North Carolina education lottery popular annual financial report

              Most of the information in this report is drawn from the
financial information appearing in the NCEL's FY 2008
Comprehensive Annual Financial Report ( CAFR). The CAFR is a
more detailed and complete financial presentation prepared in
conformance with Generally Accepted Accounting Principals
( GAAP) and was audited by an independent accounting 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 avalible for viewing on the NCEL's
website at:
http:// www. nc- educationlottery. org/ about. aspx
About The Popular Annual Financial Report
The North Carolina Education Lottery ( NCEL) finance division is
proud to present you its Popular Annual Financial Report
( PAFR) for the fiscal year ( FY) ended June 30, 2008. This
report provides an overview of the NCEL's financial condition
and a brief analysis of where the money comes from and where
those dollars are spent.
NORTH CAROLINA EDUCATION LOTTERY
POPULAR ANNUAL
FINANCIAL REPORT
FISCAL YEAR 2008
In This Report:
Commission Chairs Note......... 2
Executive Directors Note........ 2
NCEL Commission and Staff.... 3
Beneficiaries……………............ 4
County Totals………………….…. 5
Games & Sales…………………... 6
Financials……………………….... 10
Contact Information………..... 13
Commission Chair’s Note
In fiscal year 2008, the North Carolina Education Lottery transferred more than $ 350 million to support education in our state, a twelve percent increase over last year. These dollars are supporting four important programs identified by the General Assembly, including More at Four, pre- kindergarten for at- risk four year olds; class size reductions for grades K- 3; school construction; and financial need- based college scholarsh
Our success in 2008 was driven in part by additional flexibility granted by the legislature to better manage instant ticket payouts. This flexibility allowed us to increase sales and increase the amount of support for education despite a downturn in the economy.
In addition to our focus on maximizing sales and revenue, we also focus on integrity and security. Both our financial year financial audit and security audit resulted in clean audits with no material findings. These audits are an indication of the hard work and dedication of the staff and a source of great pride for the organization.
Our first performance audit, completed by the North Carolina State Auditor in April, identified four minor recommendations related to business operations. We are implementing a plan to address these recommendations which should be completed by the end of 2008.
The North Carolina Education Lottery Commission is dedicated to continuing our excellent track record. The commission members and staff will continue to work collaboratively with the Governor and the Legislature to ensure that our state’s lottery program operates with the highest standards of integrity and security while providing as much money as possible to support education at all levels.
In closing, I would like to give special thanks to the North Carolina Education Lottery staff and especially to Tom Shaheen, whose excellent management skillfully guides the operations. They work tirelessly to ensure that our lottery program is among the best in the country from an operational and ethical standpoint. Their hard work and dedication drive increasing lottery sales each year, bringing additional resources to education in our state. They deserve to be proud of the continuing success of the North Carolina Education Lottery.
Executive Director’s Note
It’s hard to believe that the North Carolina Education Lottery has completed its second full year. The days… and nights of long “ to do” lists and heavy schedules don’t seem that far aw
We passed several major milestones and had some fun along the way. By June 30, 2008 we had transferred over $ 350 million to education, meeting the amount appropriated by the North Carolina Legislature. This brought the transfer since inception to over $ 725 million. On May 3, 2008 total sales topped $ 2 billion and on June 7, 2008 fiscal year sales topped $ 1 billion.
Our focus in FY2008 was on sales. To that end, we added several new features. We conducted two vehicle giveaways: five Ford Mustangs and six Harley- Davidson ® Fatboys ® . The Mustangs were part of a Carolina Cash 5 special promotion and proved to be extremely popular. Three of the Fatboys ® were prizes on our Harley- Davidson ® instant scratch- off ticket and three were prizes in a second chance drawing. This ticket flew off the shelves.
The 2007 legislature provided us the opportunity to increase our instant ticket prize payout. We began to change the prize structure on tickets in the fall but it was January before we felt the full impact. We launched the $ 100 Million Cash Spectacular ticket on January 8 and saw immediate results with superior sales of this ticket. February, 2008 was the first month where sales for the month topped $ 100 million.
On March 31, 2008 we added a mid- day draw to our popular Carolina Pick 3 game. This addition boosted Carolina Pick 3 sales and did not detract from sales for the evening draw. And on May 16, 2008 the NCEL 200 NASCAR ® Craftsman Truck Series race took place at the Lowe’s Motor Speedway in Concord.
Again, all of this could not have been accomplished without the support of our retailers. They continue to promote and sell lottery tickets with enthusiasm.
We really don’t know how to slow down at the lottery. Staff is dedicated, energized, and always looking for ways to boost sales and raise money for education. We are proud of FY08 and look forward to FY 09 as another good year for sales.
2
John McArthur - Commission Chair
Senior Vice President, Progress Energy
Bob Farris
Attorney, Wilson
Max Cogbuen
Attorney, Asheville
Bridget- Anne Hampden
President and CEO of JHR & Associates, LLC
Charlotte
Pamela Whitaker
President, Key Resources, Inc.
Eddie Speas ( not pictured)
Attorney, Raleigh
Bryan Beatty
Secretary, Crime Control and Public Safety
Raleigh
Bob Appleton
Associate Professor Emeritus of Accounting,
UNC at Wilmington, Wilmington
Jim Woodward ( not pictured)
Chancellor Emeritus
UNC at Charlotte, Charlotte
Tom Shaheen
Executive Director
Margaret Spindola- Bode
Director, Human Resources
Nikki Howard
Internal Auditor
Sam Hammett
Deputy Executive Director, Sales
Terri Avery
Director, Sales
Deborah Doty
Deputy Executive Director, Management Information
and Gaming Systems
Tony Chung
Director, MIS
Joe Norman
Director, Gaming Systems
Fenita Shepard
Deputy Executive Director, Legal and Security
Jerry Carter
Director, Security
Quan Kirk
Director, Legal Services
Alice Garland
Deputy Executive Director, Legislative and Corporate
Communications
Pamela Walker
Director, Corporate Communications
Lou Ann Russell
Deputy Executive Director, Marketing and Advertising
Penny Railey
Director, Marketing
Robin Diehl
Deputy Executive Director, Finance and Administration
Bill Enlow
Director, Administration
Jim Knight
Director, Finance
NCEL Commission
NCEL Senior Staff
3
Beneficiaries
More at Four:
Class- Size Reduction:
School Construction:
Need- Based College Scholarships:
The NCEL has completed its second full year of operations. The NCEL finished the fiscal year with sales of $ 1.078 billion
and transfers of more than $ 350 million, which was the legislative budget for the year. Transfers from launch to date at
the end of the fiscal year were over $ 725 million.
All of this is good news for the beneficiaries of lottery proceeds. As outlined in the North Carolina Lottery Act, the North
Carolina Legislature has the authority to determine how the education lottery net proceeds will be spent. They have not
changed the initial four programs designated to receive funds in the 2005 lottery act. One hundred percent of the net
proceeds go to education programs. The dollars are divided in the following manner: 50 percent go to More at Four and
class size reduction, 40 percent to school construction , and 10 percent to need based college scholarships.
Dollars raised by the NCEL are dollars that do not have to be funded by state or local taxes. The NCEL transfers proceeds
four times a year to the Office of State Budget and Management. This office then distributes the dollars to the individual
programs based on statutory requirements.
The More at Four pre- kindergarten program serves at- risk four- year- olds. It
is an award- winning program that has been duplicated by other states. All
100 counties benefit from this program. In FY08, the NCEL funded 18,582
slots for four- year olds.
For the 07/ 08 school year, 29,497 students received education lottery college scholarships to attend
114 different institutions of higher education. In order to receive an education lottery scholarship,
the student must first qualify for the Pell Grant, which is a federal grant available to students whose
families cannot afford to pay for college. Students must be residents of North Carolina and attend
an institution in North Carolina.
The Governor and the Legislature set a goal of one teacher per 18 students in
grades K- 3. NCEL proceeds fund the teaching positions needed to reduce
class size. In FY08, 1,692 teaching positions were funded. Every county
received these teaching position dollars.
School construction dollars may be used by the
counties for any capital project. Dollars are allocated to
the counties based on student population and average
property tax. In FY08, counties initiated 176
construction projects. Since inception, the number of
projects at the end of the fiscal year comes to 246.
Schools have used the dollars for large projects like
purchasing land, building schools, or building additions
to schools; and for small projects like new gym floors,
cafeteria expansion, auditorium renovations, bathroom renovations, new roofs, stadium repairs, and the list goes on.
Counties may bank their dollars in order to amass significant funds for a larger project, or they may spend the dollars as
they are transferred to the capital accounts. Counties may also use the proceeds to pay down school bonds.
4
County Totals
FY 2008
Alamance $ 4,523,565 Forsyth12,510,759Jones511,761Nash4,291,462Rowan5,237,727
Alexander 1,173,876Franklin1,995,376Lee2,834,609New Hanover5,558,771Rutherford 2,306,841
Alleghany 414,853Gaston8,964,687Lenoir2,734,066Northampton1,009,263Sampson 3,434,821
Anson 1,340,245Gates540,621Lincoln2,346,218Onslow5,166,613Scotland2,154,594
Ashe 925,870Graham322,174Macon1,111,456Orange4,214,763Stanly 2,850,656
Avery 673,432Granville2,188,997Madison553,786Pamlico372,686Stokes2,118,513
Beaufort 1,466,243Greene981,648Martin1,050,457Pasquotank1,297,209Surry 3,203,248
Bertie 1,097,927Guilford20,623,374Mcdowell1,380,018Pender1,616,900Swain484,657
Bladen 1,693,442Halifax2,452,533Mecklenburg32,822,476Perquimans403,451Transylvania725,761
Brunswick 2,893,474Harnett4,320,213Mitchell505,936Person1,491,079Tyrrell177,445
Buncombe 5,261,821Haywood1,557,196Montgomery1,398,303Pitt6,244,547Union8,809,969
Burke 3,571,531Henderson2,400,251Moore1,926,042Polk633,185Vance2,011,239
Cabarrus 7,583,238 Wake 23,124,087
Caldwell 2,385,663 Warren 675,153
Camden 390,789 Washington 722,377
Carteret 1,607,033 Watauga 1,117,325
Caswell 903,240 Wayne 5,936,639
Catawba 4,628,419 Wilkes 3,015,879
Chatham 2,304,806 Wilson 3,093,461
Cherokee 869,460 Yadkin 1,716,639
Chowan 509,532 Yancey 511,102
Clay 331,185 Unknown 111,035
Cleveland 5,000,949 DPI Admin 5,628,567
Columbus 3,195,125 Total 349,658,992
Craven 2,764,202
Cumberland 16,626,570
Currituck 654,068
Dare 942,838
Davidson 4,931,253
Davie 1,810,258
Duplin 2,333,312
Durham 7,941,340
Edgecombe 2,466,364
Total to Date:
Alamance 7,738,301 Chowan 1,043,496Guilford36,629,526Mitchell898,536Rutherford 4,459,974
Alexander 1,994,247Clay 630,262Halifax4,429,530Montgomery2,634,227Sampson 6,116,369
Alleghany 808,790Cleveland9,560,432Harnett8,271,078Moore3,445,921Scotland4,163,130
Anson 2,544,397Columbus5,967,462Haywood2,513,397Nash7,690,628Stanly 5,259,503
Ashe 1,897,510Craven4,979,713Henderson4,412,884New Hanover10,783,607Stokes4,077,951
Avery 1,250,060Cumberland29,403,329Hertford2,129,923Northampton1,885,609Surry 6,086,779
Beaufort 2,847,313Currituck1,214,095Hoke4,210,956Onslow8,147,027Swain925,579
Bertie 1,857,461Dare 1,635,721Hyde341,220Orange7,806,777Transylvania1,344,570
Bladen 3,713,092Davidson9,149,271Iredell8,516,839Pamlico765,300Tyrrell355,321
Brunswick 4,790,550Davie3,134,310Jackson1,655,679Pasquotank2,347,298Union13,820,008
Buncombe 9,505,954Duplin4,475,581Johnson13,566,828Pender2,886,496Vance3,594,378
Burke 6,902,320Durham14,730,665Jones1,033,657Perquimans753,480Wake41,048,524
Cabarrus 13,887,891Edgecombe4,570,413Lee5,140,008Person2,833,906Warren1,278,899
Caldwell 4,177,210Forsyth23,035,725Lenoir5,025,865Pitt11,020,537Washington1,382,311
Camden 873,998Franklin3,517,608Lincoln4,419,458Polk1,284,225Watauga1,920,225
Carteret 3,066,407Gaston16,528,029Macon1,881,925Randolph7,862,416Wayne11,395,464
Caswell 1,543,149Gates1,051,076Madison922,619Richmond4,831,304Wilkes5,952,632
Catawba 8,206,869Graham606,441Martin2,043,775Robeson14,582,774Wilson5,777,626
Chatham 3,842,176 Granville3,999,666Mcdowell2,515,089Rockingham6,930,385Yadkin3,200,967
Cherokee 1,606,703Greene1,881,931Mecklenburg61,212,018Rowan9,363,912Yancey1,013,662
Unknown 111,035
DPI Admin 9,808,344
Total 642,518,077
Hertford 1,104,560
Hoke 2,360,160
Hyde 194,311
Iredell 4,610,381
Jackson 789,402
Johnston 7,311,208
Randolph 4,250,560
Richmond 2,381,819
Robeson 8,207,947
Rockingham 3,732,100
Total to date county information consists of FY2007 and FY2008 funds transferred to counties. The majority of the FY2006 funds were transferred
to the education lottery reserve fund.
5
Games & Sales
This ticket contributed to a
79 percent increase in sales
of instant scratch- off tickets
from the first half of the year
to the second half, due to the
increase in the allowed prize
payout. For the first half of
the year, instant ticket sales
represented 51 percent of
total sales. For the second
half, they represented 64
percent of total sales.
The Harley- Davidson ® ticket quickly followed the $ 100
Million Cash Spectacular ticket and included three Harley -
Davidson ® Fat Boy ® motorcycles as prizes on the ticket
and three more available through second chance drawings.
Retailers could hardly keep this ticket on their shelves.
Players also had fun with our Big Ol' Bucks series
of tickets, including Big Ol' Bucks, Jingle Big Ol'
Bucks and Junior Big Ol' Bucks. BOB the pirate
and his trusty parrot showcased these tickets for
us in a series of advertisements.
Instant Scratch Offs
For the total year, instant scratch- off tickets represented
59 percent of total sales and brought in $ 635,880,115 in
revenue.
Instant scratch- off games became much more exciting in
FY08 due to a change approved by the North Carolina
Legislature, allowing the NCEL to pay out more in prizes.
In January, 2008 the full impact of this change was felt
immediately with our $ 10 ticket, "$ 100 Million Cash
Spectacular." This was our first ticket to award a top prize
of $ 1 million, paid as an annuity with 20 installments of
$ 50,000.
$ 0
$ 10,000,000
$ 20,000,000
$ 30,000,000
$ 40,000,000
$ 50,000,000
$ 60,000,000
$ 70,000,000
$ 80,000,000
$ 90,000,000
JUL AUGSEPOCTNOVDECJANFEBMARAPRMAYJUN
INSTANT PRIZE EXPENSE INSTANT TICKET SALES
Instant Prize Expense vs. Instant Ticket Sales FY 2008
6
Carolina Pick 3
The big news in FY 2008 was the addition of a daytime Carolina Pick
3 draw. From the beginning of the game, players asked for a daytime
draw in addition to the nightly draw. On March 31 we answered the
request of players and added a 3pm draw.
Carolina Cash 5
Carolina Cash 5 experienced Mustang Madness. In a highly successful
promotion, players who purchased a $ 5 Carolina Cash 5 ticket received
an entry into one of five drawings for Ford Mustangs. Altogether the
NCEL received 403,000 entries for one of the five mustangs. Each
Mustang was delivered to the player at the store where the player
purchased the winning entry. In addition, the store received a banner
announcing that they sold the winning Mustang ticket.
Carolina Cash 5 drawings take place nightly, seven nights a week. The top prize begins at $ 50,000 and
increases with each draw when no player matches the five numbers drawn. The top prize was hit 86 times
from $ 50,000 to $ 856,998. Melvin Smith of Greenville won the record Carolina Cash 5 top prize to date and
record payout to a single winner on November 11, 2007.
Carolina Cash 5 sales topped at $ 58,516,249 for the fiscal year, representing five percent of total sales.
Just like the existing 11: 22pm nightly draw, the midday draw is
conducted at WRAL- TV studios in Raleigh, our draw partner.
However, the midday draw does not occur on Sundays and is not
televised. Instead, players can watch a video of the draw online
within minutes of the draw taking place or obtain the draw results
through a variety of outlets including the player hotline, the NCEL
web page, drawing station web pages or lottery retailers. In addition
to WRAL- TV in Raleigh, our draw station network includes WITN- TV
Greenville, WCNC- TV Charlotte, WILM- TV Wilmington, and WYCW- TV
Western NC.
We experienced an immediate increase in sales with the addition of the midday draw, a bump that has
continued throughout the remainder of the fiscal year. Through March 30, 2008 Carolina Pick 3 sales averaged
$ 369,281 per day. From March 31 through the end of the fiscal year, sales averaged $ 499,732 per day and the
Carolina Pick 3 sales topped out at $ 147,158,304 for the fiscal year, representing 14 percent of total sales.
7
Over the fiscal year, 370 players won top tier prizes.
Powerball sales reached $ 229,255,174 for the fiscal year, representing 21 percent of total sales.
Raffle
As additional online offerings, on July 4, 2007 the NCEL conducted the Sizzlin' Millionaire Raffle and then on
December 27, 2007 the NCEL conducted the Merry Millionaire Raffle. These raffles offered the best odds for a
player to win $ 1 million. In both raffles, there were five $ 1 million winners.
Powerball
Powerball is the big jackpot game. We had two large
jackpots during the fiscal year: $ 300 million on August 25,
2007 and $ 275 million on March 15, 2008. These large
jackpots had an immediate impact on sales. The largest
single day was August 25, 2007 with Powerball sales that
day of over $ 5 million.
Fifty- two players matched all five white balls to
win at least $ 200,000. Fourteen of those players
purchased the Power Play option for an additional
dollar. Power Play is a feature that multiples
winnings from two to five times, increasing
winnings to between $ 400,000 and $ 1 million.
One lucky winner picked all five white balls and
Power Played during our " 10X" promotion when
there was a " 10" on the multiplier wheel so his
$ 200,000 winnings multiplied to $ 2 million.
For the second time, Powerball came to North
Carolina for a live Powerball draw. On May 17,
2008 at Lowe's Motor Speedway, Powerball
conducted the draw live during the All Star
weekend. This event was part of our promotion
of a new instant scratch- off ticket, Speedway
Riches, and our sponsorship of the NCEL 200
Craftsman Truck Series race.
8
Sales
Sales by Region
Region InstantPowerballPick 3 Cash 5 Raffle Total
Ashville $ 50,132,761 $ 15,502,057$ 2,906,485$ 3,256,854$ 354,260 $ 72,152,417
Greensboro 97,955,265 36,545,60116,933,1308,977,1791,188,860 161,600,035
Charlotte 174,580,209 65,242,48121,363,64814,143,6071,975,840 277,305,785
Raleigh 233,830,070 87,104,29873,044,71723,710,1993,175,040 420,864,324
Greenville 79,381,810 24,860,73732,910,3248,428,410675,240 146,256,521
Total 635,880,115 229,255,174147,158,30458,516,2497,369,2401,078,179,082
% of Sales 58.98% 21.26% 13.65% 5.43% 0.68% 100.00%
FY 2007 FY 2008
Instant $ 490,564,474 $ 635,880,115
Powerball 258,967,883 229,255,174
Pick 3 89,541,216 147,158,304
Cash 5 36,501,699 58,516,249
Raffle 10,000,000 7,369,240
Total 885,575,272 1,078,179,082
Comparison FY 2007 to FY 2008 Sales
$ 0
$ 100,000,000
$ 200,000,000
$ 300,000,000
$ 400,000,000
$ 500,000,000
$ 600,000,000
$ 700,000,000
Instant PowerballPick 3Cash 5Raffle
FY 2007 FY 2008
Sales by Game FY 2007 vs. FY 2008
9
Financials
Statement of Net Assets
FY 2008 FY 2007
ASSETS
Total current assets 79,443 $ 118,760 $
Capital assets, depreciable ( net) 1,487 1,282
Total Assets 80,930 120,042
LIABILITIES
Total current liabilities 79,835 119,258
Noncurrent Liabilities 1,095 784
Total Liabilities 80,930 120,042
NET ASSETS
Invested in capital assets 1,487 1,282
Unrestricted net assets ( 1,487) ( 1,282)
Total Net Assets $ - - $
Balance IncreaseDecreaseBalance
Category July 1, 2007June 30, 2008
Capital assets, depreciable
Furniture 29 $ - $ - $ 29 $
Equipment 1,652 587 - 2,239
Motorized equipment 67 - - 67
Total capital assets, depreciable 1,748 587 - 2,335
Less accumulated depreciation for
Furniture 4 7 - 11
Equipment 450 363 - 813
Motorized equipment 12 12 - 24
Total accumulated depreciation 466 382 - 848
Total capital assets, depreciable net 1,282 205 - 1,487
Capital assets, net 1,282 $ 205 $ - $ 1,487 $
The Statement of Net Assets presents the NCEL's financial position from a long- term perspective. It reports all of
the NCEL's assets and liabilities.
* Readers wanting more detailed financial information should refer to the NCEL's
FY 2008 Comprehensive Annual Financial Report ( CAFR) available on the NCEL's
website at: http:// www. nc- educationlottery. org/ about. aspx
As required in the Lottery Act, net revenues of the NCEL are transferred four times a year to the NC Education
Lottery Fund at the Office of State Budget and Management. At year end, Net Revenues / Assets are zero for the
NCEL. There are no changes in the Net Assets from year to year.
The majority of capital asset investments were during our first full year of operation in 2007. The investment in
capital assets includes game equipment, data processing equipment, telephone equipment, software and
fixtures. The capitalization of all items including equipment, computers, and furniture follows North Carolina’s
Office of State Controller’s policies.
Condensed Statement of Net Assets ( in thousands)
Activity for Capital Assets for Year Ended June 30, 2008 ( in thousands)
Capital assets are reported at their cost, and are depreciated over their estimated useful lives.
The decrease in current assets resulted from
transfers to the State Education Fund before the end
of the fiscal year.
Current liabilities consist primarily of trade payables
to vendors, instant ticket prize liability, Powerball low-tier
liability and obligations under State Treasurer’s
Lending Agreements. In addition Current liabilities
consist of " Due to Other Funds" which represents the
amount of net revenues for the fiscal year not yet
transferred to the NC Education Fund as of June 30,
2008 but will be transferred during fiscal year 2009.
The remainder is due to other state agencies for
services provided to the NCEL.
10
Statement of Activities
FY 2008 FY 2007
Operating Revenues:
Gross Sales: 1,078,082 $ 885,575 $
Less: Prize Tickets ( 29,733) ( 23,901)
Fees and Licenses 4,782 4,521
Total Operating Revenues 1,053,131 866,195
Operating Expenses:
Salaries, Wages, and Benefits 13,793 12,279
Lottery Prizes 588,485 451,792
Retailer Commissions 75,371 61,932
Gaming Systems Services 17,286 14,315
Advertising 8,619 7,810
Marketing 1,220 953
Other Services 2,576 3,038
Furniture, Fixtures, and Equipment 240 1,433
Depreciation 382 391
Other General and Administrative Expenses 1,674 1,490
Total Operating Expenses 709,646 555,433
Operating Income 343,485 310,762
Nonoperating Revenues ( Expenses):
Investment Earnings and Other Miscellaneous Revenue 8,897 8,544
Miscellaneous Nonoperating Expenses ( 3,072) ( 3,939)
Income Before Transfers 349,310 315,367
Transfers Out ( 349,310) ( 315,367)
Change in Net Assets - $ - $
http:// www. nc- educationlottery. org/ about. aspx
This section reports the fiscal year's financial activities from a long- term perspective. It is designed to
provide a summary of the financial health and stability of the NCEL. Information in this section should
provide the reader with a general understanding of how the NCEL's resources are used.
Operating Revenues
Total gross lottery ticket
sales for the fiscal year 2008
were approximately $ 1.078
billion as compared to
$ 885.5 million in fiscal year
2007. This represents an
increase of over $ 192.5
million.
Operating Expenses
The following chart shows the major components of NCEL operating expenses and transfers as a percentage
of total revenues for the June 30, 2008 and 2007 fiscal years:
Statement of Activates ( in thousands)
* Readers wanting more detailed financial information should refer to the NCEL's FY 2008 Comprehensive
Annual Financial Report ( CAFR) available on the NCEL's website at:
On some of our instant
games players can scratch
off a ticket and win another
ticket of the same value.
Those " free" tickets are
referred to as prize tickets
and their value is deducted
from total sales.
The majority of Fees and
Licenses represent a weekly
retailer communication fee
charged to active retailers for
terminal satellite
communications and an
application fee for new
retailers and changes in
ownership.
Prize Tickets
3%
Commissions
7%
All other
Expenses and
Transfers
4%
Advertising
1%
Prize Expense
51%
Net Revenues
to be
Transferred to
NCEL Fund
35%
Net Revenues
to be
Transferred to
NCEL Fund
32%
Prize Expense
54%
Advertising
1%
All other
Expenses and
Transfers
4%
Commissions
7%
Prize Tickets
3%
Allocation of Expenses FY 2007 Allocation of Expenses FY 2008
11
Statement of Activities ( continued)
Nonoperating Revenue and Expense
Nonoperating Revenues consist of investment earnings from the Short Term Investment Fund held at the
State Treasurer’s office, and Multi- State Lottery Association ( MUSL) dividends received.
The allocable share of the expenses arising from State Treasurer’s Securities Lending Collateral program
transactions, totaling $ 3,072 and $ 3,939 for the years ended June 30, 2008 and 2007, respectively, are also
included as non- operating expense.
Section 18C- 162, NC General Statutes stipulates no more than 8% of the total annual revenues shall be
allocated for payment of expenses of the Lottery. Advertising 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 2008, prizes, commissions and gaming vendor charges
increased to $ 681 million from $ 528 million in 2007. The other expenses, which consist of advertising, salary
and benefits, professional fees, rent, maintenance, bad debt, depreciation and transfers, have remained
stable at 5% of Total Annual Revenues over the past two years. Fiscal years 2008 and 2007 administrative
expenses were $ 50 million and $ 47 million respectively.
The following graph shows the relationship between sales and expense for the NCEL.
$-
$ 20,000,000
$ 40,000,000
$ 60,000,000
$ 80,000,000
$ 100,000,000
$ 120,000,000
$ 140,000,000
JUL AUGSEPOCTNOVDECJANFEBMARAPRMAYJUN
Operating Revenue FY 2008
Prize Expense
Other Expense
Operating Revenues vs. Expense
12
Contact Information
Any request for information about this report should be sent to the Public Information Officer at the North
Carolina Education Lottery, 2100 Yonkers Road, Raleigh, North Carolina 27604.
Also, for more information please see our website at http:// www. nc- educationlottery. org
13
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