2023 Michigan Lottery Annual Comprehensive Financial Report.pdf 1 2/12/2024 9:34:47 AM2023 Michigan Lottery Annual Comprehensive Financial Report.pdf 1 2/12/2024 9:51:07 AM
BUREAU OF STATE LOTTERY
An Enterprise Fund of the State of Michigan
Annual Comprehensive Financial Report
For the Fiscal Years Ended September 30, 2023 and 2022
Prepared by Financial Gaming Services & Accounting Division
Bureau of State Lottery, State of Michigan
Annual Comprehensive Financial Report
for the fiscal years ended September 30, 2023 and 2022
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION
Letter of Transmittal………………………………………………………………………….. 1
GFOA Certificate of Achievement………………………………………………….……..... 10
Organization Chart and Principal Officials…………………….…………………………... 11
FINANCIAL SECTION
Independent Auditors’ Report………………………………………………………….…… 12
Management’s Discussion and Analysis…………………………………………………... 15
Basic Financial Statements
Statement of Net Position.……………………………………………………………… 29
Statement of Revenues, Expenses and Changes in Net Position..….…………….. 30
Statement of Cash Flows……………………………………………………………..… 31
Notes to Financial Statements………………………………………………………..… 33
Required Supplemental Information
Schedule of Lottery’s Proportionate Share of Net Pension Liability………………… 73
Schedule of Lottery’s Pension Contributions………………………………………….. 74
Notes to Pension Required Supplemental Information Schedules………………….. 75
Schedule of Lottery’s Proportionate Share of Net OPEB Liability…………………… 76
Schedule of Lottery’s OPEB Contributions…………………………………………….. 77
Notes to OPEB Required Supplemental Information Schedules……………………. 78
Schedule of Lottery’s Proportionate Share of Total OPEB Liability…………………. 79
Other Supplemental Information
Supplementary Schedule of Revenues and Expenses September 2023……......... 80
Supplementary Schedule of Revenues and Expenses September 2022……......... 82
Supplementary Schedule of Other Operating Expenses……………………............. 84
STATISTICAL SECTION
Index………………………………………………………………………………………….... 85
Michigan Statistics
Financial Trends
Net position……………………………………………………………………………….. 86
Changes in net position…………………………………………………………………. 87
Chart of Financial Trends……………………...………………………………………... 88
Bureau of State Lottery, State of Michigan
Annual Comprehensive Financial Report
for the fiscal years ended September 30, 2023 and 2022
Revenue Capacity
Revenue from ticket sales.....………………………………………………..…............ 89
Chart of ticket sales…..………..…………………………………………….……….….. 90
Debt Capacity
Ratio of outstanding debt by type……………………………………………………..... 91
Ratio of Installment prize awards liability………………………………………………...92
Demographic and Economic Information
Demographic general tracking study…………………………………………………… 93
Charts of general tracking study……………………………………………………...… 94
Demographic and economic indicators……………………..………………………. 96
Operating Information
Operating Information.………………………………………………………………… 97
Expenses and disbursements………………………………………………………... 98
Chart of expenses and disbursements……………………………………………… 99
U.S. Lottery Statistics
Fiscal Year 2022 U.S. Lottery Sales, Prizes & Government
Transfers Measured by GDP………………………………………………………… 100
Fiscal Year 2022 U.S. Lottery Sales by Game…………………………………….. 101
Compliance Information
Independent Auditors’ Report on Internal Control……………………………….... 102
STATE OF MICHIGAN
BUREAU OF STATE LOTTERY
LANSING
January 19, 2024
The Honorable Gretchen Whitmer, Governor
Members of the Legislature
Citizens of the State of Michigan
We are pleased to present to you the Annual Comprehensive Financial Report (ACFR)
of the Bureau of State Lottery (Lottery) for the fiscal years ending September 30, 2023
and 2022. Lottery management is responsible for the accuracy of the financial data and
the completeness of the contents of this report.
The Lottery is an enterprise fund within the State of Michigan and its financial statements
are included in the State’s ACFR. This report presents only the activity of the Lottery as
a single enterprise fund and is an overview of the Lottery’s operations.
The mission statement of the Lottery is:
To maximize net revenues to supplement state K-12 public education programs;
To provide fun and entertaining games of chance;
To operate all games and bureau functions with nothing less than total integrity.
Within the financial section of this ACFR, the Lottery’s Management Discussion and
Analysis (MD&A) provides a detailed narrative of activities that occurred over this time
period. This letter of transmittal is intended to complement the MD&A and should be
read in conjunction with the MD&A.
The enabling legislation of the Lottery requires biannual and special post audits of all
accounts and transactions of the Lottery by the Auditor General or by an independent
public accounting firm appointed by the Auditor General. The Auditor General has
contracted with an independent public accounting firm for these audits. The financial
statements have been audited in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the
United States.
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The Michigan Lottery supports K-12 public education.
101 E. HILLSDALE
P.O. BOX 30023 LANSING, MICHIGAN 48909
www.michiganlottery.com
(517) 335-5600
GRETCHEN WHITMER
GOVERNOR
JESSICA WEARE
ACTING COMMISSIONER
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Fiscal Year 2023 Highlights
Significant School Aid Fund Contributions. The Lottery contributed over
$1,351,900,00 to the School Aid Fund in fiscal year 2023 -- its second highest
contribution ever.
Sales and Prizes. Total sales in fiscal year 2023 were $4.9 billion. Prizes in fiscal year
2023 were $3.0 billion.
Retailer Commissions and Incentives. Lottery retailers, many of which are small,
family-owned businesses, received more than $354.6 million in commissions and
incentives.
Responsible Gaming Commitment. Michigan was the first State Lottery to receive
Internet Compliance Assessment Program certification from the National Council on
Problem Gambling and has continued to be certified since 2015. Lottery also maintains
its Responsible Gaming Verification from the North American Association of State and
Provincial Lotteries and the National Council on Problem Gambling and has continued to
be certified since 2017.
Profile of the Lottery
History
The Lottery was established under the authority of Public Act 239 of 1972 to generate
funds to support Michigan’s public school system. The first lottery game was called the
Green Ticket and went on sale November 13, 1972. On October 7, 1975, the Lottery
began selling instant games. Draw game sales began June 6, 1977 with the introduction
of the Daily 3. The first multi-jurisdictional draw game, called The Big Game, included 10
states, and went on sale August 31, 1996. The Lottery began selling lottery games over
the internet on August 11, 2014. Since the Lottery was established, it has contributed
more than $28.0 billion to the School Aid Fund.
Lottery Products
The Lottery offers a variety of games in several different styles of play, including Instant
Tickets, Pull Tabs, Draw Games, and Fast Cash. Digital versions of many games may
also be purchased online.
Instant Ticket Games
Instant games are played by scratching off the latex covering on each ticket to reveal
prize symbols. A variety of games with different themes, play styles, price points, and
prize structures are available with over 40 games released each year. The games are
priced between $1 and $50 and top prizes range from $1,000 to $6.0 million.
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Pull Tabs
Pull Tab games are similar to instant tickets, but players pull a perforated tab instead of
scratching off a latex covering. A variety of different Pull Tab games are offered and
range in price from $0.50 to $5 with top prizes ranging from $50 to $30,000.
Draw Games
Draw game tickets are printed by a retailer terminal connected to a central gaming
system. Players can select their numbers or have numbers randomly selected. Drawings
are conducted to select winning numbers and players win based on how many numbers
they matched. The frequency of the drawings varies depending on the game. Draw
games currently offered are Mega Millions, Powerball, Lucky for Life, Lotto 47, Fantasy
5, Daily 3, Daily 4, Poker Lotto, Keno!, and Club Keno. Many draw games can also be
purchased online.
Mega Millions and Megaplier
Mega Millions is a multi-jurisdictional draw game with forty-seven participating
jurisdictions. Players select five of seventy white ball numbers and one of twenty-five
gold ball numbers for a chance to win a progressive jackpot prize. The jackpot starts at
$20 million. Players may win any of nine prizes including the jackpot and eight set prize
amounts ranging from $2 to $1 million. The Megaplier is an add-on wager that allows
players to increase their non-jackpot prize. Mega Millions drawings are conducted twice
a week on Tuesday and Friday.
Powerball and Power Play, and Double Play
Powerball is a multi-jurisdictional draw game with forty-eight participating jurisdictions.
Players select five of sixty-nine white ball numbers and one of twenty-six red ball
numbers for a chance to win a progressive jackpot prize. The jackpot starts at $20
million. Players may win any of nine prizes including the jackpot and eight set prize
amounts ranging from $4 to $1 million. Power Play is an add-on wager that allows
players to increase their non-jackpot prize. Double Play is an add-on game that was
launched in August 2021 and uses a player’s Powerball numbers for an additional draw
that takes place after the regular drawing. Powerball drawings are conducted three times
per week on Monday, Wednesday, and Saturday.
Lucky for Life
Lucky for Life is a multi-jurisdiction draw game with twenty-three participating
jurisdictions. Players select five of forty-eight white ball numbers and one of eighteen
yellow ball numbers for a chance to win lifetime prize payments. Players may win any of
ten prizes including the top prize of $1,000 a day for life, the second prize of $25,000 a
year for life, or one of eight set prize amounts ranging from $3 to $5,000. Lucky for Life
drawings are conducted daily.
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Lotto 47, EZMatch, and Double Play
Lotto 47 is a draw game in which players select six of forty-seven numbers for a chance
to win a progressive jackpot prize. The jackpot starts at $1 million and is guaranteed to
increase by a minimum of $50,000 after each drawing if the jackpot is not won. Players
may win any of four prizes including the jackpot and three set prize amounts ranging
from $5 to $2,500. EZMatch is an add-on game that offers players a chance to win
instantly. Double Play is an add-on game that was launched in January 2019 and uses a
player’s Lotto 47 numbers for an additional draw that takes place after the regular
drawing. Lotto 47 drawings are conducted twice a week on Wednesday and Saturday.
Fantasy 5, EZMatch, and Double Play
Fantasy 5 is a draw game in which players select five of thirty-nine numbers for a
chance to win a progressive jackpot prize. The jackpot starts at $100,000 and increases
by a minimum of $5,000 after each drawing if the jackpot is not won. Players may win
any of four prizes including the jackpot and set prize amounts ranging from $1 to $100.
EZMatch is an add-on game that offers players a chance to win instantly. Double Play is
an add-on game that was launched in January 2019 and uses a player’s Fantasy 5
numbers for an additional draw that takes place after the regular drawing. Fantasy 5
drawings are conducted daily.
Daily 3 and Daily 4
The Daily 3 and Daily 4 are the Lottery’s longest running and most consistently popular
draw games. Players select three numbers ranging from zero to nine for the Daily 3 and
four numbers ranging from zero to nine for the Daily 4. Numerous wager options are
offered such as straight (match each number in order drawn), boxed (match numbers in
any order for a reduced prize), and wheeled (match numbers in any order for full prize).
Drawings for both games are conducted twice a day, every day of the week.
Poker Lotto
Poker Lotto offers players a chance to win instantly and again during a drawing. Players
randomly are assigned five of fifty-two cards at the time of purchase. If the player’s cards
form one of the eligible winning poker hands, the player instantly wins a prize of $2 to
$5,000. In addition to the instant game, the player’s cards are also eligible for a drawing.
Five cards are drawn and players may win prizes ranging from $3 to $100,000 based on
the number of cards matched. Poker Lotto drawings are conducted daily.
Keno!
Keno! is a draw game in which players select ten of eighty numbers. The Lottery draws
twenty-two numbers and players matching ten of those numbers win the jackpot prize of
$250,000. Players may win any of six prizes including the jackpot and lower-tier prizes
ranging from a free $1 instant ticket to $2,500. Keno! drawings are conducted daily.
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Club Keno, Kicker, The Jack, and Extra
Club Keno is a draw game predominantly played in bars, restaurants, and bowling
facilities. Players select from one to ten of eighty numbers. The Lottery draws twenty
numbers. Prizes are based on how many numbers the player matches and the selected
ticket price. The Kicker is an add-on wager that allows players to multiply their prizes by
as much as ten times. The Jack is an add-on wager that allows players to participate in a
progressive jackpot starting at $10,000. Extra is an add-on wager where an additional
drawing takes place after each Club Keno drawing. Ten “Extra” numbers are drawn from
the remaining pool of sixty. Players can win in both drawings but cannot combine
numbers from both drawings. Club Keno and Extra drawings are conducted every 3.5
minutes, and the results are displayed both in-store and online.
Fast Cash
Fast Cash tickets print from the Lottery terminal and offer players instant-win
opportunities along with a progressive jackpot that can be won at any time. Games with
different themes are offered at price points of $1, $2, $5, $10, and $20. Players can win
set prizes ranging from $1 to $250,000. All Fast Cash games feature a progressive
jackpot that grows based on sales, so no game has a static top prize. Two of the $20
price point games offer a top prize of $250,000 plus the jackpot. Each game contributes
10% of sales to the jackpot and players can win either a share or the entire jackpot,
depending on the price of their ticket.
Budgetary System and Controls
The Lottery works with the Department of Technology, Management and Budget, the
State Budget Office, and the Legislature to create an annual appropriated budget for the
Lottery’s administrative costs. The Legislature reviews and approves the Lottery’s
budget each year. This approved budget becomes a spending cap for administrative
expenses and ticket revenues provide funding for operations.
Revenue and net income forecasts are prepared throughout the fiscal year comparing
estimates and forecasts to actual sales and expenses. This information is provided to
the State Budget Office and other state agencies in order to ensure Lottery projections
are reflected accurately in State budgetary planning.
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Economic Condition and Financial Information
Local Economy
The University of Michigan Research Seminar in Quantitative Economics provides the
following highlights in its most recent Michigan forecast issued on November 17, 2023:
We project statewide employment to decrease by only 2,200 jobs in the
fourth quarter, as the UAW strike ended before it could affect the November
jobs report. Still, employment climbs by 65,900 jobs on a calendar year
basis in 2023 due to the strong gains so far this year. Job gains slow to
40,400 in 2024 as the national economy hits a soft patch. Gains nudge up to
42,400 jobs in 2025 as the national economy reaccelerates but Michigan’s
labor market runs up against labor supply constraints. We expect Michigan’s
payroll employment count to surpass its pre-pandemic level in the first
quarter of 2024. By the end of 2025, statewide employment climbs to 86,200
jobs (1.9 percent) above the pre-pandemic level, although it remains
169,100 jobs (3.6 percent) below its all-time peak from the second quarter of
2000.
We estimate that the UAW strike cost the U.S. economy 69,500 jobs in the
October jobs report, including 27,400 striking workers and 42,100 spin-off
job losses across the economy.
Michigan’s blue-collar industries have led the recovery from the pandemic
recession, and we estimate that they were the most heavily impacted by the
recent strike in the auto industry. We expect these industries to lose 7,300
jobs on a quarterly basis in the fourth quarter but to add 7,700 jobs back in
the first quarter of next year as the industry rebounds from the strike. Taking
a longer perspective, the state’s blue-collar industries’ job growth has
slowed significantly this year, and we expect slower growth for these
industries to be the norm over the next two years as well.
Our calculations suggest that the fallout from the UAW strike will increase
the state’s unemployment rate from 3.9 percent in September to 4.1 percent
in the fourth quarter of 2023. We anticipate that the unemployment rate will
tick up further to 4.2 percent in early 2024 amid a period of below-trend
growth for the national economy. We project that Michigan's unemployment
rate will hover at 4.2 percent during 2024 and the first half of 2025.
Personal income per capita in Michigan held steady at $57,000 in 2022, as
the large swings in nominal income associated with the pandemic era
became a thing of the past. We expect Michigan’s personal income per
capita to increase by 4.1 percent this year and 3.2 percent next year, as the
national economy hits a speed bump. As broad economic momentum picks
back up, Michigan personal income per capita increases by 4.1 percent in
2025. That growth would bring Michigan’s personal income per capita to
$63,800 in 2025, roughly 30 percent higher than in 2019.
Michigan's real disposable income per capita surged by 8.2 percent in 2020,
thanks to low inflation and federal support, and it edged up a further 1.3
percent in 2021.
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In 2022, however, high inflation drove a decline of nearly 9 percent, sending
living standards back to 2019 levels. We expect Michigan’s real disposable
income largely to tread water until the national economy begins to pick up
speed in the second half of 2024. Our forecast calls for a gradual return to
modest growth in living standards in 2025, with real disposable income per
capita expected to exceed the 2019 average by just 1.3 percent.
The complete forecast and analysis from the University of Michigan Research Seminar
in Quantitative Economics is available at https://lsa.umich.edu/econ/rsqe.html.
In September 2023, Michigan’s seasonally adjusted unemployment rate increased by
two-tenths of a percentage point to 3.9 percent, while the national rate remained
unchanged at 3.8 percent. Statewide total employment rose by 13,000 and
unemployment advanced by 9,000 over the month. Michigan’s workforce rose by 23,000
during September. The national jobless rate remained unchanged at 3.8 percent during
September. Michigan’s rate was one-tenth of a percentage point larger than the U.S.
rate. The national unemployment rate increased by three-tenths of a percentage point
over the year. Michigan’s rate was reduced by four-tenths of a percentage point since
September 2022.
Michigan’s September 2023 employment level rose by 3.7 percent over the year, an
increase two full percentage points larger than the employment gain seen nationally (1.7
percent). Michigan’s quarterly average jobless rate remained unchanged at 3.7 percent
between the second and third quarter of 2023. According to the Department of
Technology, Management and Budget, fifteen Michigan labor market areas displayed
employment decreases over the month, with a median reduction of 0.9 percent. The
largest over-the-month decline occurred in the Northwest Lower Michigan region (-5.1
percent). The Detroit and Lansing metro areas both demonstrated employment
advances since August. Payroll jobs advanced by 56,000, or 1.3 percent, over the year.
Michigan not seasonally adjusted nonfarm jobs edged down by 2,000, or 0.1 percent,
over the month, resulting in a nonfarm employment total of 4,452,000 in September.
Decreases across most major industries in the state were partially offset by a large
seasonal increase in the government sector (+45,000).
Financial Information
The sale of Lottery tickets provides all funding for operations and the net income is
disbursed to the School Aid Fund for public education.
Operations involve the sale of paper and digital tickets, determination of winning tickets,
payment of prizes, compensation to retailers, and administrative functions. The Lottery
also provides $1 million a year to the Department of Health and Human Services for
responsible gaming programs.
The Lottery’s Commissioner is responsible to the Governor, Legislature, and the citizens
of the State for Lottery operations.
The Lottery’s goals and objectives ensure ongoing efforts to achieve operational
efficiencies and maximize contributions to the School Aid Fund. Operational results are
included in the Financial and Statistical Sections.
The Charitable Gaming Division’s net proceeds are dedicated to the state’s General
Fund. These activities are discussed in the MD&A.
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Accounting Systems and Policies
As an enterprise fund of the State of Michigan, the Lottery operates as a business within
state government structure. The Lottery uses the accrual basis of accounting following
Generally Accepted Accounting Principles (GAAP) and Governmental Accounting
Standards Board (GASB) pronouncements.
The Lottery voluntarily follows the recommendations of the Government Finance Officers
Association of United States and Canada (GFOA) for the contents of government
financial reports and participates in GFOA’s review program for the Certificate of
Achievement for Excellence in Financial Reporting. The Lottery also adheres to financial
reporting policies and procedures issued by the Michigan Department of Technology,
Management and Budget.
Internal Controls
The Lottery and State of Michigan policies and procedures tightly control assets,
inventory, computer systems, drawings, and accounting. Separation of duties, internal
control structure, ongoing monitoring, and evaluation of information as well as stringent
employee, retailer, and contractor standards all minimize risk of loss or theft. All
employees, retailers, and contractor employees must pass a security background check
prior to being hired or licensed.
The system of internal controls has been designed to provide reasonable rather than
absolute assurance that the financial statements are free from material misstatement.
The concept of reasonable assurance recognizes that the cost of a control should not
exceed the benefits likely to be derived, and that the costs and benefits require
estimates and judgments by management.
Debt Administration
Long-term liabilities for the Lottery are for installment payments owed to certain prize
winners. These prize liabilities are funded by investments in U.S. Treasury zero-coupon
bonds and State of Michigan General Obligation Capital Appreciation Bonds, which are
held to maturity.
Long-Term Financial Planning
The Lottery continuously works to increase sales. Each year, a strategic marketing plan
is developed that identifies new product initiatives, promotions, and advertising
programs. Additionally, expenditures related to these product investments are
continuously reviewed and analyzed so that net return to the School Aid Fund is
maximized.
In the retail channel, the Lottery plans to introduce forty-eight new retail instant games,
twenty-five new Pull Tabs games, and several promotions for its Club Keno game in
fiscal year 2024. There are also some changes to Club Keno under consideration. The
proposed changes include modifying the Kicker, changing The Jack to a 9-spot,
replacing Extra with a new “Plus 3” add-on game and increasing the 10-spot top-prize to
$500,000. In fiscal year 2024, quarter 3, Cash Pop will launch as a new draw game.
Lottery’s digital gaming team plans to introduce around 40 new digital instant games,
with a total 250 running games, including new game themes and prize structures, that
will create a wider portfolio of compelling options for players. The main focus will be on
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maximizing awareness of available products and jackpots to all players visiting Lottery's
website and mobile applications to drive sales. Retail and online integrations will
continue as part of a holistic player engagement strategy.
Awards and Acknowledgements
Awards
The Government Finance Officers Association of the United States and Canada (GFOA)
awarded the Lottery a Certificate of Achievement for Excellence in Financial Reporting
for its fiscal year 2022 ACFR. To receive this prestigious award, a government agency
must publish an easily readable and efficiently organized annual comprehensive
financial report that meets GAAP and applicable legal requirements. The Lottery is proud
to have received a Certificate of Achievement from the GFOA for 18 consecutive years
and will submit this report to the GFOA for consideration.
Acknowledgement
Preparation of this report would not be possible without the hard work and dedication of
Lottery’s Financial Gaming Services and Accounting division as well as the entire Lottery
team. Their tremendous efforts and teamwork make this informative document possible.
Respectfully submitted,
Kristi L.B. Thompson
Deputy Commissioner of Administration & CFO
Jessica Karbowski Weare
Acting Commissioner
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Michigan Lottery
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
September 30, 2022
Executive Director/CEO
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ACTING
COMMISSIONER
Jessica Weare
EXECUTIVE
DIVISION
ADMINISTRATION
Kristi Thompson
Cristina McDermott
CHARITABLE
GAMING
Ron Wells
TECHNOLOGY &
PLANNING
Laura Trayer
INFORMATION
SECUR
ITY
Scott Hall
PLAYER
RELATIONS
Jake Harris
FINANCIAL GAMING
SERVICES
Natalia Tiemann
DEPARTMENT
SERVICES
Julie Proux
PRODUCT
DEVELOPMENT
Lindsay Sands
DRAW CASH &
FAST CASH
GAMES
Amanda Miller
ADVERTISING &
PROMOT
IONS
Tim Shafer
DEPARTMENT OF TECHNOL
OGY,
MANAGEMENT & BUDGET
AGENCY SERVICES
APPLICATIONS &
PROGRAMMING
NETWORK AND
COMMUNI
CATIONS
SERVER TEAM 4
INTERNAL
AUDIT (DTMB)
Sherri Washabaugh
HUMAN
RESOURCES
(MCSC)
Lori Fedewa
REGIONAL
OFFICES
Bryan Torok
Pat Napoleon
RETAILER
SERVICES
Dina Woodward
ACCOUNTING
(Treasury)
DIGITAL
GAMING
Zac Stri
ckler
GAMING CONTROL
Trisha Townsend
LEGISLATIVE
LIAISON
Mike Gallagher
GAMES &
MARKETING
Vacant
SALES
DIVISION
William Griffin
DRAWING
CONTROL
Tim Ridderhoff
Michigan State Lottery
Organization Chart and Principal Officials
TECHNOLOGY &
GAMING OPERATIONS
Aaron Dickason
GAMING
INSPECTION
CHIEF DEPUTY
COMMISSIONER
William Griffin
TECHNOLOGY &
PLATFORMS
Sandeep Jain
SECURITY &
INVESTIGATIONS
Ben Vogel
COMPLIANCE &
LEGAL AFFAIR
S
Joe Froelich
DATA CENTER
OPERATIONS
Nick Rebh
DATA CENTER
OPERATIONS TEAM &
DRAWING
OPERATIONS
Vacant
- 11 -
Independent Auditor's Report
To
Ms. Jessica Weare, Acting Commissioner,
the Bureau of State Lottery, State of Michigan,
and Mr. Doug Ringler, CPA, CIA,
Auditor General, State of Michigan
Bureau of State Lottery, State of Michigan
Report on the Audits of the Financial Statements
Opinion
We
have audited
the financial statements of the
Bureau of State Lottery, State of Michigan
(the "
Lottery
"),
an
enterprise fund of the State of Michigan,
as of and for the six-month periods and years ended September 30,
2023 and 2022 and the related notes to the financial statements, which collectively comprise the
Lottery
's basic
financial statements, as listed in the table of contents.
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects,
the financial position of the
Lottery
as of
September 30, 2023
and 2022
and the changes in its financial position
and its cash flows for the
six-month periods and years
then ended in accordance with accounting principles
generally accepted in the United States of America.
Basis for Opinion
We conducted our audit
s
in accordance with auditing standards generally accepted in the United States of
America (GAAS)
and the standards applicable to financial audits contained in
Government Auditing Standards
issued by the Comptroller General of the United States
. Our responsibilities under those standards are further
described in the Auditor's Responsibilities for the Audits of the Financial Statements section of our report. We
are
required to be
independent of the
Lottery
and to meet our other ethical responsibilities in accordance with
the relevant ethical requirements relating to our audit
s
. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
We draw attention to Note 1, which explains that these financial statements present only the Bureau of State
Lottery, State of Michigan and do not purport to, and do not, present fairly the financial position of the State of
Michigan as of September 30, 2023 and 2022 or the changes in its financial position and the changes in its cash
flows thereof for the six-month periods then ended in conformity with accounting principles generally accepted in
the United States of America. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with accounting principles generally accepted in the United States of America and for the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audits of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our
opinion
. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a
guarantee that audits conducted in accordance with GAAS
and
Government Auditing Standards
will always
detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a
reasonable user based on the financial statements.
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To
Ms. Jessica Weare, Acting Commissioner,
the Bureau of State Lottery, State of Michigan,
and Mr. Doug Ringler, CPA, CIA,
Auditor General, State of Michigan
Bureau of State Lottery, State of Michigan
In performing audits in accordance with GAAS and Government Auditing Standards, we:
•
Exercise professional judgment and maintain professional skepticism throughout the audits.
•
Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or
error, and design and perform audit procedures responsive to those risks. Such procedures include examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements.
•
Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are
appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the
Lottery's internal control. Accordingly, no such opinion is expressed.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluate the overall presentation of the financial statements.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that
we identified during the audits.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's
discussion and analysis and required supplementary information, as identified in the table of contents,
be
presented to supplement the basic financial statements. Such information is the responsibility of management
and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in
an appropriate operational, economic, or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted in the United
States of America, which consisted of inquiries of management about the methods of preparing the information
and comparing the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not provide
us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the financial statements that collectively
comprise the
Lottery
's
basic financial statements. The other supplementary information is presented for the
purpose of additional analysis and is not a required part of the basic financial statements. Such information is the
responsibility of management and was derived from and relates directly to the underlying accounting and other
records used to prepare the basic financial statements. The information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records used to
prepare the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In our
opinion, the
other supplementary information
is
fairly stated in all material respects in relation to the basic
financial statements as a whole.
Other Information
Management is responsible for the other information included in the Annual Comprehensive Financial Report.
The other information comprises the
introductory and statistical sections
but does not include the basic financial
statements and our auditor's report thereon. Our opinion on the basic financial statements does not cover the
other information, and we do not express an opinion or any form of assurance thereon.
- 13 -
To
Ms. Jessica Weare, Acting Commissioner,
the Bureau of State Lottery, State of Michigan,
and Mr. Doug Ringler, CPA, CIA,
Auditor General, State of Michigan
Bureau of State Lottery, State of Michigan
In connection with our audits of the basic financial statements, our responsibility is to read the other information
and consider whether a material inconsistency exists between the other information and the basic financial
statements or whether the other information otherwise appears to be materially misstated. If, based on the work
performed, we conclude that an uncorrected material misstatement of the other information exists, we are
required to describe it in our report.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
January 19, 2024
on
our consideration of the
Lottery
's
internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that
report is solely to describe the scope of our testing of internal control over financial reporting and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the
Lottery
's
internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the
Lottery
's
internal control over financial reporting and
compliance.
January 19, 2024
- 14 -
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 15 -
The following discussion provides an overview of the Lottery’s financial performance and
activities for the fiscal year ended September 30, 2023. Please read it in conjunction with the
financial statements, which begin on page 29.
Using This Report
The Lottery is accounted for as an enterprise fund, reporting on all of the activity’s assets and
liabilities using the accrual basis of accounting, much like a private business entity. As such, this
Annual Comprehensive Financial Report consists of a series of financial statements, along with
explanatory notes to the financial statements and supplementary schedules. The Statement of
Net Position on page 29 and the Statement of Revenues, Expenses and Changes in Net
Position on page 30, report the Lottery’s net position and its changes.
By law, the Lottery is required to deposit all of its net income each fiscal year into either the
State School Aid Fund (for income related to Lottery gaming activities) or the General Fund (for
income related to Charitable Gaming activities). The net position of the Lottery consists of
capital assets, unrealized gains or losses on investments held to fund annuitized prize
payments, as well as the change in pension and other postemployment benefits (OPEB)
liabilities, deferred inflows, and outflows related to pension and OPEB. To assess the Lottery’s
financial position and financial health, the reader of these statements should pay particular
attention to changes in the components of assets and liabilities as set forth in the Statement of
Net Position, and to changes in operating revenues, expenses, and disbursement expenses to
other funds as set forth in the Statement of Revenues, Expenses and Changes in Net Position.
In addition, the reader should also refer to the accompanying notes to the financial statements.
Financial Highlights
Compared to the fiscal year ended September 30, 2022:
Total revenues for all activities increased by $56.8 million, or 1.2%.
Operating revenues for Lottery gaming activities increased by $27.6 million, or 0.6%.
Non-operating revenues increased by $29.2 million, or 152.9%, primarily due to an
increase in common cash interest rates and decrease in unrealized loss on
investments.
Total expenses increased $41.5 million, or 0.8%.
Operating expenses decreased $63.8 million, or 1.7%, consisting of a decrease in
net prize awards of $80.2 million and an increase in direct game and administrative
expenses of $16.4 million.
Non-operating expenses increased by $105.3 million, or 8.4%, reflecting an increase
in disbursements to the School Aid Fund of $103.4 million, a decrease in prize
amortization of $0.2 million, and an increase in disbursements to the General Fund
of $2.1 million.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 16 -
Net Position
A summary of the Lottery’s net position is presented below:
2023 2022 2021
Current and other assets 277.0$ 252.6$ 254.2$
Investments - non-current 108.4 120.0 148.7
Other assets 1.1 1.5 1.8
Capital assets
(net of accumulated depreciation) 1.3 1.7 0.8
Total assets 387.8 375.8 405.5
Deferred Outflows of Resources:
Deferred outflows related to pensions 3.1 2.9 2.9
Deferred outflows related to OPEB health 8.4 7.5 10.0
Deferred outflows related to OPEB life insurance 0.7 1.0 1.0
T
ota
l
d
e
f
erre
d
out
fl
ows o
f
resources
12
.
2
11
.
4
13
.
9
Current liabilities 272.3 245.5 241.6
Long-term liabilities 167.9 168.9 196.3
Total liabilities 440.2 414.4 437.9
Deferred Inflows of Resources:
Deferred inflows related to pensions 0.3 7.8 -
Deferred inflows related to OPEB health 14.0 16.9 14.7
Deferred inflows related to OPEB life insurance 2.1 0.9 0.6
Total deferred inflows of resources 16.4 25.6 15.3
Net position:
Net investment in capital assets 0.1 0.3 0.5
Unrestricted (deficit) (56.6) (53.1) (34.3)
Total net position (56.5)$ (52.8)$ (33.8)$
Table 1 - Net Position
(in millions)
September 30,
As shown in Table 1 above, the Lottery’s net position decreased from September 2022 to 2023
by $3.7 million and decreased from September 2021 to 2022 by $19.0 million. The decreases
noted above are primarily attributable to the unrealized losses on investments that the Lottery
holds to fund future payments due on annuitized Lottery prizes. Accounting principles dictate
that the Lottery record the gain or loss related to the change in market value of investments.
U.S. Treasury zero-coupon bonds and State of Michigan General Obligation Capital
Appreciation Bonds have been purchased for the payment of installment prize awards and are
generally held to maturity. The difference between the market value of these investments and
the amortized book value is considered a restriction for unrealized gains on investments and is
not available for disbursement to the School Aid Fund. Additional detailed information on
investments may be found in Note 3 in the accompanying financial statements.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 17 -
As of September 30, 2023 and 2022, the Lottery recorded a deficit in the amount restricted for
the School Aid Fund, which resulted in a negative overall net position. This deficit amount has
been reported as unrestricted on the Statement of Net Position on page 29 in the financial
statements, as a negative balance cannot be considered restricted.
Capital assets consist of equipment and leasehold improvements, plus right of use assets under
lease arrangements. During fiscal year 2023, net capital assets decreased by $0.4 million.
Capital assets increased $0.9 million from September 2021 to 2022. Additional detailed
information on capital assets may be found in Note 5 in the accompanying financial statements.
A detail of the Lottery’s liabilities is presented in Table 2 below:
2023 2022 2021
Current:
Accounts payable and other liabilities 29.7 31.3 29.2
Due to other State agencies 32.0 14.3 28.3
Prize awards payable (net of discount) 210.6 199.9 184.1
Total current 272.3 245.5 241.6
Non-current:
Prize awards payable (net of discount) 117.5 126.6 135.0
Net pension liability 27.4 17.6 29.0
Net OPEB liability - health 16.5 16.6 25.0
Net OPEB liability - life insurance 4.1 5.8 6.1
Other non-current liabilities 1.2 1.3 0.3
Compensated absences 1.2 1.0 0.9
Total non-current 167.9 168.9 196.3
Total liabilities 440.2$ 414.4$ 437.9$
September 30,
Table 2 - Liabilities
(in millions)
Non-current liabilities consist of prize liability for prizes paid in installments over several years,
long-term pension recorded as a result of GASB 68, and long-term OPEB obligation allocation
recorded as a result of GASB 75. For the fiscal year ended September 2023, long-term prize
liability decreased $9.1 million, or 7.2%, from September 2022 and decreased by $8.4 million, or
6.2%, from September 2021 to September 2022. The decreases from September 2022 to
September 2023 and September 2021 to September 2022 are attributable to the maturing of
some long-term prize liabilities as well as minimal additions to the pool of annuitized installment
prizes. Refer to Note 7 in the accompanying financial statements for more information.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 18 -
A summary of the Lottery’s change in net position is presented in Table 3 below:
2023 2022 2021
Operating revenues 4,939.1$ 4,911.5$ 5,058.0$
Operating expenses:
Prizes and direct game expenses
Prizes less unclaimed prizes (3,016.8) (3,097.0) (3,057.0)
Commissions and game related expenses (501.8) (491.6) (515.5)
Total prizes and direct game expenses (3,518.6) (3,588.6) (3,572.5)
Income before other operating
expenses 1,420.5 1,322.9 1,485.5
Other operating expenses (68.8) (62.6) (56.2)
Operating income 1,351.7 1,260.3 1,429.3
N
on-operat
i
ng revenues an
d
(
expenses
)
:
Investment and interest revenues (losses) 10.1 (19.1) (5.6)
Investment and interest expenses (5.0) (5.2) (6.2)
School Aid Fund disbursement expense (1,352.0) (1,248.6) (1,419.8)
General Fund disbursement expense (7.5) (5.4) (4.5)
Health & Human Services disbursement expense (1.0) (1.0) (1.0)
Net non-operating expense (1,355.4) (1,279.3) (1,437.1)
Change in net position (3.7) (19.0) (7.8)
Total net position beginning of period (52.8) (33.8) (26.0)
Total net position end of period (56.5)$ (52.8)$ (33.8)$
September 30,
Table 3 - Changes in Net Position
(in millions)
Because the Lottery is required by law to deposit all of its net income into the School Aid Fund
or General Fund, change in net position does not reflect the result of the Lottery’s operating
activities. The $1,352.0 million disbursement expense to the School Aid Fund reflects the
Lottery’s operating activities for the fiscal year ended September 2023. There was an increase
in disbursement expense of $103.3 million, or 8.3%, from September 2022. For the fiscal year
ended September 2022 there was a decrease of $171.2 million, or 12.0%, from September
2021. The disbursement expense to the General Fund reflects Charitable Gaming activities for
the fiscal year ended September 2023. Charitable Gaming activities experienced an increase in
net revenues for the fiscal year ended September 2022 compared to September 2021, as well
as for the fiscal year ended September 2023 compared to September 2022. The increases from
September 2021 to September 2022 and September 2022 to September 2023 are primarily due
to minimized operating costs, as well as the shift of Millionaire Party operating expenses to the
Michigan Gaming Control Board. Refer to Note 17 for further details. Charitable Gaming net
income is disbursed annually to the General Fund.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 19 -
Disbursements to other funds are detailed in Table 4 below:
2023 2022 2021
School Aid Fund 1,352.0$ 1,248.6$ 1,419.8$
General Fund 7.5 5.4 4.5
Health & Human Services
1.0 1.0
1.0
Total Disbursements to Other Funds
1,360.5$
1,255.0$
1,425.3$
September 30,
Table 4 - Disbursements to Other Funds
(in millions)
Revenues
The following chart shows the major sources and the percentages of operating revenues for the
fiscal year ended September 30, 2023:
Instant Games 48.0%
iLottery instants, Net Win
3.7%
Daily Games 19.6%
Mega
Millions/Megaplier 4.6%
Powerball/Powerplay/
Powerball Double
Play 5.7%
Other Games 2.7%
Club Games 13.0%
Lucky for Life 0.7%
Fast Cash 1.7%
Charitable Gaming &
Other 0.3%
Total Operating Revenues
September 30, 2023
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 20 -
A detail of the Lottery’s revenues is presented in Table 5 below:
2023 2022 2021
Operating revenues:
Instant tickets 2,364.7$ 2,381.0$ 2,448.6$
iLottery Instants, Net Win 183.5 193.2 241.8
Daily games 967.8 1,070.7 1,170.0
Mega Millions/Megaplier 227.5 175.1 177.1
Powerball/Power Play/Powerball Double Play 281.5 169.4 151.1
Lucky for Life 36.8 36.6 23.6
Fast Cash 83.2 95.5 73.3
Club games 642.0 662.1 600.2
Other games and promotions 135.8 113.3 160.4
Other operating revenue 16.3 14.6 11.9
Total operating revenues 4,939.1 4,911.5 5,058.0
Non-operating revenues:
Unrealized gain (loss) on investments (5.8) (26.4) (12.2)
Amortization on bonds 5.6 5.8 6.2
Other income 10.3 1.5 0.4
Total non-operating revenue 10.1 (19.1) (5.6)
Total revenues 4,949.2$ 4,892.4$ 5,052.4$
September 30,
Table 5 - Revenues
(in millions)
Operating revenues, primarily Lottery ticket sales, for the fiscal year ended September 2023
increased from September 2022 by $27.6 million, or 0.6%, and decreased $146.5 million, or
2.8%, for the fiscal year ended September 2022 compared to September 2021.
Instant game ticket sales decreased by $16.3 million, or 0.7%, for the fiscal year ended
September 2023 compared to September 2022 and decreased by $67.6 million, or 2.7% for the
fiscal year ended September 2022 over September 2021. The sales decrease for the year
ended September 30, 2023 is primarily due to increased competition from casinos now offering
sports betting and online gaming (including significant marketing expenditures), as well as
reduction of disposable income caused by inflationary pressures.
iLottery instant ticket net win, as described in Note 8, decreased $9.7 million, or 5.0%, for the
fiscal year ended September 2023 compared to September 2022, and net win decreased $48.6
million, or 20.0%, for the fiscal year ended September 2022 compared to September 2021.
Refer to Note 8 in the accompanying financial statements.
The iLottery sales decrease for the fiscal year ended September 2023 is primaily due to
increased competition from casinos now offering sports betting and online gaming (including
significant marketing expenditures) reduction of disposable income caused by inflationary
pressures.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 21 -
Daily Games sales, as shown in Table 5 above, includes Daily 3 and Daily 4. Daily games sales
for the fiscal year ended September 2023 decreased by $102.9 million, or 9.6%, from
September 2022. Sales for the fiscal year ended September 2022 decreased $99.3 million, or
8.4%, over September 2021. The sales decrease for the fiscal year ended September 2023 is
primarily due to a decrease in high tier prize payouts, direct competition from casinos now
offering sports betting and online gaming (including significant marketing expenditures), and
reduction of disposable income by inflationary pressures.
Mega Millions sales for the fiscal year ended September 2023 increased by $52.4 million, or
29.9%, compared to the fiscal year ended September 2022. Sales for the fiscal year ended
September 2022 decreased by $2.0 million, or 1.1%, compared to September 2021. The sales
increase for the fiscal year ended September 2023 compared to the fiscal year ended
September 2022 can be attributed to an increase in the number of jackpots over $100.0 million,
particularly a $1.3 billion jackpot that was won on January 13, 2023. The decrease in sales for
the fiscal year ended September 2022 over the fiscal year ended September 2021 can be
primarily attributed to a decrease in the number of jackpots over $100.0 million.
Powerball sales for the fiscal year ended September 2023 increased by $112.1 million, or
66.2%, over September 2022, and increased by $18.3 million, or 12.1%, for the fiscal year
ended September 2022 compared to September 2021. The sales increase from September
2023 to September 2022 is primarily due to an increase in the number of jackpots greater than
$100.0 million, with one world record jackpot of over $2.0 billion won in November 2022 and
another $1.1 billion won in July 2023. The increase in sales for the fiscal year ended September
2022 is primarily due having a full year of drawings three times per week and a full year of
Double-Play game sales, both of which began in August 2021.
Lucky for Life sales had a slight increase of $0.2 million, or 0.5%, for the fiscal year ended
September 2023 over September 2022, and an increase of $13.0 million, or 55.0%, for the fiscal
year ended September 2022 over September 2021. The sales increase for both fiscal years can
be primarily attributed having a full year of daily Lucky for Life drawings, which began in July
2021, and the addition of the Lucky for Life game to the iLottery platform in May 2020.
Fast Cash sales decreased by $12.3 million, or 12.9%, for the fiscal year ended September
2023 over September 2022, and sales increased by $22.2 million, or 30.2%, for the fiscal year
ended September 2022 compared to September 2021. The sales decrease from September
2023 to September 2022 is primarily due to the lack of jackpot growth, which is the main driver
for Fast Cash sales. The jackpot was $1,000,000 or higher only 7% of the days. Currently, there
are 11 Fast Cash games on sale, and the jackpot was hit on an average of once every twenty
days during this fiscal year ended September 2023. The sales increase for the fiscal year ended
September 2022 over September 2021 is primarily due to the increase in the odds of winning
the progressive jackpot in November of 2021 creating higher jackpots and driving sales.
Club games, as shown in Table 5 above, include Club Keno add-ons (Kicker, The Jack, and
Extra), and Pull-Tabs. Club Games sales for the fiscal year ended September 2023 decreased
by $20.1 million, or 3.0%, over September 2022. Sales for the fiscal year ended September
2022 increased by $61.9 million, or 10.3%, compared to September 2021. The sales decrease
for the year ended September 30, 2023 is primarily due to an increased competition from
casinos now offering sports betting and online gaming (including significant marketing
expenditures) and reduction of disposable income by increased inflationary pressures. The
sales increase for the fiscal year ended September 2022 over September 2021 can be
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 22 -
attributed to the re-opening and return to normal operations of Michigan bars and restaurants in
2021 through 2022 after temporary closures and capacity restrictions were imposed in 2020 due
to the COVID-19 pandemic, as well as the return of the Tripler Time promotion in June 2022.
Additionally, increased focus was placed on promoting the Pull-Tabs product to retailers who do
not currently sell it.
Other games consist of Lotto 47, Lotto 47 EZ Match, Lotto 47 Double Play, Fantasy 5, Fantasy
5 EZ Match, Fantasy 5 Double Play, Keno, Raffle, Poker Lotto, Online Game Cards, and
iLottery promotions. Other game sales for the fiscal year ended September 30, 2023 increased
by $22.5 million, or 19.9%, compared to September 2022, and sales decreased by $47.1
million, or 29.3%, for the fiscal year ended September 2022 over September 2021. The sales
increase for the fiscal year ended September 2023 over September 2022 can be primarily
attributed to a large Lotto 47 jackpot in August of 2023, as well as the new Raffle game
introduced on the digital platform in May of 2023. The sales decrease for the fiscal year ended
September 30, 2022 is primarily due to an absence of pandemic-related factors that increased
sales in the fiscal year 2021, increased competition from casinos now offering sports betting and
online gaming (including significant marketing expenditures), and reduction of disposable
income by inflationary pressures.
The increase in non-operating revenues for the fiscal year ended September 2023 compared to
September 2022 resulted primarily from an increase in common cash interest revenue and a
decrease in unrealized loss on investments. The decrease in non-operating revenues for the
fiscal year ended September 2022 compared to September 2021 resulted primarily from an
increase in the unrealized loss on investments. As previously discussed, the unrealized gain or
loss on investments is a reflection of the market value of the investments and does not impact
the disbursement to the School Aid Fund.
The decrease in bond amortization for the fiscal year ended September 2023 compared to
September 2022 and September 2021 is due to a decreasing bond portfolio from maturing
investments, as well as the fact that most prize winners have elected the cash option instead of
installment payments.
Other income increased for the fiscal year ended September 2023 compared to September
2022 and September 2021. The increases are due to changes in interest rates on common cash
investments. Additional detailed information on investments may be found in Note 3 in the
accompanying financial statements.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 23 -
Expenses
The following chart shows prizes, game costs, and other operating expenses as a percentage of
total operating expenses for the fiscal year ended September 30, 2023:
Prize Awards 84.1%
Retailer and Vendor
Commissions 12.7%
Advertising 0.9%
Game Related Expense
1.3%
Other Operating
Expense 1.0%
Total Operating Expenses
September 30, 2023
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 24 -
A detail of the Lottery’s expenditures is presented in Table 6 below:
2023 2022 2021
Prizes:
Instant prizes 1,793.7$ 1,788.3$ 1,823.4$
Draw Game prizes 853.7 905.4 918.4
Club game prizes 426.5 438.7 393.3
Total prizes 3,073.9 3,132.4 3,135.1
Less: unclaimed prizes 57.1 35.4 78.1
Net prize awards 3,016.8 3,097.0 3,057.0
Direct game expenses:
Retailer commissions 354.7 356.6 370.9
Vendor commissions and other expenses 98.9 93.9 103.7
Game related expenses 48.2 41.1 40.9
Total direct game expenses 501.8 491.6 515.5
Other operating expenses:
Salaries, wages and benefits 25.6 17.5 21.6
Other professional services 5.4 8.8 7.7
Printing and supplies 2.5 1.8 1.5
Other general and administrative 3.5 3.4 2.6
Promotion and advertising 31.8 31.1 22.8
Total other operating expenses 68.8 62.6 56.2
Total operating expenses 3,587.4 3,651.2 3,628.7
Non-operating expenses:
Amortization of prize discount 5.0 5.2 6.2
School Aid Fund disbursement 1,352.0 1,248.6 1,419.8
General Fund disbursement 7.5 5.4 4.5
Health & Human Services disbursement 1.0 1.0 1.0
Total non-operating expenses 1,365.5 1,260.2 1,431.5
Total expenses 4,952.9$ 4,911.4$ 5,060.2$
September 30,
Table 6 - Expenses
(in millions)
Instant games overall payout for the fiscal year ended September 2023 increased to 75.9% from
75.1% at September 2022 and from 74.5% at September 2021. The games vary in payout
percentage depending on ticket price. Instant game prize payouts range from 60.0% for a $1
game to 79.9% for a $50 game for the fiscal year ended September 2023.
The combined Daily Games prize payout decreased overall for the fiscal year ended September
2023 compared to September 2022. Daily 3 prize payout decreased to 48.2% for the fiscal year
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 25 -
ended September 2023, compared to 52.5% for the fiscal year ended September 2022 and
50.1% at September 2021.
Daily 4 prize payout decreased to 43.9% for the fiscal year ended September 2023, compared
to 53.9% for the fiscal year ended September 2022 and 50.0% at September 2021. Daily games
are designed to yield an average prize payout of 50.0% and combined, the games averaged a
payout of 45.9% for the fiscal year ended September 2022.
The Club Games prize payout percentage increased to 66.4% for the fiscal year ended
September 2023, compared to 65.8% for the fiscal year ended September 2022 and 65.1% for
September 2021. The other draw games have an anticipated payout between 50.0% and
80.1%.
Retailer and vendor commissions have increased commensurate with higher overall sales. Total
overall increase of $3.1 million, or 0.7% for the fiscal year ended September 2023 compared to
September 2022 and decreased by $24.1 million, or 5.0%, for the fiscal year ended September
2022 compared to September 2021.
Other operating expenses have increased by $6.2 million, or 9.9%, for the fiscal year ended
September 2023 compared to September 2022 and increased by $6.4 million, or 11.3%, for the
fiscal year ended September 2022 compared to September 2021. Lessened closures and other
disruptions relating to the COVID-19 pandemic in 2020 through 2021, as well as overall
increase in sales, lead to an increase in advertising expenses for the fiscal years ended
September 2023 and September 2022 over September 2021. Increase in salaries, wages,
benefits, and printing costs, has also contributed to the increase for the fiscal year ended
September 2023 over September 2022.
Unclaimed Prizes
By law, Lottery prizes not claimed within one year of their drawing date are to be disbursed to
the State School Aid Fund.
The Lottery recognizes the value of unclaimed prizes using an allowance methodology. Under
this method, a 2-year historical average of retail game sales and actual unclaimed prizes are
utilized to estimate the amount of prizes awarded during the current year that will not be paid
out due to claims not being filed for those prizes. Refer to Note 1 for further details.
Unclaimed prizes for the fiscal year ended September 2023 increased by $21.7 million
compared to September 2022 and decreased by $42.7 million for the fiscal year ended
September 2022 compared to September 2021. The increase in unclaimed prizes for the fiscal
year ended September 2023 can be attributed to an expiration of several large instant games,
as well as one large Powerball prize. An increase in sales has also contributed to the increase
in the percentage used to estimate the annual allowance for unclaimed prizes. The large
decrease in unclaimed prizes for the fiscal year ended September 2022 compared to
September 2021 is primarily due to a revision to the unclaimed prize methodology effective in
October 2021. The historical average of sales used in the calculation was updated to make it
more consistent for Instant and Pull-Tab game sales. Also, all sales from the iLottery platform
were excluded from the historical average of sales due to a historically low amount of unclaimed
iLottery prizes.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 26 -
Charitable Gaming
A detail of the Lottery’s charitable gaming revenues, expense, and net income for the fiscal
years ended September 30 are presented in Table 7 below:
2023 2022 2021
Gross revenue 13.1$ 13.2$ 10.9$
Operating expenses (5.6) (7.8) (6.4)
Net income 7.5$ 5.4$ 4.5$
September 30,
Table 7 - Charitable Gaming Revenue, Expense, and Net Income
(in millions)
The mission of the Charitable Gaming Division is to maintain the integrity of charitable gaming
activities. Revenues received through the issuance of licenses and from the distribution of
charity-game tickets cover the costs of oversight. Any revenue in excess of program costs is
disbursed annually to the State’s General Fund.
Charitable gaming activities overseen by the Lottery include the licensing and regulation of
qualifying nonprofit organizations to conduct bingos, raffles, charity game ticket sales, and other
charitable gaming events for fundraising purposes. The Lottery also oversees the distribution
and sale of charity-game tickets (also for fund-raising purposes) to licensed suppliers.
Charitable Gaming launched a program in February 2015 to sell charity tickets through
specialized vending machines at 20 different licensed non-profit organizations.
Each year, qualifying nonprofit organizations generate millions of dollars in revenue through
their charitable gaming activities. In FY 23, 437 nonprofit organizations were qualified by the
Charitable Gaming Division to engage in charitable gaming activities. 9,455 license applications
were processed and 9,063 licenses were issued, including 428 regular bingo licenses, 333
special bingo licenses, 4,925 large raffle licenses, 2,116 small raffle licenses, 633 combination
raffle licenses, 559 annual charity game ticket licenses, 20 special charity game ticket licenses,
31 hall licenses and 18 supplier licenses.
The Charitable Gaming Division conducted 984 inspections of qualified nonprofit organizations
and investigated 52 complaints. Inspections ensure proceeds are accounted for by the qualified
licensed nonprofit organizations and used for lawful purposes and assist qualified organizations
in maximizing proceeds for their charitable cause. Abuses encountered by the Charitable
Gaming Division include improper management of gaming proceeds and failure to obtain
appropriate charitable gaming licenses.
Executive Order 2012-4 (E.O. 2012-4), effective June 10, 2012, transferred the licensing and
regulation of Millionaire Party activities from the Lottery to the Michigan Gaming Control Board
(MGCB). MGCB Millionaire Party licensing and regulation was later codified pursuant to
Michigan Public Act 159 of 2019. According to E.O. 2012-4, Millionaire Party licensing revenue
shall be remitted to the Lottery and all necessary expenses up to $3.1 million shall be financed
by the Lottery. Effective fiscal year 2023, per Public Act 269 and Public Act 270, all expenses
related to Millionaire Party are being funded from the Internet Gaming Fund and are
administered by the Michigan Gaming Control Board.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 27 -
Other Potentially Significant Factors Impacting Next Year
In the retail channel, the Lottery plans to introduce forty-eight new retail instant games in fiscal
year 2024, an increase of one game compared to the previous fiscal year. Of these forty-eight
games, 70% will consist of new titles and designs vetted by players in focus groups. The
remaining 30% will consist of reliably high-selling Bingo, Cashword and Wild Time games.
These games will continue to utilize unique themes, play styles, and new innovations, as well as
tailored prize structures that provide players with the best play experience. A new $50 game,
500X Money Maker will launch early Q1 and will have payouts of over $300,000,000 in total
cash prizes, over $38,000,000 in multiplied prizes, and no breakeven prizes. This game will
incorporate a payout of over 80% with $2,000,000 in second chance prizes. In FY24 the printed
products team will focus on having a balanced portfolio offering dependable core games and
families of games, as well as offering games designed for distinct player segments. Individual
games will be carefully chosen by exploring new themes, adapting high performing games
within the industry, and revisiting market tested player favorites.
On the draw games side, the Lottery is planning for two one-month long Club Keno Tripler Time
bonus promotions in Q2 and Q3 of fiscal year 2024. The Lottery is also considering some
changes to the game and add-ons in Q4 of FY24. The proposed changes include modifying the
Kicker, changing The Jack to a 9-spot, replacing Extra with a new “Plus 3” add-on game and
increasing the 10-spot top-prize to $500,000. In Q2 and Q4 of FY24, the Lottery will run Daily 3
& 4 bonus payout promotions. As always with Daily Game promotions, the objective will be to
stimulate winning experiences with short-term ratcheted payouts to increase excitement and
sales for the Daily 3 & 4. Promotions will only be implemented if natural payouts for the games
are lower than the designed 50% payout. The Lottery plans to launch a new first $30 Fast Cash
game in July and will have a Jackpot Slots playstyle offering players a chance to win 100% of
the progressive jackpot plus $1,000,000. In March of 2024, Lottery is planning to launch a new
draw game called Cash Pop. Cash Pop is a draw game that players can win by matching just
one number from one through 15. Players can play one number, multiple numbers – or all 15
numbers. The more numbers played the better their chance to win. The Lottery will draw one
number from 1- 15. Players can win by matching any of their numbers to the one number drawn
by the Lottery. Drawings are held every 14 minutes, and the results can be viewed on Club
Keno monitors, retail display screens, and online at michiganlottery.com. Cash prizes range
from five times up to 250 times the wager amount.
The Lottery will continue to conduct research on these new concepts. The goal of the research
is to evaluate the four concepts and determine which concept(s) offer the best opportunity to
increase player engagement, overall revenue, and provide a fun and rewarding play experience.
In FY24, Lottery will continue to add new game studios to allow for an increased launch
schedule and an expanded library of games. Lottery’s digital gaming team plans to introduce
around 40 new digital instant games, with a total 250 running games, in fiscal 2024. The main
focus will be on maximizing awareness of available products and jackpots to all players visiting
Lottery's website and mobile applications to drive sales. Additionally, the improved use of
communication channels, relevant promotions, and content personalization will increase player
engagement.
Management continuously reviews and explores new game concepts and features, promotions,
and opportunities to engage retailers.
Bureau of State Lottery, State of Michigan
Management’s Discussion and Analysis
- 28 -
Contacting the Lottery’s Financial Management
This financial report is designed to provide the Legislature and the executive branch of
government, the public, and other interested parties with an overview of the financial results of
the Lottery’s activities and to show the Lottery’s accountability for the money it receives.
Percentages presented in the Management’s Discussion and Analysis are based on the
rounded figures presented in the tables. If you have questions about this report or need
additional financial information, contact the Deputy Commissioner for Administration at the
Michigan Lottery, P.O. Box 30023, Lansing, Michigan 48909.
Bureau of State Lottery, State of Michigan
Statement of Net Position
September 30, 2023 and 2022
2023 2022
Assets
Current assets:
Equity in State Treasurer's Common Cash Fund $ 19,234,673 $ 10,854,388
Investments, at fair value 13,398,230 13,774,740
Accounts receivable - net 220,776,059 203,816,654
Inventory 23,536,875 24,317,916
Total current assets 276,945,837 252,763,698
Non-current assets:
Investments, at fair value 108,445,897 119,979,658
Other assets 1,127,805 1,456,968
Capital assets:
Leasehold improvements and equipment 4,609,370 4,919,251
Right-to-use assets 1,471,245 1,561,770
Accumulated depreciation (4,772,609) (4,777,580)
Total capital assets 1,308,006 1,703,441
Total noncurrent assets 110,881,708 123,140,067
Total assets 387,827,545 375,903,765
Deferred Outflows of Resources:
Deferred outflows related to pensions 3,103,946 2,874,148
Deferred outflows related to OPEB health 8,409,272 7,559,314
Deferred outflows related to OPEB life insurance 711,487 959,630
Total deferred outflows of resources 12,224,705 11,393,092
Liabilities
Current liabilities:
Accounts payable and other liabilities 29,687,789 31,297,108
Due to School Aid Fund 31,981,420 14,350,784
Prize awards payable - net of discount 210,607,834 199,858,773
Total current liabilities 272,277,043 245,506,665
Noncurrent liabilities:
Prize awards payable - net of discount 117,501,462 126,618,702
Net pension liability 27,382,880 17,628,158
Net OPEB liability - health 16,474,032 16,590,706
Net OPEB liability - life insurance 4,137,774 5,825,534
Lease liability - net of current portion 1,159,148 1,302,731
Accrual for compensated absences, less current portion 1,212,731 991,182
Total noncurrent liabilities 167,868,027 168,957,013
Total liabilities 440,145,070 414,463,678
Deferred Inflows of Resources:
Deferred inflows related to pensions 252,514 7,815,438
Deferred inflows related to OPEB health 13,999,503 16,927,486
Deferred inflows related to OPEB life insurance 2,112,408 917,737
Total deferred inflows of resources 16,364,425 25,660,661
Net Position
Net investment in capital assets 41,478 292,336
Unrestricted (deficit) (56,498,723) (53,119,818)
Total net position $ (56,457,245) $ (52,827,482)
See Accompanying Notes to Financial Statements
- 29 -
Bureau of State Lottery, State of Michigan
Statement of Revenues, Expenses and Changes in Net Position
For the Six Months and Years Ended September 30, 2023 and 2022
Six Months Ended Years Ended
2023 2022 2023 2022
Operating revenues
Ticket sales $ 2,403,467,303 $ 2,511,124,975 $ 4,922,869,128 $ 4,896,852,419
Charitable gaming and other 9,146,287 7,112,462 16,252,688 14,597,599
Total operating revenues 2,412,613,590 2,518,237,437 4,939,121,816 4,911,450,018
Operating expenses
Prize awards 1,499,162,039 1,611,281,085 3,073,933,344 3,132,406,516
Less - unclaimed prizes (31,957,301) (21,001,595) (57,119,041) (35,364,469)
Net prize awards 1,467,204,738 1,590,279,490 3,016,814,303 3,097,042,047
Retailer and vendor commissions and other expenses 220,273,606 231,858,119 453,579,868 450,495,823
Game related expenses 25,964,687 20,683,584 48,173,583 41,114,709
Depreciation expense 132,855 211,845 330,250 402,207
Other operating expenses 36,058,609 31,799,705 68,511,287 62,187,678
Total operating expenses 1,749,634,495 1,874,832,743 3,587,409,291 3,651,242,464
Operating income 662,979,095 643,404,694 1,351,712,525 1,260,207,554
Non-operating revenues
Investment (loss) revenue - net (5,378,481) (12,475,720) (231,174) (20,542,145)
Interest on equity in State
Treasurer's Common Cash Fund 7,410,540 1,385,187 10,362,120 1,471,328
Total non-operating revenues 2,032,059 (11,090,533) 10,130,946 (19,070,817)
Non-operating expenses
Custody fees (998) (1,640) (1,748) (2,015)
Lease interest expense (12,768) (13,907) (22,207) (21,039)
Amortization of prize award obligation discount (2,424,273) (2,512,575) (4,983,726) (5,231,633)
Loss on disposal of assets - - - -
Total non-operating expenses
before disbursements (2,438,039) (2,528,122) (5,007,681) (5,254,687)
Disbursement to School Aid Fund (664,121,408) (634,554,794) (1,351,947,360) (1,248,594,939)
Disbursement to General Fund (3,935,580) (2,791,474) (7,528,193) (5,371,955)
Disbursement to Health & Human Services (495,000) (495,000) (990,000) (990,000)
Total disbursements (668,551,988) (637,841,268) (1,360,465,553) (1,254,956,894)
Total non-operating expenses (670,990,027) (640,369,390) (1,365,473,234) (1,260,211,581)
Net non-operating expense (668,957,968) (651,459,923) (1,355,342,288) (1,279,282,398)
Change in net position (5,978,873) (8,055,229) (3,629,763) (19,074,844)
Total net position at beginning
of period (50,478,372) (44,834,940) (52,827,482) (33,815,325)
Restatement due to change
in accounting principle (Note 1) - 62,687 - 62,687
Total net position at end of
period $ (56,457,245) $ (52,827,482) $ (56,457,245) $ (52,827,482)
See Accompanying Notes to Financial Statements
- 30 -
Bureau of State Lottery, State of Michigan
Statement of Cash Flows
For the Six Months and Years Ended September 30, 2023 and 2022
Six Months Ende
d
Years Ended
2023 2022 2023 2022
Cash Flows From Operating
Activities
Cash collections from customers $ 2,391,007,227 $ 2,502,909,801 $ 4,921,933,358 $ 4,899,934,158
Payments to employees (13,770,711) (12,488,967) (27,344,440) (24,742,980)
Payments to suppliers (46,978,456) (44,555,139) (91,921,242) (84,356,901)
Payments to prize winners (1,454,041,187) (1,558,900,677) (3,020,166,208) (3,094,957,577)
Payments for retailer and
vendor commissions and other expenses (220,109,025) (231,693,538) (453,250,706) (450,166,661)
Net cash provided by
operating activities 656,107,848 655,271,480 1,329,250,762 1,245,710,039
Cash Flows From Noncapital
Financing Activities
Disbursements to School Aid Fund (869,965,960) (794,244,155) (1,334,316,724) (1,262,552,163)
Disbursements to General Fund (7,528,193) (5,371,955) (7,528,193) (5,371,955)
Disbursements to Health & Human Services (990,000) (990,000) (990,000) (990,000)
Net cash used for noncapital
financing activities (878,484,153) (800,606,110) (1,342,834,917) (1,268,914,118)
Cash Flows From Capital and
Related Financing Activities
Acquisition of capital assets - 85,537
- (14,272)
Principal on leases (9,608) (74,326) (75,029) (125,358)
Net cash provided by capital and related
financing activities (9,608) 11,211 (75,029) (139,630)
Cash Flows From Investing
Activities
Proceeds from the sale and
maturity of investment securities 3,568,333 5,993,333 13,927,333 15,256,333
Purchase of investments (2,248,236) (5,634,635) (2,248,236) (5,634,635)
Interest received 9,506,505 1,446,365 10,362,120 1,471,328
Bank fees (998) (1,640) (1,748) (2,015)
Net cash provided b
y
investing activities 10,825,604 1,803,423 22,039,469 11,091,011
Net (decrease) increase in cash and cash
equivalents (211,560,309) (143,519,996) 8,380,285 (12,252,698)
Cash and cash equivalents at
beginning of period 230,794,982 154,374,384 10,854,388 23,107,086
Cash and cash equivalents at
end of period $ 19,234,673 $ 10,854,388 $ 19,234,673 $ 10,854,388
Continued
See Accompanying Notes to Financial Statements
- 31 -
Bureau of State Lottery, State of Michigan
Statement of Cash Flows
For the Six Months and Years Ended September 30, 2023 and 2022
Six Months Ended Years Ended
2023 2022 2023 2022
Reconciliation of net operating
income to net cash provided
by operating activities
Operating income $ 662,979,095 643,404,694 $ 1,351,712,525 1,260,207,555
Adjustments to reconcile
operating income to net cash
provided by operating activities:
Depreciation expense 132,855 211,845 330,250 402,207
Pension expense 5,065,947 (639,337) 5,065,947 (639,337)
OPEB expense (1,623,771) (1,098,483) (1,623,771) (1,098,483)
Deferred Outflows - Contributions
subsequent to measurement date (2,774,535) (2,718,891) (5,620,427) (5,545,026)
Bad debt expense and other reconciling items 144,662 17,711 229,735 119,640
Interest on capital leases (12,768) (13,907) (22,207) (21,039)
Amortization of prize award
obligation discount (2,424,273) (2,512,575) (4,983,727) (5,231,633)
Net Changes in Assets and Liabilities:
Inventory 2,847,444 (216,367) 781,041 (860,522)
Receivables (21,820,691) (15,200,438) (17,188,459) (11,453,174)
Compensated absences, accounts
payable, other liabilities (2,158,521) (18,741)
(1,391,128) 2,184,586
Prize awards payable 15,587,823 33,891,388 1,631,821 7,316,103
Other assets 164,581 164,581 329,162 329,162
Net cash provided by
operating activities $ 656,107,848 $ 655,271,480 $ 1,329,250,762 $ 1,245,710,039
Schedule of noncash investing,
capital, and financing activities
Lease obligations $ 118,334 (16,230) $ 169,916 $ (1,098,802)
Increase (decrease) in fair value of
investments (8,156,165) (15,336,313) (5,807,056) (26,355,927)
Disbursements to other funds (accrual) (31,981,420) (14,350,784) (31,981,420) (14,350,784)
Total noncash investing, capital,
and financing activities $ (40,019,251) $ (29,703,327) $ (37,618,560) $ (41,805,513)
Concluded
See Accompanying Notes to Financial Statements
- 32 -
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 33 -
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
The Bureau of State Lottery (the “Lottery”) was established by Michigan Compiled Laws Section 432.5
under authority of Article 5, Section 4, of the State Constitution.
Public Act 95 of 1996 allows the Lottery to participate in joint enterprises, such as multi-state lotteries,
with other sovereignties. Michigan, a Mega Millions state, participates in Powerball and Power Play,
and Lucky for Life multi-state lottery games, with the Multi-State Lottery Association (MUSL), an
association of governmental lotteries. The association is comprised of a combination of MUSL
Lotteries and Mega Millions Lotteries. Michigan also participates in Mega Millions, a jointly operated
multi-state lottery comprised of 10 states: California, Georgia, Illinois, Massachusetts, Maryland,
Michigan, New Jersey, Ohio, Virginia, Washington and MUSL. Net income from Mega Millions,
Megaplier, Powerball, Power Play, and Lucky for Life is disbursed to the School Aid Fund.
Basis of Presentation
The Lottery is classified as an enterprise fund of the State of Michigan. Accordingly, the Lottery’s
financial statements are included in the State’s Annual Comprehensive Financial Report. The
accompanying financial statements are not intended to present the financial position and results of
operations of the State of Michigan or its enterprise funds.
Basis of Accounting
The financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting. The Lottery distinguishes operating revenue and expenses from non-
operating items. The principal operating revenue of the Lottery is primarily comprised of sales from
instant and draw game tickets and iLottery net wins. Operating expenses mainly consist of payments
to instant and draw game prize winners and commissions to retailer agents and vendors. All other
revenues and expenses are reported as non-operating. Excess revenue over expenses is designated
for payment to the State School Aid Fund in the current year, except for unrealized gains on
investments, and the cumulative impact of allocating the net pension liability and other
postemployment benefit liability, which are included in amounts reserved for future state aid transfers,
and the excess of revenue over expenses from charitable gaming activities and up to $1 million per
year to the Department of Health and Human Services for gambling addiction programs, which are
both designated for payment to the State General Fund.
The accounting policies of the Lottery conform to accounting principles generally accepted in the
United States of America (GAAP) as applicable to governmental units. The following is a summary of
the significant accounting policies used by the Lottery.
Revenue Recognition
Revenue is recognized for instant and pull tab games when tickets are activated by retailers.
For draw games, revenue is recognized and the related direct expenses of ticket sales are accrued
based upon the known relationship of the amount of ticket sales to the amount of prizes for each
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 34 -
game. This method of measuring revenue is necessary in order to properly match revenues and
expenses. Revenues for iLottery instant games are recognized when sales to the public occur and are
reported net of prizes awarded which are recognized as game play completes and prizes are known
(refer to Note 8 for more information on iLottery instant games revenue and expense). All revenues
are reported net of free plays, discounts, and allowances. Receivables represent amounts due from
retailers and amounts due from members of multi-state lotteries related to jackpot prizes won in the
State of Michigan.
Statement of Cash Flows
For the purposes of the Statement of Cash Flows, the Lottery considers equity in the State
Treasurer’s Common Cash pool to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Equity in State Treasurer’s Common Cash Fund
The State Treasurer manages the State’s Common Cash pool, which is used by the Lottery. The
pooling of cash allows the Treasurer to invest monies not needed to pay immediate obligations so that
investment earnings on available cash are maximized. Investments of the pool are not segregated by
fund; rather, each contributing fund’s balance is treated as equity in the pool and presented in this
report as “Equity in State Treasurer’s Common Cash.”
Investment policies and risk categorization are included in the State of Michigan’s Annual
Comprehensive Financial Report.
Investments
Investments are reported at fair value. Investments are in U.S. Treasury zero-coupon bonds and State
of Michigan General Obligation Capital Appreciation Bonds, Series 2009B (Michigan CAB Bonds).
These investments are purchased to meet future installment payments to prize winners. Gains and
losses are generally not realized on investments, as it is the Lottery’s and State Treasurer’s policy to
hold the Lottery’s investments to maturity or liquidation. The difference between the fair value and the
amortized cost is reported as restricted for school aid fund on the Statement of Net Position.
Inventory
Inventory consists of instant game tickets, pull tab game tickets and charity game tickets on hand and
for sale at year end as well as merchandise prizes for games that have not started as of September
30, 2023 and 2022. The inventory is valued at cost, primarily using the weighted average method.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 35 -
Provision for Doubtful Accounts
The Lottery establishes an allowance for bad debt for retailer receivables greater than 90 days old. A
bad debt expense is recorded when the allowance is established for these receivables. The amount of
the allowance for doubtful accounts totaled $2,520,528 as of September 30, 2023 and $2,367,946 as
of September 30, 2022.
Capital Assets
The Lottery has established a $5,000 threshold for capitalization of purchases of assets, which
include equipment, leasehold improvements, and right-to-use assets and are reported in the
Statement of Net Position. Such assets are recorded at historical cost or estimated historical cost if
purchased or constructed. Depreciation of equipment is computed using the straight-line method over
the estimated useful life of the assets. The Lottery has established a $5 million threshold for intangible
assets such as constructed computer software.
Information technology equipment including constructed computer software is depreciated over five
years, the estimated useful life of the assets. Right-to-use assets are depreciated over the shorter of
the useful life of the asset or the lease term. Building leasehold improvements are depreciated over
the lesser of eight years, the estimated useful life of the improvements, or the lease term. The costs of
normal maintenance and repairs that do not add to the value of assets or materially extend asset lives
are not capitalized.
Advance Wagers
All draw games may be played on an advance wager basis. An associated liability is recognized for all
wagers received for drawings to be conducted after the end of the reporting period.
Unclaimed Prizes
Prizes not claimed within one year after the drawing date or after the expiration date indicated on the
back of the instant and pull tab tickets, are forfeited by the ticket holder. The Lottery estimates the
amount of winning draw game, instant and pull tab tickets which will not be claimed within one year
after the drawing date for draw tickets or after the expiration date for instant and pull tab tickets. All
unclaimed prizes, including expired iLottery claims, are disbursed to the State School Aid Fund as
provided by State statute.
Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element represents a consumption
of net assets that applies to future periods and so will not be recognized as an outflow of resources
(expense/expenditure) until then. The Lottery reports deferred outflows of resources related to
pensions and other postemployment benefit costs in this category.
In addition to liabilities, the statement of net position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element represents an acquisition of
net assets that applies to future periods and so will not be recognized as an inflow of resources
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 36 -
(revenue) until that time. The Lottery reports deferred inflows of resources related to pensions and
other postemployment benefit costs in this category.
Pensions and Postemployment Benefits Other than Pensions (OPEB)
For the purposes of measuring the net pension liability, net OPEB liability, deferred outflows of
resources, and deferred inflows of resources related to pension and OPEB, and pension and OPEB
expense, information about fiduciary net position and additions to/deductions from fiduciary net
position of the State Employees’ Retirement System (SERS) or the postemployment life insurance
benefits plan (the “Plan”) have been determined on the same basis as they are reported by SERS or
the Plan. For this purpose, benefit payments (including refunds of employee contributions) are
recognized when due and payable in accordance with the benefit terms. Investments are reported at
fair value.
Leases
The Lottery is a lessee for noncancellable leases of equipment and buildings. The Lottery recognizes
a lease liability and an intangible right-to-use lease asset in the financial statements. At the
commencement of a lease, the Lottery initially measures the lease liability at the present value of
payments expected to be made during the lease term. Subsequently, the lease liability is reduced by
the principal portion of lease payments made. The lease asset is initially measured as the initial
amount of the lease liability, adjusted for lease payments made at or before the lease commencement
date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight-line
basis over its useful life.
The Lottery uses the interest rate charged by the lessor as the discount rate. When the interest rate
charged by the lessor is not provided, the Lottery generally uses the Published Prime Rate as of the
beginning of the fiscal year. The lease term includes the noncancellable period of the lease. If the
lease contains an option to extend and it is reasonably certain, based on all relevant factors, that the
option will be exercised, then the lease term includes that additional period.
Lease payments included in the measurement of the lease liability are composed of fixed payments.
The Lottery monitors changes in circumstances that would require a remeasurement of its lease and
will remeasure the lease asset and liability if certain changes occur that are expected to significantly
affect the amount of the lease liability. Lease assets are reported with other capital assets and lease
liabilities are reported with long-term debt on the statement of net position.
Change in Accounting
During the fiscal year ending September 30, 2022, the Lottery adopted Governmental Accounting
Standards Board (GASB) Statement No. 87, Leases, which establishes requirements for lease
accounting based on the principle that leases are financings of the right to use an underlying asset.
As a result, Lottery’s financial statements now include a liability for the present value of payments
expected to be made and a right-to-use asset.
Due to the implementation of GASB Statement No. 87, lease assets and liabilities were remeasured
for contracts previously classified as capital leases, and additional lease assets and liabilities were
recognized for other contracts, including those previously classified as operating leases, that had
been recognized as outflows of resources based on the payment provisions of the contract. These
items resulted in the restatement of the State’s financial statements and an increase in the net
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 37 -
position of the Lottery by $62,687 as of October 1, 2021. The increase represents restatement of
beginning net position for GASB 87.
Some of the Lease activity is further described in Note 12.
Net Position
Net position represents the difference between assets, deferred outflows of resources, liabilities and
deferred inflows of resources in accordance with Governmental Accounting Standards Board (GASB)
Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of
Resources, and Net Position. Net investment in capital assets consists of equipment and leasehold
improvements, less lease obligations. The difference between the fair value of investments and the
amortized book value of investments is considered restricted for School Aid Fund and is not available
for disbursement to the School Aid Fund until realized in accordance with Public Act 239. Additionally,
the pension and OPEB liabilities recorded in accordance with GASB Statement No. 68 and Statement
No. 75, as well as the change in net pension and OPEB liability and deferred inflows and outflows
related to pensions and OPEB are also considered restricted for School Aid Fund. As of September
30, 2023 and 2022, the impact of the various amounts restricted for the School Aid Fund resulted in a
negative net position. This negative position has been reported as unrestricted on the Statement of
Net Position since restricted amounts cannot be negative. This created an overall deficit net position
for the Lottery.
NOTE 2 - EQUITY IN STATE TREASURER’S COMMON CASH
The Lottery participates in the State Treasurer’s Common Cash pool. The investment authority for the
pool is found in Michigan Compiled Laws Sections 21.141 – 21.147. The pooling of cash allows the
State Treasurer to invest monies not needed to pay immediate obligations so the investment earnings
on available cash are maximized.
The State Treasurer may invest surplus funds belonging to the State in the bonds, notes, and other
evidence of indebtedness of the United States Government and its agencies and in prime commercial
paper. The Treasurer invests excess cash in short-term investments or cash equivalents.
The following paragraphs provide disclosures about deposits and investments of the State Treasurer’s
Common Cash Fund:
Common Cash Deposits
Custodial Credit Risk
The custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, the State’s deposits may not be recovered.
Deposits are exposed to custodial credit risk if they are not covered by depository insurance and the
deposits are:
a. Uncollateralized
b. Collateralized with securities held by the pledging financial institution
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 38 -
c. Collateralized with securities held by the pledging financial institution’s trust department or
agent but not in the depositor-government’s name.
The State Treasurer’s policy requires the following criteria to lessen the custodial credit risk: all
financial institutions holding the State’s money must pledge collateral equal to the amount of the
account balance for all demand and time deposits to secure the State’s fund. A bank, savings and
loan association, or credit union holding State funds must be organized under the laws of Michigan
or federal law and maintain a principal office or branch office in the State of Michigan. No deposit in
any financial organization may be in excess of 50 percent of the net worth of the organization.
Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of
deposits.
Michigan Compiled Laws Section 487.714 requires State deposits to be held in a financial institution
which maintains a principal office or branch office located in the State of Michigan. No deposits were
exposed to foreign currency risk, as is precluded by State policy.
Common Cash Investments
Risk
In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures, investments
also require certain disclosures regarding policies and practices with respect to the risks associated
with them. Custodial credit risk, credit risk, and interest rate risk are discussed in the following
paragraphs:
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty, the
State will not be able to recover the value of the investment or collateral securities that are in the
possession of the outside party.
Investment securities are exposed to custodial credit risk if the securities are uninsured, are not
registered in the name of the government and are held by either:
The counterparty, or
The counterparty’s trust department or agent but not in the government’s name.
The State Treasurer does not have an investment policy for managing custodial credit risk. At
September 30, 2023 and 2022, common cash investments were not exposed to custodial credit risk.
Credit Risk
Credit risk is the risk that an issuer or another counterparty to an investment will not fulfill its
obligations.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 39 -
Prime commercial paper investments must be rated A-1 or P-1 at the time of purchase as rated by
the two major rating services: Standard and Poor’s (A-1); and Moody’s (P-1). Borrowers must have
at least $400 million in commercial paper outstanding, and the State Treasurer may not invest in
more than 10% of the borrower’s outstanding debt. The investments are further limited to $200
million in any borrower unless the borrower has an A-1+ rating in which case the investment is not
to exceed $300 million. As of September 30, 2023 and 2022, the Lottery does not hold any
investments in commercial paper.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an
investment.
The State Treasurer’s policy states that cash equivalents are invested in short-term fixed income
securities with an average weighted maturity of less than one year to provide liquidity and safety of
principal from capital market and default risk.
NOTE 3 - INVESTMENTS
Investments totaling $121,844,127 at September 30, 2023 and $133,754,398 at September 30, 2022
are in the form of U. S. Treasury zero-coupon bonds and State of Michigan General Obligation Capital
Appreciation Bonds, series 2009B (Michigan CAB bonds).
These investments were purchased to fund future payments due to annuity prize winners. The bonds
are reported at fair value. The corresponding liability to the prize winners is recorded in prizes payable
and is disclosed in Note 7. Cash receipts from the maturity of investments totaled $13,927,333 in the
year ended September 30, 2023 and $15,256,333 in the year ended September 30, 2022. For the six
months ended September 30, 2023 and 2022, cash receipts from the maturity of investments totaled
$3,568,333 and $5,993,333, respectively.
Investments at September 30 consist of the following:
2023 2022
U. S. Treasury zero-coupon bonds 105,569,781$ 115,072,705$
Michigan CAB bonds 16,274,346 18,681,693
Total Investments 121,844,127$ 133,754,398$
As reported on the Statement of Net Position:
2023 2022
Current investments 13,398,230$ 13,774,740$
Noncurrent investments 108,445,897 119,979,658
Total Investments 121,844,127$ 133,754,398$
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 40 -
Policy Disclosures
Investment authority with regard to the State Lottery Fund is delegated to the State Treasurer per the
Michigan Compiled Laws Section 432.41. This authority is the same investment authority with regard
to the State’s pension (and other employee benefit) trust funds which is found in Michigan Compiled
Laws Section 38.1133. The law allows the State Treasurer, as investment fiduciary, to make diverse
investments in stocks, corporate and government bonds and notes, mortgages, real estate, venture
capital, and other investments.
The law has prudence standards and requires that the assets shall be invested solely in the interest of
the participants and beneficiaries. The Lottery’s policy is to invest solely in U. S. Treasury zero-
coupon bonds and Michigan CAB bonds and hold them to maturity.
Interest Rate Risk
Investments for prize annuities at September 30, 2023 and 2022 consist of the following:
September 30, 2023
Investments in
Maturities
Interest Rate Michigan Interest Rate
in Years
Low to High CAB Bonds Low to High
Less than 1 $ 10,696,851 1.88% to 4.94% $ 2,701,379 8.25% to 8.25%
1-5 43,948,433 2.01% to 4.84% 6,022,467 8.29% to 8.39%
6-10 29,869,968 1.65% to 4.76% 7,550,500 8.39% to 8.39%
11-15 16,982,802 2.03% to 4.79% - -
16-20 3,679,549 2.62% to 3.68% - -
21-25 317,259 2.57% to 3.30% - -
26-29 74,919 2.39% to 2.39% - -
Fair Value 105,569,781$ 16,274,346$
Zero-Coupon Bonds
Investments in United
States Treasur
y
September 30, 2022
Investments in
Maturities
Interest Rate Michigan Interest Rate
in Years
Low to High CAB Bonds Low to High
Less than 1 $ 10,915,185 1.72% to 4.98% $ 2,859,555 8.05% to 8.20%
1-5 45,443,535 1.88% to 4.94% 7,494,746 8.25% to 8.38%
6-10 31,620,427 1.65% to 4.71% 8,327,392 8.39% to 8.39%
11-15 21,438,944 2.03% to 4.79% - -
16-20 3,751,480 2.51% to 3.66% - -
21-25 1,677,335 2.57% to 3.68% - -
26-29 225,799 2.39% to 2.63% - -
Fair Value 115,072,705$ 18,681,693$
Zero-Coupon Bonds
Investments in United
States Treasur
y
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 41 -
Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the
fair value of those investments. The State does not have a policy regarding interest rate risk for long-
term debt investments. The investments are subject to fluctuations in fair value due to interest rate
risk, but these bonds are held to maturity to satisfy the annual installment obligations to the prize
winners. The fair value at maturity is the face value of the bonds regardless of the fluctuations in value
during the time period that the investments are outstanding, thus minimizing the interest rate risk, if
held to maturity.
Credit Risk
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations.
Investment grade, as defined in MCL Section 38.1132, includes investments in the top four major
grades, as determined by two national rating services. The State Treasurer’s policy is to use Standard
& Poor’s (AAA, AA, A, BBB) and Moody’s (Aaa, Aa, A, Baa).
The Lottery’s policy is that all long-term fixed income investments, unless unrated, must be
investment-grade at the time of purchase unless specific requirements are met.
U. S. Treasury zero-coupon bonds are explicitly guaranteed by the U. S. government and credit
quality ratings are therefore not required.
The Lottery’s procedure to invest in this type of bond does not require a specific credit rating, but
credit quality is inherently high as the bonds are explicitly guaranteed by the U.S. government. As of
September 30, 2023, and September 30, 2022 the Lottery’s investments in Michigan CAB bonds were
rated AA by Standard and Poor’s and Aa1 by Moody’s.
Concentration of Credit Risk
Investments are in U. S. Treasury zero-coupon bonds and Michigan CAB bonds. U. S. Treasury zero-
coupon bonds are guaranteed by the United States government. Therefore, there is no concentration
of credit risk for those types of bonds. As of September 30, 2023, investments in Michigan CAB bonds
account for 13.4% of the total Investments as compared to 14.0% as of September 30, 2022. This
decrease is due to the maturities of Michigan CAB bonds in the past year.
Custodial Credit Risk
Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a
transaction, the Lottery will not be able to recover the value of the investments that are in the
possession of an outside party. Investment securities are exposed to custodial credit risk if the
securities are uninsured, are not registered in the name of the entity, and are held by either the
counterparty or by the counterparty’s trust department or agent, but not in the entity’s name. The
Lottery does not have any of these types of investments.
Foreign Currency Risk
Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of
investments or deposits. As of September 30, 2023, and 2022 the Lottery had no investments subject
to foreign currency risk.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 42 -
NOTE 4 – FAIR VALUE MEASUREMENT
The Lottery categorizes its fair value measurements within the fair value hierarchy established by
generally accepted accounting principles. The hierarchy is based on the valuation inputs used to
measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical
assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant
unobservable inputs. Investments that are measured at fair value using the net asset value per share
(or its equivalent) as a practical expedient are not classified in the fair value hierarchy below.
In instances where inputs used to measure fair value fall into different levels in the above fair value
hierarchy, fair value measurements in their entirety are categorized based on the lowest level input
that is significant to the valuation. The Lottery’s assessment of the significance of particular inputs to
these fair value measurements requires judgment and considers factors specific to each asset or
liability.
The Lottery has the following recurring fair value measurements as of September 30:
2023 2022
U.S. Treasury Zero coupon bonds 105,569,781$ 115,072,705$
Michigan CAB bonds 16,274,346 18,681,693
The fair value of U.S. Treasury zero-coupon bonds and Michigan CAB bonds at September 30, 2023
and 2022 were determined primarily based on level 2 inputs. The Lottery estimates the fair value of
these investments using the matrix pricing technique using other inputs such as interest rates and
yield curves that are observable at commonly quoted intervals.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 43 -
NOTE 5 - CAPITAL ASSETS
A summary of capital asset activity for the fiscal years ended September 30, 2023 and 2022
is as follows:
Beginning Ending
Year Ending Balance Additions Deletions Balance
September 30, 2023
Capital assets being depreciated:
Leasehold improvements 1,955,988$ -$ -$ 1,955,988$
Equipment 2,963,263 - 309,881 2,653,382
Right-to-use assets 1,561,770 - 90,525 1,471,245
Total capital assets being
depreciated 6,481,021 - 400,406 6,080,615
Less: accumulated depreciation
Leasehold improvements 1,955,988 - - 1,955,988
Equipment 2,641,647 212,161 309,881 2,543,927
Right-to-use assets 179,945 146,359 53,610 272,694
Total accumulated depreciation 4,777,580 358,520 363,491 4,772,609
Total capital assets being
depreciated, net 1,703,441$ (358,520)$ 36,915$ 1,308,006$
September 30, 2022
Capital assets being depreciated:
Leasehold improvements 2,401,829$ -$ 445,841$ 1,955,988$
Equipment 2,952,492 10,771 - 2,963,263
Right-to-use assets 1,561,770 - - 1,561,770
Total capital assets being
depreciated 6,916,091 10,771 445,841 6,481,021
Less: accumulated depreciation
Leasehold improvements 2,157,592 2 170,886 1,986,708
Right-to-use assets - 149,227 - 149,227
Equipment 2,388,667 252,978 - 2,641,645
Total accumulated depreciation 4,546,259 402,207 170,886 4,777,580
Total capital assets being
depreciated, net 2,369,832$ (391,436)$ 274,955$ 1,703,441$
The 2022 beginning balance amounts have been restated for the implementation and adjustments for
GASB 87.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 44 -
NOTE 6 - DISAGGREGATION OF PAYABLE BALANCE
Accounts payable and other liabilities at September 30, 2023 and 2022 were as follows:
Accounts payable vendors $ 22,080,275 $ 20,274,826
Retailer security deposits/accounts payable 5,589,411 9,221,723
Accrued salaries 931,765 893,638
Compensated absences 1,086,338 906,921
Total $ 29,687,789 $ 31,297,108
2023 2022
NOTE 7 - PRIZE AWARDS
Installment prize awards are recorded at their present value using discount rates ranging from 1.7% to
6.5%. U.S. Treasury zero-coupon bonds and State of Michigan General Obligation Capital
Appreciation Bonds have been purchased to provide for the payment of installment prize awards in
addition to cash maintained in the State’s common cash fund. Prize awards payable as of September
30, were as follows:
2023 2022
Current - at face amount 210,865,787$ 200,133,442$
Less - unamortized discount (257,953) (274,669)
Current - at present value 210,607,834 199,858,773
Long-term - at face amount 158,530,677 173,105,208
Less - unamortized discount (41,029,215) (46,486,506)
Long-term - at present value 117,501,462 126,618,702
Total 328,109,296$ 326,477,475$
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 45 -
Prize awards payable for the fiscal year ending September 30:
2024 13,250,531$
2025 11,929,131
2026 11,829,131
2027 11,729,131
2028 11,627,131
2029-2033 55,247,055
2034-2038 33,234,455
2039-2043 8,758,455
2044-2048 6,813,656
2049-2053 2,738,332
2054-2058 1,800,200
2059-2063 1,070,000
2064-2068 845,000
2069-2073 545,000
2074-2078 312,000
Total 171,729,208
Less - unamortized discount (41,287,168)
Total installment prize awards payable at present value 130,442,040
Non-installment prize awards payable 197,667,256
Total prize awards payable 328,109,296$
Long-term liability activity of installment prize awards payable for the fiscal years ended September 30
was as follows:
Due Within
Fiscal Year Beginning Ending One Year at
Ending Balance Additions Reductions Balance Present Value
2023 140,226,564$ 4,983,727$ 14,768,250$ 130,442,040$ 12,940,578$
2022 149,435,418$ 5,231,633$ 14,440,487$ 140,226,564$ 13,607,862$
NOTE 8 – iLOTTERY NET WIN
iLottery instant game revenue is reported in ticket sales net of discounts and prize expense in the
Statement of Revenues, Expenses, and Changes in Net Position (refer to Supplementary Schedule of
Revenue and Expenses for details of sales and prize awards of each Lottery game).
The following schedule details the iLottery instant game sales and prize activity for the fiscal years
ended September 30, 2023 and 2022:
2023 2022
Sales 1,781,160,224$ 1,665,690,105$
Prizes (1,581,019,095) (1,472,511,796)
iLottery Net Win 200,141,129$ 193,178,309$
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 46 -
NOTE 9 - COMPENSATED ABSENCES
The Lottery records as a liability estimated vested vacation, sick pay and longevity. Employees are
granted vacation pay in varying amounts based on length of service. Accumulated unused vacation
pay is paid to employees or their beneficiaries upon death, retirement or resignation. Sick leave
accrues for all employees at the rate of four hours for each two-week period worked. Up to 50% of
accumulated, unused sick leave of employees hired prior to October 1, 1980
, is paid to the employees
or their beneficiaries upon death, retirement, or resignation. For employees hired after September 30,
1980
, unused sick leave is forfeited upon termination of employment. In accordance with state Civil
Service Rules, longevity compensation payments, which are separate from regular compensation, are
paid based on employee years of service. The Lottery accrues for vacation, vested sick leave of
employees hired prior to October 1, 1980, and longevity to be paid upon death, retirement, or
resignation during the period of active employment.
The State instituted a banked leave time program October 12, 2003 through November 5, 2005
whereby eligible employees worked a regular schedule but received pay for a reduced number of
hours. The banked leave time program was reinstated February 21, 2010 through September 4, 2010
for non-represented employees. Upon an employee’s separation, death or retirement from State
service, unused banked leave time hours shall be contributed by the State to the employee’s account
within the State’s 401(k) plans, and if applicable to the State’s 457 plans. The banked leave liability is
valued at the pay rates in effect as of September 30, 2023.
Long-term liability activity of these benefits for the fiscal years ended September 30 was as follows:
Fiscal Due Long-
Year Beginning Ending Within Term
Ending Balance Additions Reductions Balance One Year Liability
2023 1,898,103$ 1,803,138$ 1,402,172$ 2,299,069$ 1,086,338$ 1,212,731$
2022 2,052,592$ 1,513,268$ 1,667,757$ 1,898,103$ 906,921$ 991,182$
NOTE 10 – PENSION PLAN & OTHER EMPLOYEE BENEFITS
Defined Pension Plan
A. Plan Description
The Michigan State Employees Retirement System (the “System” or “SERS”) is a single-employer,
state-wide, defined benefit public employee retirement plan governed by the State of Michigan
(the “State”) and created under Public Act 240 of 1943, as amended. Section 2 of this act
established the board’s authority to promulgate or amend the provisions of the System. Executive
Order 2015-13 signed by the Governor on October 27, 2015 established the State of Michigan
Retirement Board. The executive order establishes the board’s authority to promulgate or amend
the provision of the System.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 47 -
The board consists of nine members:
The Attorney General
The State Treasurer
The Legislative Auditor General
The State Personnel Director
One member or retirant of the State Employees’ Retirement System appointed by the
Governor
One member of the Judges Retirement System appointed by the Governor
One current or former member or enlisted person in the Michigan Military Establishment
who is a member or retirant under the Military Retirement Provisions appointed by the
Governor
One retirant member of the State Employees’ Retirement System appointed by the
Governor
One member of the general public appointed by the Governor
The System’s pension plan was established by the State to provide retirement, survivor, and
disability benefits to the State’s government employees. The System is accounted for in a
separate pension trust fund and is administered by the Office of Retirement Services within the
Michigan Department of Technology, Management & Budget. The Department Director appoints
the office Director, with whom the general oversight of the System resides. The State Treasurer
serves as the investment officer and custodian for the system. The System’s financial statements
are available online at michigan.gov/ors.
B. Benefits Provided
Introduction - Benefit provisions of the defined benefit pension plan are established by State
statute, which may be amended. Public Act 240 of 1943, State Employees’ Retirement Act, as
amended, establishes eligibility and benefit provisions for the defined benefit pension plan.
Retirement benefits are determined by final average compensation and years of service. Members
are eligible to receive a monthly benefit when they meet certain age and service requirements.
The System also provides duty disability, non-duty disability and survivor benefits.
A member who has separated from employment may request a refund of his or her member
contribution account. A refund may cancel a former member’s rights to future benefits. However,
former members who return to employment and who previously received a refund of their
contributions may reinstate their service through repayment of the refund upon satisfaction of
certain requirements.
Effective March 31, 1997, Public Act 487 of 1996 closed the plan to new entrants. All new
employees become members of the defined contribution plan. The Public Act allows returning
employees and members who left State employment on or before March 31, 1997, to elect the
defined benefit plan instead of the defined contribution plan.
Pension Reform of 2012 - On December 15, 2011, the Governor signed Public Act 264 of 2011
into law. The legislation granted members a choice regarding their future retirement plan. They
had the following options:
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 48 -
• Option 1: DB Classified. Members voluntarily elected to remain in the DB plan for future
service and contribute 4% of their annual compensation to the pension fund until they
terminate state employment. The 4% contribution began on April 1, 2012.
• Option 2: DB 30. Members voluntarily elected to remain in the DB plan for future service and
contribute 4% of pay until they reach 30 years of service. When they reach 30 years of
service, they will switch to the State’s DC plan. The 4% contribution began April 1, 2012 and
continues until they switch to the DC plan or terminate employment, whichever comes first.
• Option 3: DB/DC Blend. Members voluntarily elected not to pay the 4% and therefore became
participants in the DC plan for future service beginning April 1, 2012. As a DC plan participant
they receive a 4% employer contribution to their 401(k) account and are eligible for an
additional dollar-for-dollar employer match of up to 3% of pay to the plan.
Deferred members of the DB plan (with 10 or more years of service) who are reemployed by the
State on or after January 1, 2012, become participants in the DC plan. Their pension calculation is
determined by their final average compensation (FAC) and years of service as of March 31, 2012.
They retain their eligibility for the retiree health insurance premium subsidy offered by the State.
Former nonvested members of the DB plan (with less than 10 years of service) who are
reemployed by the State on or after January 1, 2012 and before January 1, 2014, become
participants in the DC plan. When they have earned sufficient service credit for vesting (10 years)
they would be eligible for a pension based on their FAC and years of service in the DB plan as of
March 31, 2012. They retain their eligibility for the retiree health insurance premium subsidy
offered by the State.
Former nonvested members (with less than 10 years of service) of the DB plan who are
reemployed by the State on or after January 1, 2014 become members of the DC plan. Any
service credit previously earned would count towards vesting for the DC plan. They will not be
eligible for any pension or retiree health insurance coverage premium but will become a
participant in the Personal Healthcare Fund where they will contribute up to 2% of their
compensation to a 401(k) or 457 account, earning a matching 2% employer contribution. They will
also receive a credit into a health reimbursement account (HRA) at termination if they terminate
employment with at least 10 years of service. The credit will be $2,000 for participants who are at
least 60 years old or $1,000 for participants who are less than 60 years old at termination.
Regular Retirement - The retirement benefit is based on a member’s years of credited service
(employment) and FAC. The normal benefit equals 1.5% of a member’s FAC multiplied by the
years and partial year of credited service and is payable monthly over the member’s lifetime.
Under PA 264 of 2011, FAC is initially determined as the annual average of the highest three
years of compensation (including overtime paid before January 1, 2012, but excluding overtime
paid after December 31, 2011). If the end date for the initial FAC calculation is between January 1,
2012, and January 1, 2015, then a prorated amount of post-2008 average overtime will be added
to the initial FAC calculation. If the end date for the initial FAC calculation is January 1, 2015, or
later, then an annual average of overtime – for the six-year period ending on the FAC calculation
date – will be added to that initial FAC calculation to get the final FAC number.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 49 -
For members who switch to the DC plan for future service, the pension calculation FAC times
1.5% times years of service) will be determined as of the point the member switches to the DC
plan. If the FAC period includes the date of the switch to the DC plan, then the FAC will include up
to 240 hours of accrued annual leave multiplied by the rate of pay as of the date of the switch. The
hours will be paid at separation.
A member may retire and receive a monthly benefit after attaining:
1. age 60 with 10 or more years of credited service; or
2. age 55 with 30 or more years of credited service; or
3. age 55 with at least 15 but less than 30 years of credited service. The benefit allowance is
permanently reduced 0.5% for each month from the member’s age on the effective date of
retirement to the date the member will attain age 60.
Employees in covered positions are eligible for supplemental benefits and may retire after
attaining:
1. age 51 with 25 or more years in a covered position; or
2. age 56 with 10 or more years in a covered position.
In either case, the three years immediately preceding retirement must have been in a covered
position.
Deferred Retirement - Any member with 10 or more years of credited service who terminates
employment but has not reached the age of retirement is a deferred member and is entitled to
receive a monthly pension upon reaching age 60, provided the member’s accumulated
contributions have not been refunded. Deferred retirement is available after five years of service
for State employees occupying unclassified positions in the executive and legislative branches and
certain Department of Health and Human Services employees subject to reduction in force lay-offs
by reason of deinstitutionalization.
Non-Duty Disability Benefit - A member with 10 or more years of credited service who becomes
totally and permanently disabled not due to performing duties as a State employee is eligible for a
non-duty disability pension.
The non-duty disability benefit is computed in the same manner as an age and service allowance
based upon service and salary at the time of disability.
Duty Disability Benefit - A member who becomes totally and permanently disabled from
performing duties as a State employee as a direct result of State employment and who has not
met the age and service requirement for a regular pension, is eligible for a duty disability pension.
Public Act 109 of 2004 amended the State Employees’ Retirement Act to change the calculation of
the pension benefit and increase the minimum annual payment. If the member is under age 60,
the duty disability allowance is now a minimum of $6,000 payable annually. At age 60 the benefit
is recomputed under service retirement.
Survivor Benefit - Upon the death of a member who was vested, the surviving spouse shall
receive a benefit calculated as if the member had retired the day before the date of death and
selected a survivor pension. Certain designated beneficiaries can be named to receive a survivor
benefit. Public Act 109 of 2004 amended the State Employees’ Retirement Act to change the
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 50 -
calculation of Duty Death benefits and redefines eligibility for deceased member’s survivors. The
new minimum duty-related death benefit has been increased to $6,000.
Pension Payment Options - When applying for retirement, an employee may name a person
other than his or her spouse as a beneficiary if the spouse waives this right. If a beneficiary is
named, the employee must choose whether the beneficiary will receive 100%, 75% or 50% of the
retiree’s pension benefit after the retiree’s death. The decision is irrevocable. A description of the
options follows.
Regular Pension - The pension benefit is computed with no beneficiary rights. If the retiree made
contributions while an employee and has not received the total accumulated contributions before
death, a refund of the balance of the contributions is made to the beneficiary of record. If the
retiree did not make any contributions, there will not be payments to beneficiaries.
100% Survivor Pension - Under this option, after the retiree’s death, the beneficiary will receive
100% of the pension for the remainder of the beneficiary’s lifetime. If this option is elected, the
normal retirement benefit is reduced by a factor based upon the ages of the retiree and of the
beneficiary. If the beneficiary predeceases the retiree, the pension “pops-up” to the regular
pension amount; another beneficiary cannot be named.
75% Survivor Pension - Under this option, after the retiree’s death, the beneficiary will receive
75% of the pension for the remainder of the beneficiary’s lifetime. If this option is elected, the
normal retirement benefit is reduced by a factor based upon the ages of the retiree and of the
beneficiary. The reduction factor is lower than the factor used in the 100% option previously
described. If the beneficiary predeceases the retiree, the pension “pops-up” to the regular pension
amount; another beneficiary cannot be named.
50% Survivor Pension - Under this option, after the retiree’s death, the beneficiary will receive
50% of the pension for the remainder of the beneficiary’s lifetime. If this option is elected, the
normal retirement benefit is reduced by a factor based upon the ages of the retiree and of the
beneficiary. The reduction factor is lower than the factor used in the 100% or 75% option
previously described. If the beneficiary predeceases the retiree, the pension “pops-up” to the
regular pension amount; another beneficiary cannot be named.
Equated Pension - An equated pension may be chosen by any member under age 65 except a
disability retiree and an early supplemental retiree. Equated pensions provide an additional
amount until age 65 and may be combined with Regular, 100%, 75% or 50% option. At age 65 the
monthly amount is permanently reduced. The initial and reduced amounts are based on an
estimate of social security benefits at age 65, provided by the Social Security Administration
Office. In order to calculate this benefit, members choosing this option must provide ORS with an
estimate from the Social Security Administration Office. The actual amount received from social
security may vary from the estimate.
Post Retirement Adjustments - One-time upward benefit adjustments were made in 1972, 1974,
1976, 1977 and 1987. Beginning October 1, 1988, a 3% non-compounding increase, up to a
maximum of $25 monthly, is paid each October to recipients who have been retired 12 full months.
Beginning in 1983, eligible benefit recipients share in a distribution of investment income earned in
excess of 8% annually. This distribution is known as the supplemental payment. The supplemental
payment is offset by one year’s cumulative increases received after the implementation of the
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 51 -
annual 3% increase in benefits. These adjustment payments were not issued during fiscal years
1991 through 1994. Members who retired on or after October 1, 1987, are not eligible for the
supplemental payment.
C. Contributions
Member Contributions - Under Public Act 264 of 2011, members who voluntarily elected to
remain in the DB plan contribute 4% of compensation to the retirement system. In addition,
members may voluntarily contribute to the System for the purchase of creditable service, such as
military service or maternity leave, or a universal buy-in. If a member terminates employment
before a retirement benefit is payable, the member’s contribution and interest on deposit may be
refunded. If the member dies before being vested, the member’s contribution and interest are
refunded to the designated beneficiaries.
Employer Contributions - The statute requires the employer to contribute to finance the benefits
of plan members. These employer contributions are determined annually by the System’s actuary
and are based upon level-dollar value funding principles, so the contribution rates do not have to
increase over time. For fiscal years ending 2023 and 2022, the Lottery’s contribution rate was
23.11% and 23.97% of the defined benefit employee wages and 18.54% and 19.05% of the
defined contribution employee wages. The Lottery’s contribution to SERS for the fiscal years
ending September 30, 2023 and 2022 was $3,103,946 and $2,874,148, respectively.
D. Actuarial Assumptions
The Lottery’s net pension liability for the year ended September 30, 2023 was measured as of
September 30, 2022, and the total pension liability used to calculate the net pension liability was
determined by an actuarial valuation as of September 30, 2021 and rolled-forward using general
accepted actuarial procedures. Net pension liability for the year ended September 30, 2022 was
measured as of September 30, 2021, and the total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of September 30, 2020 and rolled-
forward using generally accepted actuarial procedures.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 52 -
The total pension liability was determined using the following actuarial assumptions at the
measurement dates:
2022 2021
Wage Inflation Rate 2.75% 2.75%
Projected Salary Increases 2.75 - 11.75, including
inflation at 2.75
2.75 - 11.75, including
inflation at 2.75
Investment Rate of Return
6.00%, net of investment
expenses
6.70%, net of investment
expenses
Cost-of-Living Pension Adjustment 3% Annual Non-
Compounded with
Maximum Annual Increase
of $300 for those eligible
3% Annual Non-
Compounded with
Maximum Annual Increase
of $300 for those eligible
Mortality For active members and
disabled retirees, RP-2014
Male and Female Employee
Annuitant Mortality Tables
were used, scaled by 100%
for males and 100% for
females and adjusted for
mortality improvements
using projection scale MP-
2017 from 2006
For active members and
disabled retirees, RP-2014
Male and Female Employee
Annuitant Mortality Tables
were used, scaled by 100%
for males and 100% for
females and adjusted for
mortality improvements
using projection scale MP-
2017 from 2006
For retirees, RP-2014 Male
and Female Employee
Annuitant Mortality Tables
were used, scaled by 93%
for males and 98% for
females and adjusted for
mortality improvements
using projection scale MP-
2017 from 2006
For retirees, RP-2014 Male
and Female Employee
Annuitant Mortality Tables
were used, scaled by 93%
for males and 98% for
females and adjusted for
mortality improvements
using projection scale MP-
2017 from 2006
September 30
Actuarial assumptions used in the September 30, 2021 and 2020 valuations were based on the
results of an actuarial experience study covering the period from October 1, 2012 through
September 30, 2017.
The long-term expected rate of return on pension plan investments was determined using a
building-block method in which best-estimate ranges of expected future real rates of return
(expected returns, net of pension plan investment expense and inflation) are developed for each
major asset class. These ranges are combined to produce the long-term expected rate of return
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 53 -
by weighting the expected future real rates of return by the target asset allocation percentage and
by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset
class included in the pension plan’s target asset allocation as of September 30, 2022 and
September 30, 2021, are summarized in the following tables:
Long Term Expected
Asset Class Target Allocation Real Rate of Return*
Domestic Equity Pools 25.0 % 5.1 %
Private Equity Pools 16.0 8.7
International Equity Pools 15.0 6.7
Fixed Income Pools 13.0 (0.2)
Real Estate & Infrastructure Pools 10.0 5.3
Absolute Return Pools 9.0 2.7
Real Return and Opportunistic Pools 10.0 5.8
Short Term Investment Pools 2.0 (0.5)
TOTAL
100.0 %
*Long-term rates of return are net of administrative expenses and 2.2% inflation
Long Term Expected
Asset Class Target Allocation Real Rate of Return*
Domestic Equity Pools 25.0 % 5.4 %
Private Equity Pools 16.0 9.1
International Equity Pools 15.0 7.5
Fixed Income Pools 10.5 (0.7)
Real Estate & Infrastructure Pools 10.0 5.4
Absolute Return Pools 9.0 2.6
Real Return and Opportunistic Pools 12.5 6.1
Short Term Investment Pools 2.0 (1.3)
TOTAL
100.0 %
*Long-term rates of return are net of administrative expenses and 2.0% inflation
Asset Allocation
September 30, 2022
Asset Allocation
September 30, 2021
E. Discount Rate
A single discount rate of 6.00% was used to measure the total pension liability as of September
30, 2022 and a single discount rate of 6.70% was used in 2021. This discount rate was based on
the long term expected rate of return on pension plan investments of 6.00% and 6.70% as of
September 30, 2022 and 2021, respectively. The projection of cash flows used to determine this
discount rate assumed that future plan member contributions will be made at the current
contribution rate and that employer contributions will be made at rates equal to the difference
between actuarially determined contribution rates and the member rate. Based on these
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 54 -
assumptions, the pension plan’s fiduciary net position was projected to be available to make all
projected future benefit payments of current plan members. Therefore, the long-term expected
rate of return on pension plan investments was applied to all periods of projected benefit
payments to determine the total pension liability.
F. Net Pension Liability
At September 30, 2023 net pension liability was measured as of September 30, 2022. The total
pension liability used to calculate the net pension liability was determined by an actuarial valuation
as of September 30, 2021 and rolled-forward using generally accepted actuarial procedures. The
Lottery’s proportion of the net pension liability was based on the Lottery’s required pension
contributions received by SERS during the measurement period October 1, 2021 through
September 30, 2022, relative to the total required employer contributions from all of SERS’s
participating employers.
At September 30, 2022 net pension liability was measured as of September 30, 2021. The total
pension liability used to calculate the net pension liability was determined by an actuarial valuation
as of September 30, 2020 and rolled-forward using generally accepted actuarial procedures. The
Lottery’s proportion of the net pension liability was based on the Lottery’s required pension
contributions received by SERS during the measurement period October 1, 2020 through
September 30, 2021, relative to the total required employer contributions from all of SERS’s
participating employers.
Proportionate Proportionate
Share $ Share %
2023 27,382,880$ 0.424 %
2022 17,628,158 0.434
G. Pension Liability Sensitivity
The following presents the Lottery’s proportionate share of the net pension liability calculated
using the discount rate as well as what the proportionate share of the net pension liability would be
if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point
higher than the current discount rate:
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 55 -
1% Decrease
Current Discount
1% Increase
5.0% 6.0% 7.0%
Lottery's proportionate share of
the net pension liability 35,765,620$ 27,382,880$ 20,256,661$
1% Decrease
Current Discount
1% Increase
5.7% 6.7% 7.7%
Lottery's proportionate share of
the net pension liability 25,495,154$ 17,628,158$ 10,927,201$
September 30, 2022
September 30, 2023
H. Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the SERS
Annual Comprehensive Financial Report that may be obtained by visiting michigan.gov/ors.
I. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources
Related to Pensions
The Lottery recognized pension expense (recovery) of $5,065,947 for the year ended September
30, 2023 and ($639,337) for the year ended September 30, 2022, respectively. The Lottery
reported deferred outflows of resources and deferred inflows of resources related to pensions from
the following sources:
Deferred Deferred Deferred Deferred
Outflows of Inflows of Outflows of Inflows of
Resources Resources Resources Resources
Changes in experiences -$ -$ -$ -$
Changes of assumptions - - - -
Changes in proportions - - - -
Net difference between projected and actual
earnings on investments - 252,514 - 7,815,438
Lottery's contributions subsequent to the
measurement date 3,103,946 - 2,874,148 -
Total 3,103,946$ 252,514$ 2,874,148$ 7,815,438$
September 30, 2023 September 30, 2022
Amounts reported as deferred outflows of resources related to pensions resulting from Lottery
contributions subsequent to the measurement date will be recognized as a reduction of the net
pension liability in the year ending September 30, 2024.
Other amounts reported as deferred outflows and inflows of resources related to pensions will be
recognized in pension expense as follows:
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 56 -
Pension
Year Ended Expense
September 30: Amount
2024 (346,023)$
2025 (540,512)
2026 (704,358)
2027 1,338,379
Defined Contribution Plan
The Lottery participates in the State of Michigan’s defined contribution plan system. The Lottery is
required to contribute to the defined contribution plan 4.0 percent of payroll with an additional match
of up to 3.0 percent. The contribution requirements of plan members and the Lottery are established
and may be amended by the State legislature. The State legislature establishes the extent to which
employer and employees are required to make contributions and establishes the benefit provisions
for the plan. For the six months ended September 30, 2023 and 2022, Lottery contributions to the
plan totaled $532,406 and $461,861 respectively. Lottery’s contributions to the plan were $983,146
for the year ended September 30, 2023 and $845,712 for the year ended September 30, 2022 and
are recorded in salaries and benefits expense.
NOTE 11 – OTHER POSTEMPLOYMENT BENEFIT (OPEB) PLANS
Defined Benefit OPEB Plan - Health
A. Plan Description
The Michigan State Employees Retirement System (the “System” or “SERS”) is a single-employer,
state-wide, defined benefit public employee retirement plan governed by the State of Michigan
(the “State”) and created under Public Act 240 of 1943, as amended. Section 2 of this act
established the board’s authority to promulgate or amend the provisions of the System. Executive
Order 2015-13 signed by the Governor on October 27, 2015 established the State of Michigan
Retirement Board. The executive order establishes the board’s authority to promulgate or amend
the provision of the System.
The board consists of nine members:
The Attorney General
The State Treasurer
The Legislative Auditor General
The State Personnel Director
One member or retirant of the State Employees’ Retirement System appointed by the
Governor
One member of the Judges Retirement System appointed by the Governor
One current or former member or enlisted person in the Michigan Military Establishment
who is a member or retirant under the Military Retirement Provisions appointed by the
Governor
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 57 -
One retirant member of the State Employees’ Retirement System appointed by the
Governor
One member of the general public appointed by the Governor
The System’s OPEB plan provides all retirees with the option of receiving health, dental, and
vision coverage under the Michigan State Employees’ Retirement Act. The System is accounted
for in a separate OPEB trust fund and is administered by the Office of Retirement Services within
the Michigan Department of Technology, Management & Budget. The Department Director
appoints the office Director, with whom the general oversight of the System resides. The State
Treasurer serves as the investment officer and custodian for the system. The System’s financial
statements are available online at michigan.gov/ors.
B. Benefits Provided
Benefit provisions of the other postemployment benefit (OPEB) plan are established by State
statute, which may be amended. Public Act 240 of 1943, as amended, establishes eligibility and
benefit provisions for the OPEB plan. Defined Benefit (Tier 1) members are eligible to receive
health, prescription drug, dental, and vision coverage on the first day they start receiving pension
benefits. Defined Contribution (Tier 2) participants who elected to retain the graded premium
subsidy benefit under the reform elections of Public Act 264 of 2011 are also eligible to receive
subsidized health, prescription drug, dental and vision coverage after terminating employment, if
they meet eligibility requirements. Retirees with the Premium Subsidy benefit contribute 20% of
the monthly premium amount for the health (including prescription coverage), dental and vision
coverage. Retirees with a graded premium subsidy benefit accrue credit towards insurance
premiums in retirement, earning a 30% subsidy with ten years of service, with an additional 3%
subsidy for each year of service thereafter, not to exceed the maximum allowed by statute or 80%.
There is no provision for ad hoc or automatic increases. The State Employees’ Retirement Act
requires joint authorization by DTMB and the Civil Service Commission to make changes to retiree
medical benefit plans. Defined Contribution (Tier 2) participants who elected the Personal
Healthcare Fund under Public Act 264 of 2011, and those hired on or after January 1, 2012, are
not eligible for any subsidized health, prescription drug, dental or vision coverage in retirement,
but may purchase it at their own expense (certain conditions apply).
Former nonvested members of the DB plan who are reemployed by the state on or after January
1, 2014 are not eligible for retiree health insurance coverage premium subsidy but will become a
participant in the Personal Healthcare Fund.
This plan is closed to new hires.
C. Contributions
The statute requires the employer to contribute to finance the benefits of plan members. These
employer contributions are determined annually by the System’s actuary and are based upon
level-percent of payroll value funding principles, so the contribution rates do not have to increase
over time.
For fiscal year ending September 30, 2023, Lottery’s contribution rate was 14.09% of the defined
benefit and defined contribution employee wages. For the fiscal year ending September 30, 2022,
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 58 -
Lottery’s contribution rate was 17.26% of the defined benefit and defined contribution employee
wages. The Lottery’s contribution to SERS for the fiscal years ending September 30, 2023 and
2022 were $2,358,932 and $2,518,531, respectively. Active employees are not required to
contribute to SERS OPEB.
D. Actuarial Assumptions
The Lottery’s net OPEB liability for the year ended September 30, 2023 was measured as of
September 30, 2022, and the total OPEB liability used to calculate the net OPEB liability was
determined by an actuarial valuation as of September 30, 2021 and rolled-forward using generally
accepted actuarial procedures. Net OPEB liability for the year ended September 30, 2022 was
measured as of September 30, 2021, and the total OPEB liability used to calculate the net OPEB
liability was determined by an actuarial valuation as of September 30, 2020 and rolled-forward
using generally accepted actuarial procedures. The total OPEB liability was determined using the
following actuarial assumptions at the measurement dates:
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 59 -
2022 2021
Wage Inflation Rate
2.75% 2.75%
Projected Salary Increases
2.75% - 11.75%, including
inflation at 2.75%
2.75% - 11.75%, including
inflation at 2.75%
Investment Rate of Return
6.20%, net of investment
expenses
6.90%, net of investment
expenses
Health Care Cost Trend Rate
Pre-65: 7.50% Year 1 graded
to 3.50% in Year 15; 3.0%
year 120
Post 65: 6.25% Year 1 graded
to 3.50% in Year 15; 3.0%
year 120
Pre-65: 7.50% Year 1 graded
to 3.50% in Year 15; 3.0%
year 120
Post 65: 6.25% Year 1 graded
to 3.50% in Year 15; 3.0%
year 120
Mortality
For active members and
disabled retirees, RP-2014
Male and Female Employee
Annuitant Mortality Tables
were used, scaled by 100%
for males and 100% for
females and adjusted for
mortality improvements using
projection scale MP-2017
from 2006
For active members and
disabled retirees, RP-2014
Male and Female Employee
Annuitant Mortality Tables
were used, scaled by 100%
for males and 100% for
females and adjusted for
mortality improvements using
projection scale MP-2017
from 2006
For retirees, RP-2014 Male
and Female Employee
Annuitant Mortality Tables
were used, scaled by 93% for
males and 98% for females
and adjusted for mortality
improvements using
projection scale MP-2017
from 2006
For retirees, RP-2014 Male
and Female Employee
Annuitant Mortality Tables
were used, scaled by 93% for
males and 98% for females
and adjusted for mortality
improvements using
projection scale MP-2017
from 2006
September 30
The actuarial assumptions were based upon the results of an experience study covering the
period October 1, 2012 through September 30, 2017.
The long-term expected rate of return on OPEB plan investments was determined using a
building-block method in which best-estimate ranges of expected future real rates of return
(expected returns, net of OPEB plan investment expense and inflation) are developed for each
major asset class. These ranges are combined to produce the long-term expected rate of return
by weighting the expected future real rates of return by the target asset allocation percentage and
by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset
class included in the OPEB plan’s target asset allocation as of September 30, 2022 and 2021, are
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 60 -
summarized in the following tables:
Long Term Expected
Asset Class Target Allocation Real Rate of Return*
Domestic Equity Pools 25.0 % 5.1 %
Private Equity Pools 16.0 8.7
International Equity Pools 15.0 6.7
Fixed Income Pools 13.0 (0.2)
Real Estate & Infrastructure Pools 10.0 5.3
Absolute Return Pools 9.0 2.7
Real Return and Opportunistic Pools 10.0 5.8
Short Term Investment Pools 2.0 (0.5)
TOTAL 100.0 %
*Long-term rates of return are net of administrative expenses and 2.2% inflation
Long Term Expected
Asset Class Target Allocation Real Rate of Return*
Domestic Equity Pools 25.0 % 5.4 %
Private Equity Pools 16.0 9.1
International Equity Pools 15.0 7.5
Fixed Income Pools 10.5 (0.7)
Real Estate & Infrastructure Pools 10.0 5.4
Absolute Return Pools 9.0 2.6
Real Return and Opportunistic Pools 12.5 6.1
Short Term Investment Pools 2.0 (1.3)
TOTAL 100.0 %
*Long-term rates of return are net of administrative expenses and 2.0% inflation
Asset Allocation
September 30, 2022
Asset Allocation
September 30, 2021
E. Discount Rate
A single discount rate of 6.20% was used to measure the total OPEB liability as of September 30,
2022. A single discount rate of 6.90% was used to measure the total OPEB liability as of
September 30, 2021. This single discount rate was based on the expected rate of return on OPEB
plan investments of 6.20% and 6.90% as of September 30, 2022 and 2021, respectively. The
projection of cash flows used to determine this single discount rate assumed that in the future,
plan member contributions will be made at the current contribution rate and that employer
contributions will be made at rates equal to the difference between actuarially determined
contribution rates and the member (retiree) rate. Based on these assumptions, the OPEB plan's
fiduciary net position was projected to be available to make all projected future benefit payments
of current plan members. Therefore, the long-term expected rate of return on OPEB plan
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 61 -
investments was applied to all periods of projected benefit payments to determine the total OPEB
liability.
F. Net OPEB Liability
At September 30, 2023, the Lottery reported a liability of $16,474,032 for its proportionate share of
SERS’ net OPEB liability. The net OPEB liability was measured as of September 30, 2022, and
the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial
valuation as of September 30, 2021 and rolled-forward using generally accepted actuarial
procedures. The Lottery’s proportion of the net OPEB liability was based on Lottery’s required
OPEB contributions received by SERS during the measurement period October 1, 2021, through
September 30, 2022, relative to the total required employer contributions from all of SERS’s
participating employers. At September 30, 2022, Lottery’s proportion was 0.423%.
At September 30, 2022, the Lottery reported a liability of $16,590,706 for its proportionate share of
SERS’ net OPEB liability. The net OPEB liability was measured as of September 30, 2021, and
the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial
valuation as of September 30, 2020 and rolled-forward using generally accepted actuarial
procedures. The Lottery’s proportion of the net OPEB liability was based on Lottery’s required
OPEB contributions received by SERS during the measurement period October 1, 2020, through
September 30, 2021, relative to the total required employer contributions from all of SERS’s
participating employers. At September 30, 2021, Lottery’s proportion was 0.435%.
G. Sensitivity of the NET OPEB Liability to Changes in the Discount Rate
The following presents the Lottery’s proportionate share of the net OPEB liability calculated using
the discount rate as well as what the proportionate share of the net OPEB liability would be if it
were calculated using a discount rate that is one percentage point lower or one percentage point
higher than the current discount rate:
1% Decrease
Current Discount
1% Increase
5.2% 6.2% 7.2%
Lottery's proportionate share of
the net OPEB liability 20,915,641$ 16,474,032$ 12,744,407$
1% Decrease
Current Discount
1% Increase
5.9% 6.9% 7.9%
Lottery's proportionate share of
the net OPEB liability 20,975,769$ 16,590,706$ 12,894,544$
September 30, 2023
September 30, 2022
Sensitivity of the NET OPEB Liability to Healthcare Cost Trend Rates
The following table presents the Lottery’s proportionate share of the net OPEB liability calculated
using the assumed trend rates as well as what the proportionate share of the net OPEB liability
would be if it were calculated using a trend rate that is one percentage point lower or one
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 62 -
percentage point higher than the current trend rate:
1% Trend Current 1% Trend
Decrease
Trend Rate
Increase
(6.50% to 2.00%) (7.50% to 3.00%) (8.50% to 4.00%)
Lottery's proportionate share of
the net OPEB liability 12,582,340$ 16,474,032$ 20,951,096$
1% Trend Current 1% Trend
Decrease
Trend Rate
Increase
(6.50% to 2.00%) (7.50% to 3.00%) (8.50% to 4.00%)
Lottery's proportionate share of
the net OPEB liability 12,690,927$ 16,590,706$ 21,081,917$
September 30, 2023
September 30, 2022
H. OPEB Plan Fiduciary Net Position
Detailed information about the OPEB plan’s fiduciary net position is available in the SERS Annual
Comprehensive Financial Report that may be obtained by visiting michigan.gov/ors.
I. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources
Related to OPEB
For the years ended September 30, 2023 and 2022 the Lottery recognized OPEB (recovery) of
($1,535,685) and ($1,300,219), respectively. At September 30, 2023 and 2022, the Lottery
reported deferred outflows of resources and deferred inflows of resources related to OPEB from
the following sources:
Deferred Deferred Deferred Deferred
Outflows of Inflows of Outflows of Inflows of
Resources Resources Resources Resources
Changes in experiences -$ 12,249,122$ -$ 13,080,181$
Changes of assumptions 5,211,402 605,878 4,470,155 798,030
Changes in proportions 438,672 1,144,503 570,628 774,542
Net difference between projected and actual
earnings on investments 400,266 - - 2,274,733
Lottery's contributions subsequent to the
measurement date 2,358,932 - 2,518,531 -
Total 8,409,272$ 13,999,503$ 7,559,314$ 16,927,486$
September 30, 2023 September 30, 2022
Amounts reported as deferred outflows of resources related to OPEB resulting from the Lottery’s
contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB
liability in the year ending September 30, 2024.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 63 -
Other amounts reported as deferred outflows and inflows of resources related to OPEB will be
recognized in OPEB expense as follows:
Year Ended Expense
September 30: Amount
2024 (2,739,678)$
2025 (2,745,677)
2026 (2,096,526)
2027 (201,723)
2028 (165,559)
Defined Contribution Plan
The Lottery participates in the State of Michigan’s defined contribution plan system. The Lottery is
required to contribute to the defined contribution plan 4.0 percent of payroll with an additional match
of up to 3.0 percent. The contribution requirements of plan members and the Lottery are established
and may be amended by the State legislature. The State legislature establishes the extent to which
employer and employees are required to make contributions and establishes the benefit provisions
for the plan. For the six months ended September 30, 2023 and 2022, Lottery contributions to the
plan totaled $69,365 and $54,099, respectively.
Lottery’s contributions to the plan were $126,039 for the year ended September 30, 2023 and
$97,522 for the year ended September 30, 2022 and are recorded in salaries and benefits expense.
Postemployment Life Insurance Benefits
A. Plan Description
The State of Michigan provides postemployment life insurance benefits (the Plan) to eligible
individuals upon retirement from State employment. Members of the State Employees Retirement
System (SERS), the State Police Retirement System (SPRS), the Judges’ Retirement System
(JRS), and certain members of the Military Retirement Provisions (MMRP) may receive a life
insurance benefit if they meet the benefit eligibility requirements. The Plan is a single-employer,
state-wide, defined benefit other postemployment benefits (OPEB) plan. The State contracts with
Minnesota Life Insurance Company to administer the payout of life insurance benefits. The Plan is
administered by the Michigan Civil Service Commission under Article XI, Section 5 of the Michigan
Constitution of 1963, and Michigan Civil Service Commission Rule 5-11.
Activity of the Plan is accounted for in the State Sponsored Group Insurance Fund (Fund), an
internal service fund in the State of Michigan Annual Comprehensive Financial Report
(SOMACFR). The Fund was administratively established to account for employee insurance
benefit programs, which are largely self-funded. Five group insurance programs are offered to
State employees: health, dental, vision, long-term disability, and life.
The Plan is not a trust and has no assets.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 64 -
B. Benefits Provided
The State’s group policy with Minnesota Life Insurance Company includes any active employee in
the category of classified State service with an appointment of at least 720 hours duration, but
excluding employees with non-career appointments and those working less than 40% of full time;
any active official or active unclassified employee of the State who has been approved for
coverage by the Civil Service Commission; any retired employee or official who was insured under
this policy or the prior policies it replaced prior to entry into a State Retirement System; and
Wayne County employees who a) were State Judicial Council employees on October 1, 1996 and
whose employment was transferred to the Recorder’s Court on October 1, 1996 and b) whose
employer subsequently became the Wayne County Clerk’s Office.
Eligible retirees are provided with life insurance coverage equal to 25% of the active life insurance
coverage (which amount is rounded to the next higher $100 provided the retiree retired after July
1, 1974), $1,000 for spouse and $1,000 for each dependent under age 23.
The active life insurance amount is either a) two times the employee’s basic annual salary, the
result rounded to the next higher $1,000 if not already a multiple thereof, with a minimum of
$10,000 and a maximum of $200,000; or b) one times the employee’s basic annual salary, the
result rounded to the next higher $1,000 if not already a multiple thereof, with a minimum of
$10,000 and a maximum of $50,000.
C. Contributions
The State requires the employer to contribute 100% of the premiums for employee and retiree life
insurance coverage. The premium rate for fiscal years 2023 and 2022 was $.28 for each $1,000 of
coverage.
The employee contributes 100% of the premiums for dependent life coverage, and an employee
must have been enrolled in dependent life insurance to maintain eligibility for dependent coverage
as a retiree. The State is liable for benefit payments that exceed premiums paid. The Michigan
Civil Service Commission is responsible for establishing and amending funding policies. More
specific information concerning eligibility requirements, benefit level, and funding policies is
included in employee collective bargaining agreements, benefit plan booklets, and rules and
regulations issued by the Michigan Civil Service Commission.
D. Actuarial Valuations and Assumptions
The Lottery’s total OPEB liability as of September 30, 2023 was measured as of September 30,
2022 and is based on an actuarial valuation performed as of September 30, 2021 and rolled
forward using generally accepted actuarial procedures. The Lottery’s total OPEB liability as of the
September 30, 2022 was measured as of September 30, 2021 and is based on an actuarial
valuation performed as September 30, 2021.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan
as understood by the employer and plan members) and include the types of benefits provided at
the time of each valuation and the historical pattern of sharing of benefit costs between the
employer and plan members to that point. The actuarial methods and assumptions used include
techniques that are designed to reduce the effects of short-term volatility in actuarial accrued
liabilities consistent with the long-term perspective of the calculations. The normal cost and the
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 65 -
allocation of benefit values between service rendered before and after the valuation date was
determined using an Individual Entry-Age Actuarial Cost Method with these characteristics: a) the
annual normal cost for each individual active member, payable from the date of employment to the
date of retirement, is sufficient to accumulate the value of the member’s benefit at the time of
retirement; and b) each annual normal cost is a constant percentage of the members’ year by year
projected covered pay.
The total OPEB liability was measured using the following actuarial assumptions:
Wage Inflation Rate: 2.75% per year at September 30, 2022 and 2021
Investment Rate of Return (discount rate): 4.40% per year at September 30, 2022
2.19% per year at September 30, 2021
Mortality: Healthy Life and Disabled Life Mortality, with 110% used in the pension valuations for
SERS plan members at September 30, 2022 and 2021.
IBNR: A liability equal to 25.0% of expected first year cash flow was held for postemployment life
insurance benefits claims incurred but not reported (IBNR).
Spouse Benefits for Future Retirees: The liabilities for active members were loaded to account for
potential postemployment life insurance benefits payable to spouses of future retirees at 1.75% for
SERS retirees at September 30, 2022 and 2021.
Liabilities for retired members were loaded to account for postemployment life insurance benefits
payable to the spouses of current retirees at 1.75% for SERS retirees at September 30, 2022 and
2021.
Compensation: For some SERS retirees, FAC was not reported. The FAC for these members
was assumed to be $54,575 for SERS retirees at September 30, 2022 and 2021 (the average of
all SERS retiree records reported with FAC).
For SERS DC plan retirees, compensation at retirement and other information was not provided to
the actuary. The postemployment life insurance benefit policies for this group were assumed to
have the same average value as the policies for retirees in the SERS DB plan.
Other: The face values of The Plan policies currently in force were requested by the actuary but
were not available for use in this valuation. The actuary estimated the value of the
postemployment life insurance benefit policies for retirees as follows:
Individuals retired after July 1974: 50% x compensation at retirement (compensation reported for
the 2021 retirement system valuations)
Spousal benefits: $1,000
Individuals retired on or before July 1974: A minimum benefit of $1,000 and a maximum
benefit of $5,000 for an average of 3,000
Spousal benefits: $1,000
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 66 -
Data for current retiree members of the Plan was not available for use in this valuation. All current
retiree members of the retirement plans deemed eligible for postemployment life insurance
benefits and reported in connection with the 2022 retirement valuations were included in this
valuation of the Plan.
E. Discount Rate
A discount rate of 4.40% and 2.19% was used to measure the ending total OPEB liability for
Postemployment Life Insurance Benefits as of September 30, 2022 and 2021, respectively. This
discount rate was based on the tax-exempt municipal bond rate based on an index of 20-year
general obligation bonds with an average AA credit rating as of the measurement date since the
plan has no assets.
F. Total OPEB Liability for Postemployment Life Insurance Benefits
As of September 30, 2023, the Lottery reported a liability of $4,137,774 for its proportionate share
of the State’s Postemployment Life Insurance Benefit’s total OPEB liability. The total OPEB liability
was measured as of September 30, 2022 based on an actuarial valuation performed as of
September 30, 2021, and rolled forward using generally accepted actuarial procedures. The
Lottery’s proportion of the total OPEB liability was determined by dividing the Lottery’s actual
contributions to the Plan during the measurement period of October 1, 2021 through September
30, 2022, by the percent of OPEB actual contributions received from all applicable employers. At
September 30, 2022, the Lottery’s proportion was 0.417%.
As of September 30, 2022, the Lottery reported a liability of $5,825,534 for its proportionate share
of the State’s Postemployment Life Insurance Benefit’s total OPEB liability. The total OPEB liability
was measured as of September 30, 2021 based on an actuarial valuation performed as of that
date. The Lottery’s proportion of the total OPEB liability was determined by dividing the Lottery’s
actual contributions to the Plan during the measurement period of October 1, 2020 through
September 30, 2021, by the percent of OPEB actual contributions received from all applicable
employers. At September 30, 2021, the Lottery’s proportion was 0.428%.
G. Sensitivity of the Total OPEB Liability for Postemployment Life Insurance
The following presents the Lottery’s proportionate share of the total OPEB liability calculated using
the discount rate as well as what the proportionate share of the total OPEB liability would be if it
were calculated using a discount rate that is one percentage point lower or one percentage point
higher than the current discount:
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 67 -
1% Decrease
Current Discount
1% Increase
3.40% 4.40% 5.40%
Lottery's proportionate share of
the total OPEB liability 4,818,274$ 4,137,774$ 3,595,006$
1% Decrease
Current Discount
1% Increase
1.19% 2.19% 3.19%
Lottery's proportionate share of
the total OPEB liability 7,023,495$ 5,825,534$ 4,906,915$
September 30, 2022
September 30, 2021
H. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources
Related to OPEB for Postemployment Life Insurance Benefits
For the years ended September 30, 2023 and 2022, the Lottery recognized OPEB (recovery)
expense of ($88,086) and $201,736, respectively.
At September 30, 2023 and 2022, the Lottery reported deferred outflows of resources and
deferred inflows of resources related to OPEB from the following sources:
Deferred Deferred Deferred Deferred
Outflows of Inflows of Outflows of Inflows of
Resources Resources Resources Resources
Changes in experiences -$ 444,965$ 823$ 729,535$
Changes of assumptions 486,209 1,507,042 701,047 141,151
Changes in proportions 67,729 160,401 105,413 47,051
Lottery's contributions subsequent to the
measurement date 157,549 - 152,347 -
Total 711,487$ 2,112,408$ 959,630$ 917,737$
September 30, 2023 September 30, 2022
Amounts reported as deferred outflows of resources related to OPEB resulting from Lottery’s
contributions subsequent to the measurement date will be recognized as a reduction of the total
OPEB liability in the year ended September 30, 2024. Other amounts reported as deferred outflows of
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 68 -
resources related to OPEB will be recognized in OPEB expense as follows:
Year Ended Expense
September 30: Amount
2024 (308,693)$
2025 (282,048)
2026 (317,273)
2027 (359,138)
2028 (291,318)
The aggregate amount of OPEB expense (recovery) by plan for the fiscal years ending September 30
is as follows:
2023 2022
Health ($1,535,685) ($1,300,219)
Life Insurance (88,086)$ 201,736$
(1,623,771)$ (1,098,483)$
NOTE 12 - LEASE AND RENTAL COMMITMENTS
The Lottery leases certain assets from various third parties. The assets leased include buildings and
equipment. Payments are generally fixed monthly with certain variable payments not included in the
measurement of the lease liability. For the year ended September 30, 2023, the Lottery incurred
expenditures of $53,613,656 and $45,467,192 for the IGT and Neopollard contracts, respectively. The
incurred expenditure is the total commission amount paid to the vendors that includes a portion of
variable payments made on terminal lease expenditures. See Footnote 15 for further details related to
the IGT and Neopollard contracts.
Lease asset activity is included in Note 5.
Lease liability activity for the fiscal years ended September 30 is as follows:
Fiscal Due Long-
Year Beginning Ending Within Term
Ending Balance Additions Reductions Balance One Year Liability
2023 1,436,443$ 241,721$ 411,637$ 1,266,527$ 107,379$ 1,159,148$
2022 337,642$ 1,975,041$ 876,240$ 1,436,443$ 133,713$ 1,302,730$
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 69 -
Future principal and interest payment requirements related to the Lottery lease liability at September
30, 2023 are as follows:
Principal Interest Executory Costs Total
2024 107,379$ 20,812$ 116,756$ 244,947$
2025 108,924 19,267 116,756 244,947
2026 109,977 17,695 115,204 242,876
2027 108,032 16,084 110,547 234,663
2028 103,567 14,421 101,022 219,010
Thereafter 728,649 62,596 479,433 1,270,678
1,266,527$ 150,876$ 1,039,717$ 2,457,120$
The current portion of lease obligation is reported under accounts payable and other liabilities in the
Statement of Net Position on page 29.
NOTE 13 - RISK MANAGEMENT
The Lottery is exposed to various risks related to general liability and property losses, portions of its
employee insurance benefit and employee bonding programs, automobile liability, and workers’
compensation and unemployment compensation claims.
The State of Michigan has elected not to purchase commercial insurance for many of the risks of
losses to which the Lottery is exposed, but to self-insure for such risks. Settled claims related to the
commercial insurance have not exceeded the amount of insurance coverage in any of the past three
fiscal years. More detailed information on risk management is available in the State of Michigan’s
Annual Comprehensive Financial Report.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 70 -
NOTE 14 - TRANSACTIONS WITH OTHER STATE AGENCIES
As a State agency, the Lottery is required to utilize services, supplies and equipment provided by
other State agencies. The following is a summarization of these charges for the six-month periods and
years ended September 30, 2023 and 2022:
Six Months Year
September 30, 2023 Ended Ended
Department of Technology, Management & Budget:
Information Technology:
Direct costs $ 765,386 $ 2,700,721
Lansing Metropolitan Area Network (LMAN) 19,814 26,557
Michigan.gov portal web charges 5,132 9,621
Overhead 249,361 249,361
Total Information Technology charges 1,039,692 2,986,259
Support services (including Internal Audit) 404,300 404,300
Space rental - Lottery Central, Detroit, Saginaw offices 545,458 1,090,916
Vehicle and travel services 615,441 984,888
Other - Telephone, mailing and other offices services 189,099 268,782
Total Department of Technology, Management & Budget 2,793,989 5,735,144
Gaming Control Board (17,400) (17,400)
Civil Service Commission 416,082 416,082
Department of Treasury 498,050 830,119
Attorney General 232,926 347,118
Other Agencies 25,970 32,976
Total all State agencies $ 3,949,616 $ 7,344,038
Six Months Year
September 30, 2022 Ended Ended
Department of Technology, Management & Budget:
Information Technology:
Direct costs $ 211,340 $ 2,828,863
Lansing Metropolitan Area Network (LMAN) 18,593 24,559
Michigan.gov portal web charges 5,040 15,898
Overhead 146,233 146,233
Total Information Technology charges 381,206 3,015,553
Support services (including Internal Audit) 165,350 330,700
Space rental - Lottery Central, Detroit, Saginaw offices 582,610 1,165,220
Vehicle and travel services 598,012 885,601
Other - Telephone, mailing and other offices services 108,709 167,508
Total Department of Technology, Management & Budget 1,835,887 5,564,582
Gamin
g
Control Board 1,646,518 2,758,928
Civil Service Commission 220,290 450,852
Department of Treasury 493,576 807,147
Attorney General 152,438 321,181
Other Agencies 23,239 34,081
Total all State agencies $ 4,371,948 $ 9,936,771
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 71 -
NOTE 15 - COMMITMENTS AND CONTINGENCIES
The Lottery has contracted with International Game Technologies (IGT) to provide for the operation of
the gaming system through January 19, 2031. A contract amendment effective July 31, 2018
extended the contract an additional ten years, from January 20, 2021 through January 19, 2031.
Effective with the date of the amendment, IGT began receiving compensation of $62 per retail
location, per month, for retail communications network and management, regardless of whether there
are multiple terminals at one location. IGT is also compensated for the costs of personnel for the
merchandiser program, as well as ongoing equipment maintenance fees for all equipment provided
(whether equipment is new or was previously provided under the contract). The IGT contract includes
a lease for equipment based on variable payments. These payments are based on future events and
require subjectivity and extensive forecasting in estimating future amounts. The compensation for
equipment is included in the base contract, for which compensation is calculated on a percentage of
sales and therefore not included in the lease liability reported under GASB 87. Effective January 20,
2019, the contract rate is 1.06% of net sales. An upgrade to system hardware and software began in
September 2021 and implementation was completed in January 2023.
The Lottery contracted with Pollard to provide the development, implementation, operational support,
and maintenance of an iLottery System and iLottery Games. Effective December 1, 2020, the contract
was extended from July 14, 2022 through July 17, 2026. The contract continues to include both an
instant game and draw based game component, as well as reimbursable staffing and operational
expenses. Under the contract extension effective December 1, 2020, the commission rate for instant
games decreased from 18.4% to 17.4% for the first $100 million in instant game total gross profit
during the contract year. For instant game gross profit in excess of $100 million during the contract
year, the rate decreased to 18.4%, down from the previous rate of 19.6%. Draw based game
commission is set at 6.0% of gross sales, down from the previous rate of 8.5% of gross sales.
The Lottery continues to receive a monthly incentive from Pollard equal to 0.5% of Pollard’s
commission during the prior month, down from the previous incentive of 1.0%, to be used for any
services provided by Pollard under the contract. The contract extension also includes additional
funding for enhanced marketing and promotions, channel mix and portal development, game
development, responsible gaming program enhancements, enterprise development, supplemental
reporting, and data center configuration maintenance.
The Lottery has also entered into contracts with vendors to provide third-party digital games on the
iLottery platform. The Lottery extended its contract with Instant Win Gaming (IWG) from September
20, 2021 to July 17, 2026 to continue providing digital instant games on the iLottery instant game
platform. The extension also increased the monthly royalty fee paid to IWG from 3.4% to 4.5% of net
win for gross sales. Effective July 15, 2022, the Lottery entered into an agreement with IGT to begin
providing instant win or other game products on the iLottery platform. The Lottery shall pay IGT a
monthly royalty of 4.5% of the net win. The Lottery also entered into an agreement with EquiLottery,
LLC (EQL) effective July 12, 2022 to begin providing instant win or other game products on the
iLottery platform, and the Lottery will pay EQL a monthly royalty of 4.5% of the net win.
The Lottery also contracted with Interaction Gaming, LLC through January 29, 2025. A contract
extension effective January 30, 2021 will allow for maintenance and refining of two new e-commerce
mobile applications on IOS and Android devices and a new responsive e-commerce website. The
Lottery pays the project costs according to an agreed-upon payment schedule, as well as remits
quarterly payments to the vendor for ongoing maintenance costs.
Bureau of State Lottery, State of Michigan
Notes to Financial Statements
September 30, 2023 and 2022
- 72 -
Effective September 11, 2022, the Lottery extended its existing contract with Diamond Game
Enterprises for five years until September 10, 2027. The extension allows five 1-year contract renewal
options, adds $1.6 million in funding to allow the continued purchase of Charitable Gaming paper
instant tickets, and provides funding for continued maintenance of the ticket dispensing equipment
located at twenty non-profit locations in Michigan.
The Lottery exercised 1-year options to extend its contracts with Scientific Games International, Inc,
Pollard Banknote Limited, and IGT to continue as prequalified vendors for the printing of instant game
tickets through December 31, 2023.
Effective January 1, 2022, Lottery contracted with Simons-Michelson-Zieve, Inc. through December
31, 2024 to provide advertising, marketing, and promotional services in an effort to maximize the net
proceeds of the Lottery, with two 1-year options to renew the contract.
From time to time, the Lottery is party to lawsuits and claims arising in the normal course of business.
The Lottery has defended and intends to continue to defend these actions vigorously and believes,
based on currently available information, that adverse settlements, if any, will not be material to its
financial position or results of operations.
NOTE 16 – UPCOMING ACCOUNTING PRONOUNCEMENTS
In June 2022, the Governmental Accounting Standards Board issued GASB Statement No. 101,
Compensated Absences, which updates the recognition and measurement guidance for compensated
absences under a unified model. This statement requires that liabilities for compensated absences be
recognized for leave that has not been used and leave that has been used but not yet paid in cash or
settled through noncash means and establishes guidance for measuring a liability for leave that has
not been used. It also updates disclosure requirements for compensated absences. The provisions of
this statement are effective for the Lottery's financial statements for the fiscal year ending September
30, 2025.
2023 2022 2021 2020 2019 2018 2017 2016 2015
Lottery's proportion of the net pension liability 0.424% 0.434% 0.430% 0.439% 0.435% 0.431% 0.420% 0.408% 0.403%
Lottery's proportionate share of the net pension liability 27,382,880$ 17,628,158$ 28,985,924$ 29,293,732$ 26,317,640$ 22,396,495$ 22,208,139$ 22,432,145$ 20,722,586$
Lottery's covered payroll 14,657,814 14,508,773 14,371,539 14,178,535 13,751,447 13,312,723 12,681,633 12,056,738 N/A
Lottery's proportionate share of the net pension liability as a percentage of
its covered payroll 187% 121% 202% 207% 191% 168% 175% 186% N/A
Plan fiduciary net position as a percentage of the total pension liability 66.92% 78.08% 64.07% 64.71% 67.22% 69.45% 67.48% 66.11% 68.07%
The amounts presented for each fiscal year were determined as of the measurement date of September 30 of the previous year.
This schedule is required to show information for ten years, additional years will be displayed as it becomes available.
Bureau of State Lottery, State of Michigan
Required Supplementary Information
Schedule of Lottery's Proportionate Share of Net Pension Liabilit
y
State Employees' Retirement System
For the Fiscal Years Ended September 30
- 73 -
Bureau of State Lottery, State of Michigan
Required Supplementary Information
Schedule of Lottery's Pension Contributions
State Employees' Retirement Syste
m
For the Fiscal Years Ended September 30
2023 2022 2021 2020 2019 2018 2017 2016 2015
Statutorily required contribution 3,103,946$ 2,874,148$ 2,835,697$ 2,658,934$ 2,620,385$ 2,845,679$ 3,054,724$ 2,998,747$ 3,045,205$
Contributions in relation to the stautorily required contribution 3,103,946 2,874,148 2,835,697 2,658,934 2,620,385 2,845,679 3,054,724 2,998,747 3,045,205
Contribution deficiency (excess) - - - - - - - - -
Lottery's covered payroll 16,502,358$ 14,657,814$ 14,508,773$ 14,371,539 14,178,535 13,751,447 13,312,723 12,681,633 12,056,738
Contributions as a percentage of covered payroll 18.8% 19.6% 19.5% 18.5% 18.5% 20.7% 22.9% 23.6% 25.3%
This schedule is required to show information for ten years, additional years will be displayed as it becomes available.
- 74 -
Bureau of State Lottery, State of Michigan
Notes to Pension Required Supplementary Information Schedules
Year Ended September 30, 2023
- 75 -
The comparability of trend information is affected by changes in actuarial assumptions, benefit
provisions, actuarial funding methods, accounting policies, and other changes. Those changes
usually affect trends in contribution requirements and in ratios that use the pension and other
postemployment benefit liability as a factor.
The schedule of contributions for pensions is presented to show the responsibility of the Lottery
in meeting the actuarial requirements to maintain the System on a sound financial basis.
The schedule of the proportionate share of the net pension liability and schedule of contributions
for pensions are schedules that are required in implementing GASB Statement No. 68. The
schedule of the proportionate share of the net pension liability represents in actuarial terms, the
accrued liability less the market value of assets. The schedule of contributions for pensions is a
comparison of the Lottery’s contributions to the actuarially determined contributions.
The information presented in the schedule of contributions was used in the actuarial valuation for
purposes of determining the actuarially determined contribution rate. Additional information as of
the latest actuarial valuation for the pension plan follows.
Valuation – Actuarially determined contribution amounts are calculated as of September 30 each
year. The September 30, 2020 valuation determined the contribution rate for the State of
Michigan’s fiscal year ending September 30, 2023.
Methods and Assumptions Used to Determine Contribution for Fiscal Year 2023
Actuarial cost method Entry Age, Normal
Amortization method Level Dollar, Closed
Remaining amortization period 14 years, closed ending on September 30, 2036
Asset valuation method 5-Year Smoothed Fair Value
Inflation 2.25%
Salary Increases 2.75% - 11.75%, including wage inflation at 2.75%
Investment rate of return 6.70% net of investment expenses
Retirement age Experience-based table of rates that are specific to the type
of eligibility condition
Mortality Active members and disabled retirees: RP-2014 Male and
Female Employee Annuitant Mortality Tables scaled by
100% for males and females and adjusted for mortality
improvements using projection scale MP-2017 from 2006.
Retirees: RP-2014 Male and Female Annuitant Mortality
Tables scaled by 93% for males and 98% for females and
adjusted for mortality improvements using projection scale
MP-2017 from 2006.
Bureau of State Lottery, State of Michiga
n
Required Supplementary Informatio
n
Schedule of Lottery's Proportionate Share of Net OPEB Liabilit
y
State Employees' Retirement System - Healthcar
e
For the Fiscal Years Ended September 30
2023 2022 2021 2020 2019 2018
Lottery's proportion of the net OPEB liability 0.423% 0.435% 0.428% 0.442% 0.440% 0.436%
Lottery's proportionate share of the net OPEB liability 16,474,032$ 16,590,706$ 25,009,194$ 34,790,283$ 34,926,285$ 35,925,905$
Lottery's covered payroll 14,657,814 14,508,773 14,371,539 14,178,535 13,751,447 13,312,723
Lottery's proportionate share of the net OPEB liability as a percentage of
its covered payroll 112% 114% 174% 245% 254% 270%
Plan fiduciary net position as a percentage of the total OPEB liability 56.64% 57.12% 38.29% 27.88% 24.41% 19.9%
The amounts presented for each fiscal year were determined as of the measurement date of September 30 of the previous year.
This schedule is required to show information for ten years, additional years will be displayed as it becomes available.
- 76 -
Bureau of State Lottery, State of Michigan
Required Supplementary Information
Schedule of Lottery's OPEB Contributions
State Employees' Retirement System - Healthcar
e
For the Fiscal Years Ended September 30
2023 2022 2021 2020 2019 2018
Statutorily required contribution 2,358,932$ 2,518,531$ 3,335,059$ 3,010,364$ 3,369,182$ 3,043,818$
Contributions in relation to the stautorily required contribution 2,358,932 2,518,531 3,335,059 3,010,364 3,369,182 3,043,818
Contribution deficiency (excess) - - - - - -
Lottery's covered payroll 16,502,358 14,657,814 14,508,773 14,371,539 14,178,535 13,751,447
Contributions as a percentage of covered payroll 14.3% 17.2% 23.0% 20.9% 23.8% 22.1%
This schedule is required to show information for ten years, additional years will be displayed as it becomes available.
- 77 -
Bureau of State Lottery, State of Michigan
Notes to OPEB Required Supplementary Information Schedules
Year Ended September 30, 2023
- 78 -
The comparability of trend information is affected by changes in actuarial assumptions, benefit provisions,
actuarial funding methods, accounting policies, and other changes. Those changes usually affect trends in
contribution requirements and in ratios that use the other postemployment benefit liability as a factor.
The schedule of contributions for OPEB is presented to show the responsibility of the Lottery in meeting
the actuarial requirements to maintain the System on a sound financial basis.
The schedule of the proportionate share of the net OPEB liability and schedule of contributions for OPEB
are schedules that are required in implementing GASB Statement No. 75. The schedule of contributions is
a comparison of the Lottery’s contributions to the actuarially determined contributions.
The information presented in the schedule of contributions was used in the actuarial valuation for purposes
of determining the actuarially determined contribution rate. Additional information as of the latest actuarial
valuation for the OPEB plan follows.
Valuation – Actuarially determined contribution amounts are calculated as of September 30 each year.
The September 30, 2020 valuation determined the contribution rate for the State of Michigan’s fiscal year
ending September 30, 2023.
Methods and Assumptions Used to Determine Contribution for Fiscal Year 2023
Actuarial cost method Entry Age, Normal
Amortization method Level – Percent of Payroll, Closed
Remaining amortization period 15 years, closed ending September 30, 2036
Asset valuation method 5-year smoothed value
Inflation 2.25%
Salary Increases 2.75% - 11.75%, including wage inflation at 2.75%
Investment rate of return 6.90% net of OPEB plan investment expenses
Retirement age Experience-based table of rates that are specific to the type of
eligibility condition
Health Care Cost Trend Rate 7.50% in year 1, gradually decreasing to 3.50% year 15, 3.00% in
year 120
Aging Factors Based on the 2013 SOA “Health Care Costs-From Birth to Death”
Mortality Active members and disabled retirees: RP-2014 Male and Female
Employee Annuitant Mortality Tables scaled by 100% for males
and females and adjusted for mortality improvements using
projection scale MP-2017 from 2006.
Retirees: RP-2014 Male and Female Annuitant Mortality Tables
scaled by 93% for males and 98% for females and adjusted for
mortality improvements using projection scale MP-2017 from
2006.
Bureau of State Lottery, State of Michiga
n
Required Supplementary Informatio
n
Schedule of Lottery's Proportionate Share of Total OPEB Liabilit
y
Postemployment Life Insurance Benefit
For the Fiscal Years Ended September 30
2023 2022 2021 2020 2019 2018
Lottery's proportion of the total OPEB liability 0.417% 0.428% 0.432% 0.425% 0.423% 0.416%
Lottery's proportionate share of the total OPEB liability 4,137,774$ 5,825,534$ 6,069,835$ 5,199,726$ 5,281,241$ 5,319,247$
Lottery's covered employee payroll 15,507,086 13,667,033 13,622,113 13,719,049 11,122,483 12,158,951
Lottery's proportionate share of the total OPEB liability as a percentage of
its covered employee payroll 26.7% 42.6% 44.6% 37.9% 47.5% 43.7%
The amounts presented for each fiscal year were determined as of the measurement date of September 30 of the previous year.
This schedule is required to show information for ten years, additional years will be displayed as it becomes available.
The plan is not a trust and has no assets.
- 79 -
Bureau of State Lottery, State of Michigan
Supplementary Schedule of Revenues and Expenses
For the Six Months and Year Ended September 30, 2023
Six Months Ended Year Ended
Percent Percent
Amount of Sales Amount of Sales
Lottery ticket sales: Daily 3 $ 221,883,059 9.2% $ 449,141,766 9.1%
Daily 4 250,205,993 10.4% 518,704,003 10.5%
Lotto 47 26,895,341 1.1% 49,598,997 1.0%
Lotto 47 Double Pla
y
3,434,650 0.1% 6,352,047 0.1%
Lotto 47 EZ Match 1,017,336 0.0% 1,924,826 0.0%
Mega Millions 98,690,763 4.1% 199,008,770 4.0%
Megaplie
r
13,967,330 0.6% 28,439,501 0.6%
Powerball 98,555,408 4.1% 237,999,897 4.8%
Power Pla
y
15,082,298 0.6% 35,428,803 0.7%
Powerball Double Pla
y
3,687,969 0.2% 8,083,104 0.2%
Keno 3,685,729 0.2% 7,519,572 0.2%
Fantasy Five 24,077,523 1.0% 49,436,651 1.0%
Fantasy Five Double Pla
y
4,768,840 0.2% 9,632,685 0.2%
Fantasy Five EZ Match 1,309,117 0.1% 2,643,664 0.1%
Raffle 2,396,390 0.1% 3,091,237 0.1%
Club Keno 194,071,322 8.1% 388,842,534 7.9%
Club Keno Kicke
r
76,397,097 3.2% 153,139,452 3.1%
The Jack 5,139,120 0.2% 10,116,232 0.2%
Club Keno Extra 23,243,994 1.0% 46,116,907 0.9%
Poker Lotto 2,772,314 0.1% 5,608,320 0.1%
Lucky for Life 18,399,498 0.8% 36,767,690 0.7%
Fast Cash 45,345,825 1.9% 83,246,011 1.7%
Pull-Tab tickets 21,011,860 0.9% 43,740,112 0.9%
Instant tickets 1,160,428,510 48.3% 2,364,743,242 48.0%
iLottery Instants, Net Win 94,528,572 3.9% 200,141,129 4.0%
iLottery Sales - OGC Promotions - 0.0% - 0.0%
iLottery Promos-Non Game Specific (7,528,555) -0.2% (16,598,024) -0.3%
Total lottery ticket sales 2,403,467,303 100.0% 4,922,869,128 100.0%
Prize awards: Daily 3 105,702,907 4.4% 216,628,573 4.4%
Daily 4 105,528,371 4.4% 227,757,514 4.6%
Lotto 47/Lotto 47 Double Pla
y
17,809,013 0.7% 32,931,055 0.7%
Lotto 47 EZ Match 653,525 0.0% 1,233,893 0.0%
Mega Millions/Megaplie
r
53,045,047 2.2% 110,216,116 2.2%
Powerball/Power Play/Powerball Double Pla
y
58,243,600 2.4% 139,701,546 2.8%
Keno 1,386,702 0.1% 2,832,053 0.1%
Fantasy Five/Fantasy Five Double Pla
y
15,020,822 0.6% 30,950,825 0.6%
Fantasy Five EZ Match 836,874 0.0% 1,691,764 0.0%
Raffle 1,360,309 0.1% 1,727,101 0.0%
Club Keno/Kicker/Jack/Extra 199,258,972 8.3% 394,788,060 8.0%
Poker Lotto 1,627,323 0.1% 3,303,100 0.1%
Lucky for Life 10,909,183 0.5% 23,197,699 0.5%
Fast Cash 33,307,423 1.4% 61,549,377 1.3%
Pull-Tab tickets 15,204,812 0.6% 31,712,406 0.6%
Instant tickets 879,267,156 36.7% 1,793,712,262 36.4%
Total prize awards 1,499,162,039 62.4% 3,073,933,344 62.4%
Less: unclaimed prizes (31,957,301) -1.3% (57,119,041) -1.3%
Net prize awards 1,467,204,738 61.0% 3,016,814,303 61.3%
Gross margin 936,262,565 39.0% 1,906,054,825 38.7%
Retailer and vendor commissions and other expenses (220,273,606) -9.2% (453,579,868) -9.2%
Game-related expense (25,964,687) -1.1% (48,173,583) -1.1%
Net ticket revenue 690,024,272 28.7% 1,404,301,374 28.5%
Other operating expense (33,316,861) -1.4% (62,947,846) -1.3%
Depreciation expense (132,855) 0.0% (330,250) 0.0%
Other miscellaneous revenue 2,468,960 0.1% 3,161,054 0.1%
Net lottery operating income 659,043,516 27.4% 1,344,184,332 27.3%
Continued
- 80 -
Bureau of State Lottery, State of Michigan
Supplementary Schedule of Revenues and Expenses
For the Six Months and Year Ended September 30, 2023
Six Months Ended Year Ended
Percent Percent
Amount of Sales Amount of Sales
Charitable gaming:
Charitable gaming revenue 6,677,327 0.3% 13,091,634 0.3%
Charitable gaming expense (2,741,748) -0.1% (5,563,441) -0.1%
Net charitable gaming income 3,935,579 0.2% 7,528,193 0.2%
Non-operating revenues (expenses):
Amortization expense - prize discount $ (2,424,273) -0.1% $ (4,983,726) -0.1%
Amortization revenue - investment discount 2,777,684 0.1% 5,575,882 0.0%
Unrealized gain (loss) on investments (8,156,165) -0.3% (5,807,056) -0.1%
Loss on disposal of assets - 0.0% - 0.0%
Interest revenue - common cash fund 7,410,540 0.3% 10,362,120 0.2%
Bank fees (998) 0.0% (1,748) 0.0%
Interest costs - capital leases (12,767) 0.0% (22,207) 0.0%
Disbursement to School Aid Fund (664,121,408) -27.6% (1,351,947,360) -27.5%
Disbursement to General Fund (3,935,580) -0.2% (7,528,193) -0.2%
Disbursement to Health & Human Services (495,000) 0.0% (990,000) 0.0%
Net non-operating revenues (expenses) (668,957,967) -27.8% (1,355,342,288) -27.5%
Change in net position $ (5,978,872) -0.2% $ (3,629,763) -0.1%
Concluded
- 81 -
Bureau of State Lottery, State of Michigan
Supplementary Schedule of Revenues and Expense
s
For the Six Months and Year Ended September 30, 202
2
Six Months Ended Year Ended
Percen
t
Percen
t
Amount of Sales Amount of Sales
Lottery ticket sales: Daily 3 $ 240,236,32
5
9.6% $ 486,175,522 9.9%
Daily 4 280,818,000 11.2% 584,504,962 11.9%
Lotto 47 23,073,817 0.9% 43,462,521 0.9%
Lotto 47 Double Pla
y
909,515 0.0% 1,784,418 0.0%
Lotto 47 EZ Match 2,997,813 0.1% 5,771,804 0.1%
Mega Million
s
101,981,330 4.1% 153,810,122 3.1%
Megaplie
r
13,819,978 0.6% 21,305,430 0.4%
Powerball 64,192,457 2.6% 141,588,972 2.9%
Power Pla
y
10,510,938 0.4% 21,674,421 0.4%
Powerball Double Pla
y
2,907,213 0.1% 6,164,709 0.1%
Keno 4,052,853 0.2% 8,121,757 0.2%
Fantasy Fiv
e
26,594,263 1.1% 53,534,572 1.1%
Fantasy Five Double Pla
y
1,373,534 0.1% 2,756,982 0.1%
Fantasy Five EZ Matc
h
5,083,482 0.2% 10,186,697 0.2%
Raffle 1,008,592 0.0% 1,646,462 0.0%
Club Keno 202,297,412 8.1% 403,336,410 8.2%
Club Keno Kicker 80,812,872 3.2% 161,509,653 3.3%
The Jack 4,406,548 0.2% 7,823,996 0.2%
Club Keno Extra 23,329,933 0.9% 46,244,134 0.9%
Poker Lotto 2,932,863 0.1% 5,863,364 0.1%
Lucky for Lif
e
18,455,120 0.7% 36,591,626 0.7%
Fast Cash 39,762,588 1.6% 95,493,523 2.0%
Pull-Tab tickets 21,400,689 0.9% 43,172,941 0.9%
Instant tickets 1,250,025,21
4
49.8% 2,380,954,30
4
48.6%
iLottery Instants, Net Win 97,143,314 3.9% 193,178,309 3.8%
iLottery Sales - OGC Promotion
s
- 0.0% (456) 0.0%
iLottery Promos-Non Game Specifi
c
(9,001,688
)
-0.3% (19,804,736
)
-0.4%
Total lottery ticket sales 2,511,124,975 100.0% 4,896,852,419 100.0%
Prize awards: Daily 3 121,579,388 4.8% 255,167,754 5.2%
Daily 4 144,872,246 5.8% 315,061,257 6.4%
Lotto 47/Lotto 47 Double Pla
y
14,835,361 0.6% 27,452,948 0.6%
Lotto 47 EZ Match 582,667 0.0% 1,143,174 0.0%
Mega Millions/Megaplie
r
57,103,200 2.3% 86,595,119 1.8%
Powerball/Power Play/Powerball Double Pla
y
38,624,574 1.5% 82,708,467 1.7%
Keno 1,945,590 0.1% 3,965,964 0.1%
Fantasy Five/Fantasy Five Double Pla
y
16,894,272 0.7% 33,310,644 0.7%
Fantasy Five EZ Matc
h
881,828 0.0% 1,767,581 0.0%
Raffle 593,741 0.0% 1,154,637 0.0%
Club Keno/Kicker/Jack/Extra 207,329,799 8.3% 407,428,474 8.3%
Poker Lotto 1,742,414 0.1% 3,475,541 0.1%
Lucky for Lif
e
11,039,729 0.4% 21,913,999 0.4%
Fast Cash 31,321,831 1.2% 71,634,419 1.5%
Pull-Tab tickets 15,522,959 0.6% 31,293,688 0.6%
Instant tickets 946,411,486 37.8% 1,788,332,85
0
36.5%
Total prize awards 1,611,281,085 64.2% 3,132,406,516 64.0%
Less: unclaimed prize
s
(21,001,595
)
-0.8% (35,364,469
)
-0.8%
Net prize awards 1,590,279,490 63.3% 3,097,042,047 63.2%
Gross margin 920,845,485 36.7% 1,799,810,372 36.8%
Retailer and vendor commissions and other expenses (231,858,119) -9.2% (450,495,823) -9.2%
Game-related expense (20,683,584) -0.8% (41,114,709) -0.9%
Net ticket revenue 668,303,782 26.6% 1,308,199,840 26.7%
Other operating expense (27,861,333) -1.1% (54,333,761) -1.1%
Depreciation expense (211,845) 0.0% (402,207) 0.0%
Other miscellaneous revenue 382,616 0.0% 1,371,727 0.0%
Net lottery operating income 640,613,220 25.5% 1,254,835,599 25.6%
Continued
- 82 -
Bureau of State Lottery, State of Michigan
Supplementary Schedule of Revenues and Expenses
For the Six Months and Year Ended September 30, 2022
Six Months Ended Year Ended
Percent Percent
Amount of Sales Amount of Sales
Charitable gaming:
Charitable gaming revenue 6,729,846 0.3% 13,225,872 0.3%
Charitable gaming expense (3,938,372) -0.2% (7,853,917) -0.2%
Net charitable gaming income 2,791,474 0.1% 5,371,955 0.1%
Non-operating revenues (expenses):
Amortization expense - prize discount $ (2,512,575) -0.1% $ (5,231,633) -0.1%
Amortization revenue - investment discount 2,860,593 0.1% 5,813,782 0.0%
Unrealized gain (loss) on investments (15,336,313) -0.6% (26,355,927) -0.5%
Loss on disposal of assets - 0.0% - 0.0%
Interest revenue - common cash fund 1,385,187 0.1% 1,471,328 0.0%
Bank fees (1,640) 0.0% (2,015) 0.0%
Interest costs - capital leases (13,907) 0.0% (21,039) 0.0%
Disbursement to School Aid Fund (634,554,794) -24.7% (1,248,594,939) -24.7%
Disbursement to General Fund (2,791,474) -0.1% (5,371,955) -0.1%
Disbursement to Health & Human Services (495,000) 0.0% (990,000) 0.0%
Net non-operating revenues (expenses) (651,459,923) -25.3% (1,279,282,398) -25.4%
Change in net position $ (8,055,229) -0.3% $ (19,074,844) -0.4%
Concluded
- 83 -
Bureau of State Lottery, State of Michigan
Supplementary Schedule of Other Operating Expenses
For the Six Months and Years Ended September 30, 2023 and 2022
Six Months Ended Years Ended
2023 2022 2023 2022
Salaries and wages $ 8,389,518 7,452,272 $ 16,654,203 14,798,049
Employee benefits and taxes 5,963,378 251,043 8,954,992 2,695,143
Promotion and advertising 16,789,919 17,949,805 31,814,356 31,093,167
Printing and supplies, including
purchase of charitable gaming
tickets 1,608,891 933,239 2,486,572 1,751,501
Other contractual services 2,241,681 3,664,650 5,408,654 8,845,995
Building rent and leases 606,696 644,108 1,211,572 1,286,136
Travel 534,167 524,301 1,006,788 907,391
Utilities 175,190 174,442 369,891 433,823
Postage 115,389 77,493 184,270 115,271
Equipment maintenance and rental (332,957) (16,297) 149,595 78,403
Bad debt expense (70,357) 143,149 229,054 180,566
Interest paid on security deposits 37,094 1,500 41,340 2,233
Total $ 36,058,609 $ 31,799,705 $ 68,511,287 $ 62,187,678
- 84 -
- 85 -
Bureau of State Lottery, State of Michigan
Index
Statistical Section
This part of the Lottery’s annual comprehensive financial report presents detailed information as a context for
understanding what the information in the financial statements, note disclosures, and required supplementary
information says about the Lottery’s overall financial health. The Michigan Bureau of State Lottery began operating in
October 1972 and commenced ticket sales in November 1972. Data from the last 10 fiscal years of Lottery operations
are presented in the following charts and graphs.
Contents Page
Financial Trends
These schedules contain trend information to help the reader understand how
the Lottery’s financial performance and well-being have changed over time.
Net position..…………………….……………………….……………………………………….……….. 86
Changes in net position..……………………………….………………………………………………… 87
Chart of financial trends……….…………………………………………………….……………...……. 88
Revenue Capacity
This schedule and graph contains information to help the reader assess the
Lottery’s most significant revenue source, ticket sales.
Instant Games – represent the face value of tickets activated by retailers.
Draw Games – represents the face value of tickets sold to the public.
Club Games – represents the face value of tickets sold to the public
iLottery Instant Games – represents sales less promotional tickets and prizes paid.
Revenues from ticket sales……………………………….………..……………………………………. 89
Chart of ticket sales……………………………………….…………..………………………………….. 90
Debt Capacity
This schedule presents information to help the reader assess the Lottery’s current
levels of outstanding debt. Prize liability is determined by prize structure and luck of the draw.
Investments in U.S. Treasury zero-coupon bonds and Michigan CAB bonds are purchased
to meet future installment payments to prize winners.
Ratio of outstanding debt by type…………………………………………………………………………. 91
Ratio of installment prize awards liability…………………………………………………………………. 92
Demographic and Economic Information
These graphs offer demographic and economic indicators to help the reader
understand the environment within which the Lottery’s financial activities
take place.
Demographic general tracking study……………………………………………………………………. 93
Charts of general tracking study…………………………………………………………………........... 94
Demographic and economic indicators………………………………………………………………..... 96
Operating Information
This schedule contains service, retailer data, prize data, expenses and amounts
disbursed to the state School Aid Fund and prize winner data to help the reader
understand how the Lottery’s financial report relates to the products the Lottery
provides and the service it performs for the State.
Operating information…………………………………………………………………………………….. 97
Expenses and disbursements……………………………………………………………………………. 98
Chart of expenses and disbursements………………………………………………………………….. 99
Industry Comparative Information
These schedules show comparative information regarding sales, profits and
expenses of all United States Lotteries…………………………………………………………………. 100
Compliance Information
Independent Auditors’ Report on Internal Control…………………………………………………….... 102
Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive reports for
September 30, 2023.
Bureau of State Lottery, State of Michigan
Financial Trends
Net Position
Fiscal Years Ending September 30, 2014 through September 30, 2023
(In Millions)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net position
Net investment in capital assets 0.6$ 1.5$ 1.2$ 1.2$ 1.0$ 1.1$ 0.7$ 0.5$ 0.3$ 0.04$
Restricted for School Aid Fund 26.8 11.8 8.7 - - - - - - -
Unrestricted (deficit) (0.6) (1.5) (1.2) (2.5) (44.9) (34.5) (26.7) (34.3) (53.1) (56.5)
Total net position 26.8$ 11.8$ 8.7$ (1.3)$ (43.9)$ (33.4)$ (26.0)$ (33.8)$ (52.8)$ (56.5)$
Source: Bureau of State Lottery, State of Michigan
- 86 -
Bureau of State Lottery, State of Michigan
Financial Trends
Changes in Net Position
Fiscal Years Ending September 30, 2014 through September 30, 2023
(In Millions)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Operating revenues
Ticket sales 2,596.4$ 2,771.9$ 3,104.5$ 3,329.8$ 3,578.0$ 3,884.2$ 4,247.4$ 5,046.1$ 4,896.9$ 4,922.9$
Charitable gaming and other 12.5 13.2 13.6 17.3 13.9 13.2 9.2 11.9 14.6 16.2
Total operating revenues 2,608.9 2,785.1 3,118.1 3,347.1 3,591.9 3,897.4 4,256.6 5,058.0 4,911.5 4,939.1
Operating expenses
Prize awards
1,590.7 1,697.0 1,884.8 2,044.0 2,237.0 2,405.2 2,640.0 3,135.1 3,132.4 3,073.9
Less - unclaimed prizes (30.8) (31.5) (28.5) (27.6) (22.0) (40.5) (56.4) (78.1) (35.4) (57.1)
Net prize awards 1,559.9 1,665.5 1,856.3 2,016.4 2,215.0 2,364.7 2,583.6 3,057.0 3,097.0 3,016.8
Retailer commissions 188.5 203.6 231.7 249.2 266.5 287.6 307.7 370.9 356.6 354.6
Game related expenses 61.3 63.9 80.2 93.9 101.4 104.8 128.3 144.6 135.0 147.1
Other operating expenses 51.9 52.0 66.4 61.7 68.0 73.5 58.4 56.2 62.6
68.8
Total operating expenses 1,861.6 1,985.0 2,234.6 2,421.2 2,650.9 2,830.6 3,078.0 3,628.7 3,651.2 3,587.3
Operating income 747.3 800.1 883.5 925.9 941.0 1,066.8 1,178.6 1,429.3 1,260.3 1,351.8
Non-operating revenues
Investment revenue 18.0 12.9 13.5 (2.7) (4.2) 21.9 15.5 (6.0) (20.6) (0.2)
Interest on equity in State Treasurer's
Common Cash Fund 0.1 0.1 0.3 0.6 0.9 1.6 1.1 0.4 1.5 10.3
Total non-operating revenues 18.1 13.0 13.8 (2.1) (3.3) 23.5 16.6 (5.6) (19.1) 10.1
Non-operating expenses
Amortization of prize obligation discount (9.7) (8.5) (7.5) (6.8) (6.9) (6.3) (6.1) (6.2) (5.2) (5.0)
Non-operating expenses before disbursements (9.7) (8.5) (7.5) (6.8) (6.9) (6.3) (6.1) (6.2) (5.2) (5.0)
School Aid Fund disbursement (742.8) (795.5) (888.9) (924.1) (941.3) (1,070.6) (1,179.9) (1,419.8) (1,248.6) (1,352.0)
School Aid Fund disbursement-Club Keno Advertising (0.1) - - - - - - - -
-
General Fund disbursement (2.9) (2.9) (3.0) (1.9) (1.9) (1.9) (0.8) (4.5) (5.4) (7.5)
Health and Human Services disbursement (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0) (1.0)
Total disbursements (746.8) (799.4) (892.9) (927.0) (944.2) (1,073.5) (1,181.7) (1,425.3) (1,255.0) (1,360.5)
Total non-operating expenses (756.5) (807.9) (900.4) (933.8) (951.1) (1,079.8) (1,187.8) (1,431.5) (1,260.2) (1,365.5)
Net non-operating revenue (expense) (738.4) (794.9) (886.6) (935.9) (954.4) (1,056.3) (1,171.2) (1,437.1) (1,279.3) (1,355.4)
Change in net position 8.9$ 5.2$ (3.1)$ (10.0)$ (13.4)$ 10.5$ 7.4$ (7.8)$ (19.0)$ (3.6)$
Source: Bureau of State Lottery, State of Michigan
- 87 -
Bureau of State Lottery, State of Michigan
Financial Trends 2014 through 2023
0.0
230.0
460.0
690.0
920.0
1,150.0
1,380.0
1,610.0
1,840.0
2,070.0
2,300.0
2,530.0
2,760.0
2,990.0
3,220.0
3,450.0
3,680.0
3,910.0
4,140.0
4,370.0
4,600.0
4,830.0
5,060.0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
2,596.4
2,771.9
3,104.6
3,329.8
3,578.1
3,884.2
4,247.4
5,046.1
4,896.9
4,896.9
Millions
Ticket
Sales
Ticket Sales History
0.0
70.0
140.0
210.0
280.0
350.0
420.0
490.0
560.0
630.0
700.0
770.0
840.0
910.0
980.0
1,050.0
1,120.0
1,190.0
1,260.0
1,330.0
1,400.0
1,470.0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
742.9
795.5
888.9
924.1
941.3
1,070.6
1,179.9
1,419.8
1,248.6
1,351.9
Millions
Net to Education
Net To Education
0.0
17.0
34.0
51.0
68.0
85.0
102.0
119.0
136.0
153.0
170.0
187.0
204.0
221.0
238.0
255.0
272.0
289.0
306.0
323.0
340.0
357.0
374.0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
188.5
203.6
231.7
249.2
266.5
287.6
307.7
370.9
356.6
354.6
Millions
Commissions
Retailer Commissions
0.0
135.0
270.0
405.0
540.0
675.0
810.0
945.0
1,080.0
1,215.0
1,350.0
1,485.0
1,620.0
1,755.0
1,890.0
2,025.0
2,160.0
2,295.0
2,430.0
2,565.0
2,700.0
2,835.0
2,970.0
3,105.0
3,240.0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
1,590.7
1,697.0
1,884.9
2,044.1
2,237.0
2,405.2
2,640.0
3,135.1
3,132.4
3,073.9
Millions
Prizes
Prizes Awarded
Source: Bureau of State Lottery, State of Michigan
- 88 -
Bureau of State Lottery, State of Michigan
Revenue Capacity
Revenues from Ticket Sales
Fiscal Years Ending September 30, 2014 through September 30, 2023
(In Millions)
TICKET SALES 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Instant Games
Instant Tickets 913.1$ 1,013.2$ 1,136.8$ 1,321.6$ 1,488.2$ 1,655.5$ 2,038.2$ 2,448.6$ 2,381.0$ 2,364.7$
iLottery Games
iLottery Instants, Net Win 0.6 18.5 48.0 77.9 93.7 116.3 219.1 241.8 193.2 200.1
iLottery Online Game Card Promos - - (0.3) (0.6) - - - - - -
iLottery Non-Game Specific Promos - - (2.0) (5.1) (6.8) (8.2) (14.8) (22.6) (19.8) (16.6)
Club Games
Club Keno, Lucky Streak, The Jack 410.4 430.5 461.7 471.8 438.5 421.9 354.9 377.9 411.2 399.0
Club Keno Kicker, Lucky Streak Plus 140.7 150.4 164.0 169.0 157.3 152.5 131.6 146.4 161.5 153.1
Club Keno Extra - - - 0 32.0 42.9 38.2 42.2 46.2 46.1
Pull Tab, Insta Tabs 32.4 32.9 32.5 32.9 32.9 33.6 28.3 33.7 43.2 43.7
Total Club Games 583.5 613.8 658.2 673.7 660.7 650.9 553.0 600.2 662.1 641.9
Draw Games
Daily 3, Double 3 327.0 344.6 366.9 369.0
371.3 395.9 447.6 535.9 486.2 449.1
Daily 4, Double 4 366.3 398.3 415.6 441.4 466.5 493.9 534.2 634.1 584.5 518.7
Winfall, Lotto 47, Lotto 47 EZ Match, Lotto 47 Double Play 45.9 53.9 45.4 70.1 50.2 67.2 75.6 93.4 51.0 57.9
Poker Lotto 39.1 16.1 13.6 11.0 7.9 7.1 6.3 6.7 5.9 5.6
Lucky for Life - 15.6 16.7 14.7 14.9 14.2 15.2 23.6 36.6 36.8
Monopoly - 1.8 - - - - - - - -
Keno 10.3 9.8 9.5 9.0 9.0 8.8 8.6 8.8 8.1 7.5
Fantasy 5, Fantasy 5 EZ Match, Fantasy 5 Double Play 60.1 56.1 59.6 59.7 57.2 64.5 69.2 70.9 66.5 61.7
Raffle 5.8 0.2 2.8 0.2 15.0 - - 3.2 1.6 3.1
Powerball, Powerplay, Powerball Double Play 104.0 109.5 206.6 153.9 125.8 144.1
92.1 151.1 169.4 281.5
Mega Millions, Megaplier 140.7 120.5 127.1 102.7 153.2 192.4 115.3 177.1 175.1 227.5
Fast Cash - - - 30.6 71.2 81.6 87.8 73.3 95.5 83.3
Total Draw Games 1,099.2 1,126.4 1,263.8 1,262.3 1,342.2 1,469.7 1,451.9 1,778.1 1,680.4 1,732.7
TOTAL TICKET SALES 2,596.4$ 2,771.9$ 3,104.5$ 3,329.8$ 3,578.0$ 3,884.2$ 4,247.4$ 5,046.1$ 4,896.9$ 4,922.8$
PRICE PER TICKET:
Instant Games Range from $1 to $50 Draw Games: Daily 3 $.50 and $1
iLottery Instants Range from $.05 to $20 Raffle Range from $5 to $50
Club Games: Club Keno, Kicker, Lucky Streak, $1 Powerball $2
Lucky Streak Plus, The Jack $1 Poker Lotto & Lucky for Life $2
Club Keno Extra $1 Fast Cash Range from $1 to $20
Pull Tab, Insta Tab Games Range from $.50 to $5 Mega Millions $2
All other draw games $1
Note: Principal revenue payers are the general public. Please see Demographic and Economic Information on page 92 for statistics.
Source: Bureau of State Lottery, State of Michigan
-
89
-
Bureau of State Lottery, State of Michigan
Revenue Capacity
Ticket Sales 2014 through 2023
Instant Games
43.7%
iLottery Instants
Net Win
2.9%
Club Keno, Lucky Streak, The Jack 10.9%
Club Keno Kicker,
Lucky Streak Plus
4.0%
Club Keno Extra
0.6%
Pull-Tab, Insta Tabs
1.0%
Daily 3 Games 10.6%
Daily 4 Games 12.6%
Lotto Games 1.6%
Poker Lotto 0.3%
Keno 0.2%
Fantasy 5 Games
1.6%
Raffle 0.1%
Powerball/Powerplay/P
owerball Double Play
4.0%
Mega
Millions/Megaplier
4.0%
Lucky for Life
0.5%
Fast Cash
1.4%
Source: Bureau of State Lottery, State of Michigan
-
90
-
Bureau of State Lottery, State of Michigan
Debt Capacity
Ratio of Outstanding Debt By Type
Fiscal Years Ending September 30, 2014 through September 30, 2023
(Dollars In Millions, except Per Capita)
BUSINESS-TYPE
ACTIVITIES
TOTAL PERCENTAGE
FISCAL OUTSTANDING OF PERSONAL PER
YEAR
LEASES DEBT INCOME CAPITA
2014 -$ -$ N/A N/A
2015 -$ -$ N/A N/A
2016 -$ -$ N/A N/A
2017 -$ -$ N/A N/A
2018 0.5$ 0.5$ 0.0001% 0.05$
2019 0.5$ 0.5$ 0.0001% 0.05$
2020 0.4$ 0.4$ 0.0001% 0.04$
2021 0.3$ 0.3$ 0.0001% 0.03$
2022 1.4$ 1.4$ 0.0002% 0.14$
2023 1.3$ 1.3$ Unavailable Unavailable
Effective October 1, 2021 GASB 87 was adopted
SOURCES: U.S. Census Bureau, Population Division, U.S. Department of Commerce, Bureau of Economic Analysis.
Michigan Department of Technology, Management, and Budget
Personal Income and Debt figures are updated annually to coincide with demographic and economic indicators.
These amounts are not available for the current fiscal year.
PRIMARY GOVERNMENT
- 91 -
Bureau of State Lottery, State of Michigan
Debt Capacit
y
Ratio of Installment Prize Awards Liability
Fiscal Years Ending September 30, 2014 through September 30, 2023
(In Millions)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
INSTALLMENT PRIZE AWARDS LIABILITY
Current - at face amount 29.7$ 23.9$ 17.0$ 15.1$ 15.1$ 15.2$ 15.2$ 14.7$ 13.9$ 13.2$
Long-term - at face amount 280.4 267.4 255.1 236.1 223.1 212.9 198.3 186.7 173.1 158.5
Total installment prize awards 310.1$ 291.3$ 272.1$ 251.2$ 238.2$ 228.1$ 213.5$ 201.4$ 187.0$ 171.7$
INVESTMENTS
Face amount 298.8$ 270.9$ 256.3$ 238.8$ 226.0$ 213.9$ 197.5$ 187.4$ 178.8$ 168.7$
Installment prize awards payable as a
percentage of investments: 103.78% 107.53% 106.16% 105.19% 105.40% 106.64% 108.10% 107.47% 104.59% 101.78%
Note: Details regarding the Bureau's prize awards and investments can be found in the notes to the financial statements.
Source: Bureau of State Lottery, State of Michigan
- 92 -
Bureau of State Lottery, State of Michigan
Demographic and Economic Information
Demographic General Tracking Study
Fiscal Years Ending September 30, 2014 through September 30, 2023
These are the results of the Lottery's demographic general tracking study prepared biennially of Lottery Player profiles.
2014 2016 2018 2023
Gender
Male 48% 48% 50% 56%
Female 52% 52% 50% 44%
Education
Some high school 2% 2% 1% 1%
Completed high school 20% 15% 15% 16%
Some college 37% 28% 28% 29%
Completed college/post graduate degree 40% 52% 53% 35%
Technical or vocation school 2% 3% 3% 4%
Refused
Age
18 - 24 Yrs 10% 8% 9% 9%
25 - 34 Yrs 21% 16% 13% 14%
35 - 44 Yrs 21% 20% 16% 19%
45 - 54 Yrs 23% 20% 19% 18%
55 - 64 Yrs 17% 17% 22% 18%
65 Yrs & over 10% 18% 20% 23%
Refused
Income
Under $25,000 25% 15% 15% 11%
$25,000 - $50,000 32% 27% 24% 21%
$50,000 - $100,000 34% 35% 36% 37%
$100,000 or more 9% 20% 22% 28%
Refused 3%3%2%
Ethnicit
y
White 81% 80% 82% 80%
Black/African-American/Caribbean-American 13% 15% 12% 14%
Hispanic/Latino 3% 4% 2% 4%
Asian/Pacific Islander 2% 1% 1% 2%
Other 1% 0% 0% 3%
Refused
NOTES: Calendar year 2023 is the most recent year for which data is available.
Source: Bureau of State Lottery
General Tracking Study
- 93 -
Bureau of State Lottery, State of Michigan
Demographic and Economic Information 2014 though 2023
0%
20%
40%
60%
80%
100%
2014 2016 2018 2023
Education
Some high school Completed high school
Some college Completed college/post graduate degree
Technical or vocation school Refused
0%
20%
40%
60%
80%
100%
2014 2016 2018 2023
Age
18 - 24 Yrs 25 - 34 Yrs 35 - 44 Yrs 45 - 54 Yrs
55 - 64 Yrs 65 Yrs & over Refused
0%
20%
40%
60%
80%
100%
2014 2016 2018 2023
Income
Under $25,000 $25,000 - $50,000 $50,000 - $100,000 $100,000 or more Refused
Source: Bureau of State Lottery
General Tracking Study
- 94 -
Bureau of State Lottery, State of Michigan
Demographic and Economic Information 2014 through 2023
0%
20%
40%
60%
80%
100%
2014 2016 2018 2023
Gender
Male Female
0%
20%
40%
60%
80%
100%
2014 2016 2018 2023
Ethnicity
White
Black/African-American/Caribbean-American
Hispanic/Latino
Other
Refused
Asian/Pacific Islander
Source: Bureau of State Lottery
General Tracking Study
- 95 -
Bureau of State Lottery, State of Michigan
Demographic and Economic Indicators
Fiscal Years Ending September 30, 2013 through September 30, 2022
(In Thousands)
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Population (a)
Michigan 9,896 9,909 9,923 9,928 9,962 9,996 9,987 9,967 10,038 10,034
United States 316,129 318,857 321,419 323,128 325,719 327,167 328,240 329,484 332,032 333,288
Total Personal Income (b)
Michigan 386.5$ 403.7$ 424.8$ 439.4$ 460.3$ 484.0$ 491.6$ 530.8$ 558.3$ 569.8$
United States 14,151.4$ 14,683.1$ 15,464.0$ 15,913.0$ 16,820.0$ 17,813.0$ 18,542.3$ 19,607.4$ 21,056.6$ 21,803.5$
Per Capita Income (b)
Michigan 39.1$ 40.7$ 42.8$ 44.3$ 46.2$ 48.4$ 49.2$ 53.3$ 55.6$ 56.8$
United States 44.8$ 46.0$ 48.1$ 49.2$ 51.6$ 54.4$ 56.5$ 59.5$ 63.4$ 65.4$
Unemployment Rate (c)
Michigan 7.2% 5.0% 4.6% 4.3% 4.0% 3.9% 3.9% 8.2% 5.7% 4.2%
United States 5.9% 5.1% 5.0% 4.2% 3.7% 3.7% 3.5% 7.9% 4.7% 3.6%
Michigan estimated wage and salary employees (c)
Goods Producing:
Natural Resources and Mining 7.9 8.3 7.2 6.7 7.0 6.9 7.0 6.7 7.1 7.2
Construction 127.2 139.0 144.9 151.3 161.1 168.5 170.4 168.8 173.2 182.3
Manufacturing 566.3 588.5 595.9 603.6 619.1 636.6 630.2 573.7 599.4 608.0
Total Goods Producing 701.4 735.8 748.0 761.6 787.2 812.0 807.6 749.2 779.7 797.5
Service-Providing:
Private Service-Providing
Trade, Transportation, and Utilities:
Wholesale Trade 163.8 169.7 173.5 172.2 174.1 172.1 171.9 161.8 164.9 175.4
Retail Trade 474.1 476.6 479.5 483.0 484.1 480.5 476.5 453.0 463.1 462.2
Transportation and Utilities 130.3 132.0 137.8 284.0 294.2 316.6 193.0 190.7 198.2 202.9
Information 56.2 57.0 56.8 57.5 55.9 55.5 54.3 48.3
52.7 57.8
Financial Activities:
Finance and Insurance 151.6 154.1 158.9 162.1 165.1 164.0 170.8 174.7 178.8 171.8
Real Estate and Rental and Leasing 49.1 51.9 52.1 53.9 53.5 56.1 56.6 49.8 54.1 55.3
Professional and Business Services:
Professional, Scientific, and Technical Services 264.6 272.8 292.1 297.4 293.4 301.5 296.4 292.6 309.4 316.2
Management of Companies and Enterprises 59 58.3 59.7 61.9 66.5 69.2 70.4 69.5 71.3 71.1
Administrative, Support Services, and Waste Management 281.7 302.6 294.8 302.0 291.6 292.2 286.2 245.1 271.1 271.7
Educational and Health Services:
Educational Services 76.2 80.1 79.1 75.6 75.8 75.6 77.1 65.6 74.8 78.9
Health Care and Social Assistance 564.2 574.5 585.2 596.9 600.6 606.0 610.8 577.4 576.6 597.9
Leisure and Hospitality:
Accommodation and Food Services 349.8 351.4 362.4 373.5 379.5 375.6 373.4 233.8 332.8 350.8
Other 36.8 40.4 40.5 43.6 42.0 41.7 43.5 22.0 38.3 42.0
Other Services 171.2 171.0 171 172.1 170.2 166.7 163.9 143.2 157.3 158.9
Total Private Service-Providing 2,828.6 2,892.4 2,943.4 3,135.7 3,146.5 3,173.3 3,044.8 2,727.5 2,943.4 3,012.9
Government: 614.3 609.3 612.4 624.3 623.6 620.3 632.6 576.4 591.1 612.2
Total Service-Providing 3,442.9 3,501.7 3,555.8 3,760.0 3,770.1 3,793.6 3,677.4 3,303.9 3,534.5 3,625.1
Total Wage and Salary Employment 4,144.3 4,237.5 4,303.8 4,521.6 4,557.3 4,605.6 4,485.0 4,053.1 4,314.2 4,422.6
NOTES: Calendar year 2022 is the most recent year for which data is available except for the State and U.S. unemployment rate SOURCES: (a) U.S. Census Bureau, Population Division
Wage and Salary Employment based on North American Industry Classification System. (b) U.S. Department of Commerce, Bureau of Economic Analysis
Components in Wage and Salary Employment may not total due to truncation. (c) Michigan Department of Technology, Management & Budget and U.S. Department of Labor, Bureau of Labor Statistics
Due to confidentiality issues, the names of the top individual employers are not available. The industry data provided are intended to provide similar alternative information regarding the concentration of employment in various sectors of the Michigan economy.
- 96 -
Bureau of State Lottery, State of Michigan
Operating Information
Fiscal Years Ending September 30, 2014 through September 30, 2023
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Number of Employees 174 174 175 172 178 184 174 175 179 186
Number of Retailers 10,684 10,654 10,650 10,645 10,792 10,508 10,492 10,423 10,419 10,408
Prize Payout Percentage 61.27% 61.22% 60.71% 61.39% 62.52% 61.92% 62.16% 62.13% 63.97% 62.44%
Percentage of Lottery Ticket
Sales disbursed to the
State School Aid Fund 28.61% 28.70% 28.63% 27.75% 26.31% 27.56% 27.78% 28.14% 25.50% 27.46%
Number of Millionaire
Prize Winners 39 42 46 38 39 42 42 70 53 44
Number of Prize Winners
Greater than $600 56,735 68,359 74,352 82,435 91,984 94,046 115,829 139,050 130,113 113,865
Source: Bureau of State Lottery, State of Michigan
- 97 -
Bureau of State Lottery, State of Michigan
Operating Information
Expenses & Disbursements to the State's School Aid Fund, General Fund, and Health & Human Services
Fiscal Years Ending September 30, 2014 through September 30, 2023
(In Millions)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
EXPENSES
Prize Awards 1,590.7$ 1,697.0$ 1,884.8$ 2,044.0$ 2,237.0$ 2,405.2$ 2,640.0$ 3,135.1$ 3,132.4$ 3,073.9$
Unclaimed Prizes (30.8) (31.5) (28.5) (27.6) (22.0) (40.5) (56.4) (78.1) (35.4) (57.1)
Net Prize Awards 1,559.9 1,665.5 1,856.3 2,016.4 2,215.0 2,364.7 2,583.6 3,057.0 3,097.0 3,016.8
Promotion and Advertising 17.6 17.6 22.0 24.0 27.9 29.8 20.0 22.8 31.1 31.8
Game Related Expenses 61.3 63.9 80.2 93.9 101.4 104.8 128.2 144.6 135.0 147.1
Retailer Commissions 188.5 203.6 231.7 249.2 266.5 287.6 307.7 370.9 356.6 354.6
Operating Expenses 25.4 25.2 35.1 27.6 30.3 33.5 32.0 27.0 23.7 31.5
Charitable Gaming Expenses 8.9 9.2 9.3 10.1 9.8 10.2 6.5 6.4 7.8 5.6
TOTAL EXPENSES 1,861.6$ 1,985.0$ 2,234.6$ 2,421.2$ 2,650.9$ 2,830.6$ 3,078.0$ 3,628.7$ 3,651.2$ 3,587.4$
DISBURSEMENTS TO THE STATE
School Aid Fund 742.8 795.5 888.9 924.1 941.3 1,070.6 1,179.9 1,419.8 1,248.6 1,351.9
School Aid Fund-Club Keno Adv 0.1 - - - - - - - - -
General Fund 2.9 2.9 3.0 1.9 1.9 1.9 0.8 4.5 5.4 7.5
Health & Human Services 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
TOTAL DISBURSEMENTS 746.8$ 799.4$ 892.9$ 927.0$ 944.2$ 1,073.5$ 1,181.7$ 1,425.3$ 1,255.0$ 1,360.4$
Source: Bureau of State Lottery, State of Michigan
- 98 -
Bureau of State Lottery, State of Michigan
Operating Information
Expenses and Disbursements 2014 through 2023
Net Prize Awards
60.8%
Advertising
0.6%
Game Related Expenses
2.8%
Retailer Commissions and
Other Expenses
7.3%
Operating Expenses
0.8%
Charitable Gaming
Expenses
0.2%
School Aid Fund
27.4%
General Fund
0.1%
Source: Bureau of State Lottery, State of Michigan
-
99
-
Fiscal Year 2022 U.S. Lottery Sales, Prizes & Government Transfers Measured by GDP*
Lottery
2022
Pop.
1
(M)
2022 Gross
Domestic
Product
2
(Mil)
Ticket Sales
3
(Mil)
VLT
(net)
(Mil)
Gaming
(net)
(Mil) Prizes
4
(Mil)
Gov't
Transfers
5
(Mil)
PC
Sales
PC
Gov't
Ticket Sales
as % of
GDP
Gov't
Transfers as
% of GDP
7
Arizona
7.4
435,310 1,368.37 925.42
269.52
$186 $37 0.314% 0.062%
Arkansas
3.0
153,715 579.56 402.41
99.39
$190 $33 0.377% 0.065%
California 6
39.0
3,568,888 8,853.25 5,825.67
2,020.88
$227 $52 0.248% 0.057%
Colorado
5.8
447,520 826.88 538.89
180.32
$142 $31 0.185% 0.040%
Connecticut
3.6
312,212 1,603.23
1,041.16
410.08 $442 $113 0.514% 0.131%
Delaware 4, 5
1.0
85,220 230.73
416.1 177.8
223.55
284.63
$227 $280 0.271% 0.334%
D.C.
0.7
157,671 207.26
114.07
40.67
$309 $61 0.131% 0.026%
Florida
22.2
1,303,945 9,324.63 6,245.46
2,333.50
$419 $105 0.715% 0.179%
Georgia
10.9
725,984 5,421.14 3,585.30
1,474.00
$497 $135 0.747% 0.203%
Idaho
1.9
100,798 376.32 257.12
73.21
$194 $38 0.373% 0.073%
Illinois 6
12.6
987,388 3,393.76
2,211.36
699.65
$270 $56 0.344% 0.071%
Indiana
6.8
447,236 1,702.86
1,138.52
346.81
$249 $51 0.381% 0.078%
Iowa
3.2
231,651 432.66 274.21
97.95
$135 $31 0.187% 0.042%
Kansas
2.9
202,279 312.99
401.0 191.47
187.38 $107 $64 0.155% 0.093%
Kentucky
4.5
249,047 1,676.50 1,152.01
359.33
$372 $80 0.673% 0.144%
Louisiana
4.6
271,519 582.93 328.42
191.20
$127 $42 0.215% 0.070%
Maine
1.4
80,455 385.80 262.40
72.09
$279 $52 0.480% 0.090%
Maryland 4,5
6.2
458,827 2,662.70
1,331.8 717.6
1,689.11
1,527.11
$432 $248 0.580% 0.333%
Massachusetts
7.0
673,789 5,855.59 4,311.15 1,105.44 $839 $158 0.869% 0.164%
Michigan
10.0
603,911 4,896.85
3,096.04
1,254.96
$488 $125 0.811% 0.208%
Minnesota
5.7
436,382 740.16 469.77
172.63
$129 $30 0.170% 0.040%
Mississippi
2.9
132,606 421.89 251.26
122.81
$144 $42 0.318% 0.093%
Missouri
6.2
379,232 1,779.95
1,264.39
386.44
$288 $63 0.469% 0.102%
Montana 6
1.1
63,245 116.04 78.52
16.81
$103 $15 0.183% 0.027%
Nebraska
2.0
157,892 202.27 119.57
49.43
$103 $25 0.128% 0.031%
N. Hampshire
1.4
104,436 527.86 321.75
146.56
$378 $105 0.505% 0.140%
New Jersey
9.3
709,181 3,634.15 2,209.07
1,111.00
$392 $120 0.512% 0.157%
New Mexico
2.1
116,734 136.87
74.11
41.07 $65 $19 0.117% 0.035%
New York 4, 5
19.7
1,931,539 8,178.08
1,758.4 419.0
4,901.59
3,608.11
$416 $183 0.423% 0.187%
N. Carolina
10.7
696,520 3,887.05 2,543.96
932.93
$363 $87 0.558% 0.134%
N. Dakota
0.8
68,449 29.18
15.36
6.72 $37 $9 0.043% 0.010%
Ohio 4,5
11.8
777,870 4,297.70
1,331.3
2,791.67
1,405.36
$366 $120 0.552% 0.181%
Oklahoma
4.0
223,333 350.34 226.71
79.34
$87 $20 0.157% 0.036%
Oregon 4, 5
4.2
268,864 397.15
1,246.1
257.17
910.50
$94 $215 0.148% 0.339%
Pennsylvania
13.0
888,137 5,121.29 3,376.12
1,220.95
$395 $94 0.577% 0.137%
R. Island 4,5
1.1
69,751 305.09
481.2 39.7
673.70
388.64
$279 $355 0.437% 0.557%
S. Carolina
5.3
286,535 2,253.56 1,486.91
561.82
$427 $106 0.786% 0.196%
S. Dakota 4, 5
0.9
64,025 75.20
325.4
42.93
179.25
$83 $197 0.117% 0.280%
Tennessee
7.1
447,507 1,886.94 1,202.36
487.82
$268 $69 0.422% 0.109%
Texas
30.0
2,149,054 8,296.89 5,599.72
1,998.42
$276 $67 0.386% 0.093%
Vermont
0.6
38,425 151.47 100.69
31.14
$234 $48 0.394% 0.081%
Virginia
8.7
622,989 3,752.42 2,676.93
779.57
$432 $90 0.602% 0.125%
Washington
7.8
703,117 907.69 573.99
216.84
$117 $28 0.129% 0.031%
W. Virginia 4,5
1.8
93,891 242.79
970.9 61.6
152.45
567.93
$137 $320 0.259% 0.605%
Wisconsin 6
5.9
387,972 887.82 557.12
268.63
$151 $46 0.229% 0.069%
Wyoming
0.6
45,208 27.41 15.72
3.18
$47 $5 0.061% 0.007%
Total 319.5 23,360,259 99,301.2 7,861.3 1,816.7 65,797.3 28,722.0 $311 $90 0.425% 0.123%
* Fiscal year ends June 30 except New York (March 31), Texas (August 31) and D.C. and Michigan (Sept. 30). 1 Source: U.S. Census Bureau
2
Source: U.S. Bureau of Economic Analysis;
3
Traditional lottery games only;
4
Prizes don't include VLT & sports books
5
Includes government transfers for VLT operations;
6
Unaudited
Note: If a lottery's operating statement did not include governnment transfers, then net income is reported.
Bureau of State Lottery, State of Michigan
Industry Comparative Information
(in $millions)
Source: LaFleur's 2022 World Lottery Almanac
- 100 -
Fiscal Year 2022 U.S. Lottery Sales by Game*
(in $millions)
Lottery
Pop.
(M)
Instant
Pull
tab
3-digit 4-digit
In-State
Lotto Small Bloc Power Ball
Mega
Millions For Life ITG
Monitor
Games
Other
Total
Sales
Arizona 7.4 1,043.2
14.1 16.8 0.0 68.9 0.0 117.5 60.2 0.0 46.0 0.0 1.8 1,368.4
Arkansas 3.0
480.1 0.0 12.3 6.5 9.3 0.0 31.0 15.5 6.2 18.7 0.0 0.0 579.6
California 1 39.0
6,830.1 0.0 184.3 37.2 421.4 0.0 569.9 372.8 0.0 0.0 437.6 0.0 8,853.3
Colorado 5.8
590.3 0.0 15.3 0.0 82.7 0.0 83.1 35.1 20.4 0.0 0.0 0.0 826.9
Connecticut 3.6
801.3 0.0 140.4 134.0 45.6 0.0 80.0 39.7 30.5 38.7 141.9 151.2 1,603.2
Delaware 1.0 110.9
0.0
34.6 28.7
4.1 2.7
23.5 11.1 5.3 0.0 9.7
230.7
DC 0.7 43.9
0.0
38.3 52.5
0.0
7.5 6.1 3.0 9.6 13.6
32.8 207.3
Florida 22.2
7,025.3 0.0 469.4 305.1 557.8 0.0 494.1 239.2 64.8 10.8 0.0 158.0 9,324.6
Georgia 10.9
3,370.2 0.0 606.6 420.2 127.3 0.0 158.6 109.1 24.6 5.5 289.3 309.9 5,421.1
Idaho 1.9
234.8 78.3 2.3 1.1 5.9 2.6 30.2 13.9 4.6 0.0 2.5 376.3
Illinois 1 12.6 2,156.8
0.0 305.2 311.1
221.3 0.0 165.0 106.8
0.0 129.5 0.0 0.4 3,396.3
Indiana 6.8
1,342.9 0.0 49.3 46.1 77.2 0.0 104.2 40.2 6.8 29.3 0.0 6.8 1,702.9
Iowa 3.2
293.1 12.7 9.3 5.6 0.0 7.0 53.1 20.4 8.1 23.4 0.0
0.0
432.7
Kansas 2.9
199.3 7.7 8.5 0.0 8.6 7.3 35.7 16.0 7.8 0.0 19.1 3.0 313.0
Kentucky 4.5
963.5 0.0 187.1 57.1 15.2 0.0 71.1 35.5 11.7 14.6 94.6 30.0 1,480.4
Louisiana 4.6
292.8 0.0 70.1 58.3 31.1 0.0 68.3 31.6 0.0 20.1 0.0 10.5 582.9
Maine 1.4
311.0 0.0 6.4 5.0 1.1 11.8 22.7 8.9 6.6 12.3 0.0 0.0 385.8
Maryland 6.2
1,009.5 0.0 266.6 373.1 62.1 0.0 127.6 81.0 19.5 76.9 606.1 27.1 2,649.6
Massachusetts 7.0
3,906.9 0.0 0.0 358.1 117.2 0.0 132.0 76.7 44.9 0.0 1,217.2 2.6 5,855.6
Michigan 10.0
2,381.0 43.2 486.2 584.5 123.4 0.0 169.4 175.1 36.6 95.5 627.0 175.0 4,896.9
Minnesota 5.7
561.6 0.0 22.4 0.0 26.7 11.0 72.8 25.4 13.2 0.0 7.0 740.2
Mississippi 2.9
329.3 0.0 19.0 5.0 12.5 0.0 36.8 19.3 0.0 0.0 0.0 0.0 421.9
Missouri 6.2
1,195.3 103.8 71.0 49.2 0.0 90.0 40.7 12.6 0.0 56.5 160.9 1,780.1
Montana 1 1.1
25.5 0.0 0.0 0.0 9.2 2.0 12.4 5.0 3.7 7.9 0.0 50.4 116.0
Nebraska 2.0
117.2 0.0 7.6 0.0 16.9 2.1 35.7 14.6 8.1 0.0 0.0 0.0 202.3
N. Hampshire 1.4
313.8 0.0 5.4 4.9 0.0 11.3 40.6 18.8 8.4 18.1 53.5 53.0 527.9
New Jersey 9.3
2,056.9 0.0 432.4 274.9 220.3 0.0 241.0 147.2 59.0 40.2 158.3 4.0 3,634.2
New Mexico 2.1
80.1 0.0 4.9 1.9 7.3 3.9 25.8 11.7 0.0 1.1 0.0 0.0 136.9
New York 19.7
4,517.7 0.0 958.6 948.1 282.2 0.0 358.4 294.6 120.9 0.0 663.5 34.1 8,178.1
N. Carolina 10.7
2,649.7 0.0 487.4 222.0 74.7 0.0 180.4 83.5 40.8 65.5 81.2 1.9 3,887.0
N. Dakota 0.8
0.0 0.0 0.0 0.0 0.0 7.0 12.0 5.6 4.6 0.0 0.0 0.0 29.2
Ohio 11.8
2,287.8 0.0 437.3 267.7 87.4 0.0 151.3 99.5 37.6 208.7 649.5 64.4 4,291.2
Oklahoma 4.0
263.5 0.0 6.9 0.0 3.9 5.9 44.3 19.6 6.3 0.0 0.0 0.0 350.3
Oregon 4.2
163.4 0.0 0.0 2.0 35.2 0.0 57.5 24.6 0.0 0.0 112.0 2.5 397.1
Pennsylvania 13.0
3,513.4 0.0 282.6 245.6 309.7 0.0 267.9 111.2 26.5 149.1 55.7 159.5 5,121.3
Rhode Island 1.1
130.6 0.0 0.0 22.9 5.9 0.0 26.2 10.9 8.1 0.0 89.7 10.9 305.1
S. Carolina 5.3
1,599.0 0.0 289.1 153.3 28.5 0.0 105.1 44.3 0.0 34.2 0.0 2,253.6
South Dakota 0.9
48.3 0.0 0.0 0.0 2.2 1.8 14.2 4.5 4.3 0.0 0.0 0.0 75.3
Tennessee 7.1
1,547.4 0.0 81.5 50.6 15.1 10.4 108.4 43.7 12.2 0.0 14.4 0.3 1,884.0
Texas 30.0
6,727.3 0.0 298.8 146.8 325.3 0.0 405.8 392.9 0.0 0.0 0.0 0.0 8,296.9
Vermont 0.6
121.3 0.0 1.3 1.3 0.0 3.9 9.2 4.2 2.8 7.5 0.0 0.0 151.5
Virginia 8.7
1,325.1 0.0 349.7 361.9 44.9 0.0 133.4 92.6 29.5 57.0 47.0 1,311.4 3,752.4
Washington 7.8
665.2 0.0 21.4 0.0 71.5 0.0 80.6 48.7 0.0 0.0 0.0 20.3 907.7
West Virginia 1.8
168.8 0.0 8.0 4.9 4.7 4.9 31.5 12.9 0.0 0.0 7.0 242.8
Wisconsin1 5.9
637.8 1.1 27.8 19.1 76.3 0.0 88.7 36.0 0.0 0.0 0.0 1.0 887.8
Wyoming 0.6
0.0 0.0 0.0 0.0 8.8 1.8 9.0 4.9 2.9 0.0 0.0 0.0 27.4
Total 319.5 64,432.7 157.1 6,754.9 5,588.4 3,698.4 97.4 5,183.8 3,111.8 689.6 1,099.3 5,478.7 2,793.3 99,085.4
65.0% 0.2% 6.8% 5.6% 3.7% 0.1% 5.2% 3.1% 0.7% 1.1% 5.5% 2.8% 100.0%
Notes to Table: Fiscal year 2022 is latest data available. *Fiscal year ends June 30 for most states except New York (March 31), Texas (August 31), D.C. and Michigan (September 30).
1
Unaudited
Bureau of State Lottery, State of Michigan
Industry Comparative Information
Systems Games
% of total
Source: LaFleur's 2022 World Lottery Almanac
- 101 -
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with
Government Auditing Standards
Independent Auditor's Report
To Management;
Ms. Jessica Weare, Acting Commissioner,
the Bureau of State Lottery, State of Michigan;
and Mr. Doug Ringler, CPA, CIA,
Auditor General, State of Michigan
Bureau of State Lottery, State of Michigan
We have audited, in accordance with
auditing standards generally accepted in the United States of America
and
the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller
General of the United States, the financial statements of the
Bureau of State Lottery, State of Michigan
(the
"
Lottery
") as of and for the six-month period and year ended
September 30, 2023
and the related notes to the
financial statements, which collectively comprise
the
Lottery's
basic
financial statements, and have issued our
report thereon dated January 19, 2024.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the
Lottery's
internal control over
financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of
the
Lottery's
internal control. Accordingly, we do not express an
opinion on the effectiveness of the Lottery's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal
control such that there is a reasonable possibility that a material misstatement of the
Lottery's
financial statements
will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and
was not designed to identify all deficiencies in internal control that might be material weaknesses or significant
deficiencies, and, therefore, material weaknesses or significant deficiencies may exist that were not identified. We
identified a certain deficiency in internal control, described in the accompanying
schedule of findings
as Finding
2023-001, that we consider to be a material weakness.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether
the
Lottery's
financial statements are free from material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements, noncompliance with which could have a direct and material effect on the financial statements.
However, providing an opinion on compliance with those provisions was not an objective of our audit, and,
accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance
or other matters that are required to be reported under Government Auditing Standards.
102
To Management;
Ms. Jessica Weare, Acting Commissioner,
the Bureau of State Lottery, State of Michigan;
and Mr. Doug Ringler, CPA, CIA,
Auditor General, State of Michigan
Bureau of State Lottery, State of Michigan
The Lottery's Response to the Finding
Government Auditing Standards require the auditor to perform limited procedures on
the
Lottery's
response to the
finding identified in our audit and described in the accompanying schedule of findings.
The
Lottery's
response was
not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we
express no opinion on it.
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the Lottery's internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering
the
Lottery's
internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
January 19, 2024
103
Bureau of State Lottery, State of Michigan
Schedule of Findings
Period and Year Ended
September 30, 2023
Reference
Number
Finding
2023-001
Finding Type
- Material weakness
Criteria
- Good business practices would state having a timely period-end close process. The
general ledger should be completed and reviewed during the period-end close process.
Condition
- Monthly and period-end close process as of March 31, 2023 was not performed
timely, resulting in delayed reconciliations and interim reporting.
Context
- Cash reconciliations and other account reconciliations were performed multiple
months after the month that was being closed during the six-month period ended March 31,
2023.
Cause
- A platform upgrade created delays in receiving accurate reporting. The Lottery worked
with its third-party vendor to correct reports to accurately reflect the data. This combined with
short staffing created significant delays in the period-end close process during the six-month
period ended March 31, 2023.
Effect
- Related to the March 31, 2023 six-month period audit, journal entry adjustments were
provided late in the audit process subsequent to the trial balance being received.
Recommendation
- The Lottery and its third-party vendor have completed the referenced
platform upgrade, resolving the specific issue. We recommend that the Lottery ensures a timely
closing process using the new system platform, including the preparation of the financial
statements.
Views of Responsible Officials and Planned Corrective Actions
- The Lottery recognizes
and concurs with the cause of the finding related to the March 31, 2023 audit. The Lottery
diligently worked to address the issues found in the March 31, 2023 audit and has taken
corrective action. Pursuant to the relevant contract, the Lottery expects to continue pursuing
compensation for the vendor’s failure to provide timely and accurate reconciliation data. This
specific issue has been resolved going forward, as the conversion between systems is
complete, such that the new system is operational and all financial data moving forward is
generated by and can be retrieved from the new system. The Lottery has requested a detailed
backup plan from the vendor to ensure there is always timely and accurate receipt of financial
and gaming data. The Lottery has been escalating reporting issues quickly so resolution can be
addressed promptly.
104
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