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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 2100 Yonkers Road, Raleigh NC 27604 919- 301- 3300 15 copies of this public document were printed at a cost of $ 120.00 or $ 8.00 per copy
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Title | North Carolina education lottery popular annual financial report |
Other Title | Popular annual financial report |
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Full Text | 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 2100 Yonkers Road, Raleigh NC 27604 919- 301- 3300 15 copies of this public document were printed at a cost of $ 120.00 or $ 8.00 per copy |
OCLC number | 707367726 |