finance division is proud to present you its Popular Annual Financial
Report (PAFR) for the fiscal year (FY) ended June 30, 2015. This report provides an overview of the NCEL's financial
condi􀆟􉽯on and a brief analysis of where the money comes from and where those dollars are spent.
Most of the informa􀆟􉽯on in this report is drawn from the financial informa􀆟􉽯on appearing in the NCEL's FY 2015
Comprehensive Annual Financial Report (CAFR). The CAFR is a more detailed and complete financial presenta􀆟􉽯on
prepared in conformance with Generally Accepted Accoun􀆟􉽮ng Principals (GAAP) and was audited by an Inde-pendent
accoun􀆟􉽮ng firm, receiving an unqualified (clean) opinion. The financial data in this report also conforms
with GAAP. The CAFR, PAFR and the NCEL's Annual Report are available for viewing on the NCEL's website at:
h􀆩􊥰p://www.nc-educa􀆟􉽯onlo􀆩􊥥ery.org/about.aspx
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NORTH CAROLINA EDUCATION LOTTERY
For the ninth year in a row, the N.C. Educa􀆟􉽯on Lo􀆩􊥥ery completed its fiscal year by se􀆫􊭮ng a record not only for lo􀆩􊥥ery
􀆟􉽣cket sales, but also for its contribu􀆟􉽯on to educa􀆟􉽯on programs in North Carolina.
The Educa􀆟􉽯on Lo􀆩􊥥ery ended the fiscal year on June 30, 2015 with $1.97 billion in sales and $526 million in earnings.
Since incep􀆟􉽯on on March 30, 2006 through the end of FY15, the lo􀆩􊥥ery surpassed $13.4 billion in sales and exceeded
$3.9 billion in overall transfers to the state and educa􀆟􉽯on.
The instant product con􀆟􉽮nued to be the largest revenue source, genera􀆟􉽮ng $1.29 billion in sales. The lo􀆩􊥥ery launched
50 new instant games during the year, including a $20 game, $200 Million Blowout, which offered 20 prizes from $1
million to $4 million plus a new “Win It All” feature for players to win all prizes on a 􀆟􉽣cket with one scratch. The lo􀆩􊥥ery
also launched its sixth draw game, All or Nothing, a $2 game with a top prize of $250,000 when a 􀆟􉽣cket matches all or
the numbers or none of the numbers drawn.
Total prize money won was $1.23 billion, or on average about $3.4 million a day. During the year, prizes of $1 million or
more were won 55 􀆟􉽭mes. Many winners put their money right back to work in the economy, by paying bills, buying new
houses or cars, taking vaca􀆟􉽯ons, saving and inves􀆟􉽮ng the money for re􀆟􉽲rement or college, or dona􀆟􉽮ng to personal
good causes.
Recruitment and reten􀆟􉽯on of retail loca􀆟􉽯ons con􀆟􉽮nued to support 􀆟􉽣cket sales. In FY15, retailers earned $138.7 million
in sales commissions and incen􀆟􉽶ves and the number of retailers stood at 6,901 to finish the year.
More than 588,000 North Carolinians joined the lo􀆩􊥥ery’s Lucke‐Zone, a website where they can get lo􀆩􊥥ery news, ask
ques􀆟􉽯ons about lo􀆩􊥥ery games, and enter second‐chance drawings and other promo􀆟􉽯ons.
Along with the growth in par􀆟􉽣cipa􀆟􉽯on, the lo􀆩􊥥ery strengthened its programs to encourage responsible play. During the
year, the Educa􀆟􉽯on Lo􀆩􊥥ery became the 5th U.S. lo􀆩􊥥ery to achieve one of the top cer􀆟􉽦fica􀆟􉽯ons from the World Lo􀆩􊥥ery
Associa􀆟􉽯on for its responsible gaming program. The Level 3 cer􀆟􉽦fica􀆟􉽯on a􀆩􊥥ests that the Educa􀆟􉽯on Lo􀆩􊥥ery has estab‐lished
the resources and programs to support top principles of responsible gaming governing the protec􀆟􉽯on of players,
coopera􀆟􉽯on with others interested in problem gambling, and adver􀆟􉽳sing prac􀆟􉽣ces.
The State Lo􀆩􊥥ery Act directs the lo􀆩􊥥ery to increase and maximize the available revenues for educa􀆟􉽯on purposes. In
FY15, a breakdown of lo􀆩􊥥ery revenues showed 62 percent went to prizes, 27 percent for educa􀆟􉽯on programs that the
lo􀆩􊥥ery serves, 7 percent in retailer commissions. The remaining 4 percent of revenues included 1.5 percent to gaming
vendors, 1 percent to adver􀆟􉽳sing, and the rest for other administra􀆟􉽶ve expenses.
The Educa􀆟􉽯on Lo􀆩􊥥ery transfers its net assets on a quarterly basis to the Office of State Budget and Management to the
North Carolina State Lo􀆩􊥥ery Fund. The monies are then distributed as outlined in the FY15 budget approved by the
General Assembly. The General Assembly made the following alloca􀆟􉽯on of lo􀆩􊥥ery dollars, distribu􀆟􉽮ng both the money
raised during the fiscal year and surpluses from previous year that had not been allocated. The budget allocated:
 44 percent of the net assets, or $254.6 million, for teacher salaries in grades K‐3;
 19 percent, or $113.3 million, for salaries of teacher assistants;
 17 percent, or $100 million, for the Public School Building Capital Fund which provides monies to North Carolina
coun􀆟􉽥es to build and repair schools;
 13 percent, or $75.5 million, to the N.C. Pre‐K program to fund seats in the prekindergarten program for at‐risk four
‐year‐olds;
 5 percent, or $30.4 million, for N.C. Educa􀆟􉽯on Lo􀆩􊥥ery Scholarships which are awarded based on financial need;
 2 percent, $10.7 million, to the UNC Need‐Based Grant program, which provides financial aid based on need to
students a􀆩􊥥ending one of the 16 UNC system ins􀆟􉽴tu􀆟􉽯ons.
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EDUCATION PROGRAMS RECEIVING LOTTERY DOLLARS
Lo􀆩􊥥ery funds have always supported specific
educa􀆟􉽯on ini􀆟􉽡a􀆟􉽶ves in all North Carolina
coun􀆟􉽥es. Each year in the state budget, our
legislature can adjust how lo􀆩􊥥ery dollars are
allocated. Changes for the fiscal year 2015
budget went into effect on July 1, 2014
‐ Kelly Bancro􀅌􄰬, first grade teacher, Harne􀆩􊤠
“I want students to remember that I made
learning fun. We don’t sit in rows and doing
worksheets, we have fun learning. The spark in
li􀆩􊥬le children’s eyes when they know they have
learned something. I love when a child reads on
their own for the first 􀆟􉽭me and then looks at
me and says, ‘I can read.’ What a joy!”
SALES
The gross lo􀆩􊥥ery 􀆟􉽣cket sales for fiscal year 2015 totaled $1.97 billion as compared to $1.84 billion for fiscal year 2014 and $1.69
billion for fiscal year 2013. This represents an increase of $130 million from 2014 and $280 million from 2013.
Gross instant 􀆟􉽣cket sales were $1.294 billion for fiscal year 2015 compared with $1.17 billion for fiscal year 2014 and $1.01
billion in fiscal year 2013, an increase of approximately $124 million from fiscal year 2014 and approximately $284 million from
fiscal year 2013. The increase realized during fiscal year 2015 is a􀆩􊥲ributable to several factors. The NCEL saw con􀆟􉽮nued strong
performance of games featuring “Back Scratch”, an addi􀆟􉽯onal play area on the back of the 􀆟􉽣cket, with the launch of the $5
Break the Bank and $5 Trucks and Bucks games. Break the Bank was one of the highest performing $5 games of the year with
nearly $30 Million in sales. Trucks & Bucks also featured “Back Scratch”, as well as, the opportunity for players to win one of
three four wheel drive trucks in a second chance drawing. Each winner had a choice of a Chevrolet Silverado, Ford F‐150 or
Dodge Ram. The game was very popular amongst players because of this one‐of‐a‐kind prize opportunity. The NCEL also
expanded the “Bucks” family of games to include all of the Holiday themed 􀆟􉽣ckets this past year which included $1 – Jingle
Bucks, $2 – Jolly Jingle Bucks, $3 – Jingle Bingo Bucks, $5 – Jumbo Jingle Bucks and $10 – Millionaire Jingle Bucks Collec􀆟􉽶vely,
these holiday themed “Bucks” 􀆟􉽣ckets became the best‐selling holiday 􀆟􉽣ckets ever for the NCEL.
Draw game sales were $678 million for fiscal year 2015 compared to $669 million for fiscal year 2014 and $678 for fiscal year
2013, represen􀆟􉽮ng a $9 million increase over fiscal year 2014 and no change from fiscal year 2013. Draw game sales suffered
from a lack of high jackpots in the mul􀆟􉼐‐state game Powerball. Since surpassing $500 million twice in fiscal year 2013, the
Powerball jackpot has broken the mark only once. This led to sales of $130 million for fiscal year 2015, a decrease of $19 million
from fiscal year 2014 and of $67 million from 2013. A􀅌􄱥er reaching a top jackpot of $636 million in fiscal year 2014, the NCEL’s
other mul􀆟􉼐‐state game, Mega Millions, reached a top jackpot amount for fiscal year 2015 of $321 million. This resulted in sales
of $61 million, a decrease of $13 million from sales of $74 million in fiscal year 2014.
Sales information by game are shown on the table below.
SASLALEESS F BYY 2R0E1G3IO TNO F YF Y20 2120 15
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*The EZ Match game is an additional add on to the Carolina Cash 5 game, sales for EZ Match have been included with Cash 5 in the chart.
STATEMENT OF NET POSITION
The Statement of Net Posi􀆟􉽯on presents the NCEL's financial posi􀆟􉽯on from a long‐term perspec􀆟􉽶ve. It reports all of the NCEL's
assets and liabili􀆟􉽥es.
Condensed Statement of Net Position (in thousands) A current asset is an asset which can either be converted to
cash or used to pay current liabili􀆟􉽥es within 12 months. The
NCEL’s total current assets mainly consist of total cash,
accounts receivable, investments in annuity contracts, and
inventory.
A noncurrent or capital asset is an asset or property which can
not easily converted into cash. The NCEL’s noncurrent assets
are mainly made up of long term investments in annuity
contracts, prepaid items, furniture and equipment.
Total current liabili􀆟􉽥es are what the NCEL currently owes to its
suppliers, winners and the state, all of which are short term
debts to be paid within a year. The NCEL’s total current
liabili􀆟􉽥es are made up of accounts payable, accrued payroll,
current annuity prizes, and due to other funds ("Due to Other
Funds" represents the amount of net revenues for the fiscal
year not yet transferred to the State as of June 30, 2015 but
will be transferred during fiscal year 2016.)
Noncurrent liabili􀆟􉽥es are the NCEL’s long term financial
obliga􀆟􉽯ons that are not due in the present accoun􀆟􉽮ng year.
The majority of the NCEL’s noncurrent liabili􀆟􉽥es consist of long
*Readers wanting more detailed financial information should refer to the
NCEL's FY 2015 Comprehensive Annual Financial Report (CAFR) available on
the NCEL's website at: http://www.nc-educationlottery.org/about.aspx
As required in the Lo􀆩􊥥ery Act, net revenues of the NCEL are transferred four 􀆟􉽭mes a year to the NC Educa􀆟􉽯on Lo􀆩􊥥ery Fund at
the Office of State Budget and Management. At year end, Net Revenues /Assets are zero for the NCEL. There are no changes
Activity for Capital Assets for Year Ended June 30, 2015 (in thousands)
The majority of capital asset investments were during our first full year of opera􀆟􉽯on in 2007. The investment in capital assets
includes game equipment, data processing equipment, telephone equipment, so􀅌􄱷ware and fixtures. The capitaliza􀆟􉽯on of all
items including equipment, computers, and furniture follows North Carolina’s Office of State Controller’s policies. Capital
assets are reported at their cost, and are depreciated over their es􀆟􉽭mated useful lives. 5
STATEMENT OF ACTIVITIES
This sec􀆟􉽯on reports the fiscal year's financial ac􀆟􉽶vi􀆟􉽥es from a long‐term perspec􀆟􉽶ve. It is designed to provide a
summary of the financial health and stability of the NCEL. Informa􀆟􉽯on in this sec􀆟􉽯on should provide the reader with a general
understanding of how the NCEL's resources are used.
Statement of Activities (in thousands) OPERATING REVENUES:
Opera􀆟􉽮ng revenues is income derived
from the lo􀆩􊥥ery’s everyday ac􀆟􉽶vi􀆟􉽥es,
and mainly consists of 􀆟􉽣cket sales and
communica􀆟􉽯ons fees collected from
retailers.
Total gross lo􀆩􊥥ery 􀆟􉽣cket sales for the
fiscal year 2015 were approximately
$1.972 billion as compared to $1.839
billion in fiscal year 2014. This
represents an increase of around
$135 million.
The majority of Fees and Licenses
represent a weekly retailer
communica􀆟􉽯on fee charged to ac􀆟􉽶ve
retailers for terminal satellite
communica􀆟􉽯ons and an applica􀆟􉽯on
fee for new retailers and changes in
ownership.
OPERATING EXPENSES:
The following charts show the major
components of NCEL opera􀆟􉽮ng
Expense and transfers as a percentage
of total revenues for the June 30,
2015 and 2014 fiscal years:
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An opera􀆟􉽮ng expense is an expense that an organiza􀆟􉽯on incurs as a result of its normal business opera􀆟􉽯ons. In the lo􀆩􊥥ery’s
case these expenses are all directly related to the produc􀆟􉽯on and sale of lo􀆩􊥥ery 􀆟􉽣ckets.
Sec􀆟􉽯on 18C‐162, NC General Statutes s􀆟􉽰pulates no more than 8% of the total annual revenues shall be allocated for payment
of expenses of the Lo􀆩􊥥ery. Adver􀆟􉽳sing expenses shall not exceed 1% of the total annual revenues.
Prizes, retailer commissions and gaming vendor charges all directly relate to sales. As expected, as sales have
increased and so have these expenses. In fiscal year 2015 prizes, commissions and gaming vendor charges
increased to $1,397 million from $1,293 million in 2014. The other expenses, which consist of adver􀆟􉽳sing, salary and benefits,
professional fees, rent, maintenance, bad debt, deprecia􀆟􉽯on and transfers, have remained at 4% of Total Annual Revenues
this year. Fiscal years 2015 and 2014 administra􀆟􉽶ve expenses were $53 million and $47 million respec􀆟􉽶vely.
The following graph shows the rela􀆟􉽯onship between sales and expense for the NCEL.
Operating Revenues vs. Expense
NONOPERATING REVENUES & EXPENSES:
Nonopera􀆟􉽮ng Revenues and Expenses are defined as revenues or expenses that are incurred by ac􀆟􉽶vi􀆟􉽥es not related to the
core opera􀆟􉽯ons of an organiza􀆟􉽯on. In the lo􀆩􊥥ery’s case, nonopera􀆟􉽮ng items are any revenues or expenses incurred not
directly associated with the sale of lo􀆩􊥥ery 􀆟􉽣ckets.
Nonopera􀆟􉽮ng Revenues consist of investment earnings from the Short Term Investment Fund held at the State Treasurer’s
office, and Mul􀆟􉼐‐State Lo􀆩􊥥ery Associa􀆟􉽯on (MUSL) dividends received.
Nonopera􀆟􉽮ng Expenses mainly consist of transfers from the NCEL to the State. These transfers consist of net revenues to
the state, compulsive gambling treatment contribu􀆟􉽯ons and unclaimed prizes transferred to the North Carolina Educa􀆟􉽯on
Readers wan􀆟􉽮ng more detailed financial informa􀆟􉽯on on any of the lo􀆩􊥥ery’s financial ac􀆟􉽶vi􀆟􉽥es and results should refer to
the NCEL's FY 2015 Comprehensive Annual Financial Report (CAFR) available on the NCEL's website at:
h􀆩􊥰p://www.nc‐educa􀆟􉽯onlo􀆩􊥥ery.org/about.aspx 7
A W A R D S & A K NO W L E D G M E N T S
The Government Finance Officers Association of the United States and Canada (GFOA) has given an
Award for Outstanding Achievement in Popular Annual Financial Reporting to the North Carolina
Education Lottery for its Popular Annual Financial Report for
the fiscal year ended June 30, 2014. The Award for
Outstanding Achievement in Popular Annual Financial
Reporting is a prestigious national award recognizing
conformance with the highest standards for preparation of
state and local government popular reports.
In order to receive an Award for Outstanding Achievement
in Popular Annual Financial Reporting, a government unit
must publish a Popular Annual Financial Report, whose
contents conform to program standards of creativity,
presentation, understandability, and reader appeal.
An Award for Outstanding Achievement in Popular Annual
Financial Reporting is valid for a period of one year only.
The North Carolina Education Lottery has received a Popular
Award for the last 7 consecutive years (fiscal years ended
2008-2014.) We believe our current report continues to
conform to the Popular Annual Financial Reporting
requirements, and we are submitting it to GFOA.
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