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An audit by the State Controller's Office found that the California Lottery failed to recall compromised scratchers tickets and did not consistently follow security testing procedures for some of its games.
The State Controller's Office audit
In 2017, a division within the lottery found that six scratch-off games failed internal security tests, revealing enough data to compromise the tickets. A compromised ticket means that numbers or images on the tickets became visible before scratching.
While the audit mentions the compromised tickets, it didn't disclose specific details on how the tickets were compromised, as giving that information could potentially help scammers, according to The Sacramento Bee.
Meanwhile, the California Lottery pushed back against the audit's findings, arguing that the scratchers didn't need to be recalled and that the state's ticket security controls were adequate. However, the lottery acknowledged that its documentation processes could be improved.
Carolyn Becker, the lottery's deputy director of public affairs and communications, said in a statement to The Sacramento Bee:
All recommendations as a result of this report have been fully and completely implemented since the audit took place. Players trust that our games are fair, and we work hard to ensure it stays that way. The integrity of our games is of utmost value to us.
Becker also pointed out that new leadership has taken over since the audit period ended six years ago, leading to enhanced processes for better record-keeping.
Scratchers tickets are equipped with security features to prevent fraud, such as tampering or forging winning tickets. A compromised ticket refers to any security risk that could undermine the game's integrity. The audit warned that compromised tickets could harm the California Lottery's reputation and ticket sales.
The audit covered the period from July 2015 to June 2018, but it took time to publish due to the analysis required. The Controller's Office stated that it would conduct a follow-up review to evaluate the lottery's corrective actions but did not provide a specific timeline for this review.
Recalling compromised tickets
During the audit, investigators within the California State Lottery recommended recalling six games produced by Scientific Games International, Inc., one of the state's three scratchers vendors.
These compromised tickets were reported to the sales and marketing division, and they acknowledged the issues. However, they decided against recalling the tickets, stating the tickets were “close to their end-of-game dates.”
However, the audit found that the end-of-game dates for five of the six compromised tickets were between one and seven months away.
then-lottery Director Alva Johnson wrote in response to the audit:
Any decision to remove games from retail involves a complex cost-benefit analysis, balancing the severity of the issue and the potential risk with the projected impact to our mission, which ultimately drives all our decision-making.
Johnson was appointed to his position in 2019, but then he stepped down from the director role in December 2023.
The lottery prints an average of 1.1 billion tickets every year, which makes errors unavoidable, the lottery said. However, after this 2017 incident, the vendor responsible for the compromised tickets started using a new ink process in November 2018. The lottery said it had not encountered similar issues since, but the Controller's Office said they couldn't verify the new ink process, as these changes took place after the audit period.
New security process
The audit also found the lottery's insufficient documentation of issues with some scratchers tickets and the steps taken to address these deficiencies. The review found that 17% of the "Scratchers Ticket Security-Testing Worksheets" had at least one deficient result.
In addition, the audit revealed that 55% of reordered scratchers games and 35% of new scratch-off games were not tested before being released to the public, increasing the risk of fraud and selling poor-quality or compromised tickets, ultimately damaging the lottery's reputation.
To improve these areas, the lottery implemented a new tracking log for scratchers tickets, incorporating “pass/fail measurements” and new methods of documenting issues with tickets. A representative sample of all tickets is now tested by vendors before distribution, with additional internal checks conducted by the enforcement division.
Enjoy playing the California Lottery, and please remember to play responsibly.
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