Wednesday, January 19, 2005

Charities get 4% of gambling dollarsState audit finds business costs high

State auditors have found that charitable causes supported by legal gambling in Minnesota are being shortchanged as more than 40 percent of the groups sponsoring gambling spend too much of their revenue on business expenses.
The Office of the Legislative Auditor reported Tuesday that 43 percent of the more than 1,400 licensed nonprofits that run charitable gambling are spending more than 55 percent of their profits — gross receipts minus prizes — on business expenses.
Minnesotans spent $1.4 billion on charitable games in 2004, on games like bingo, pull-tabs, raffles and others. About 82 percent was returned in prizes, but of the $257 million in gross profits, $131 million went to charities.
In other words, for every dollar gambled, 4 cents went to charities.
Spending more than 55 percent of profits on business expenses — such as rent or employee salaries — is against state law. But it's gone undetected because of a quirk in the way compliance is checked, the audit said.
Auditors said gambling venues are able to skirt the law by tallying business expenses over a period of years, instead of year by year. The director of the trade group that represents charitable gambling purveyors said that's necessary because one-time expenses such as expansion costs can push the amount spent above 55 percent, and it takes a few years to bring the average back in line.
"That's a somewhat misleading claim," said King Wilson, director of Allied Charities.
Wilson said he didn't think most gamblers would be surprised that only 4 cents on the dollar is actually going to charities. "I don't buy into looking at the cents on the dollar, because prizes are so much of what we do," he said.
The audit rapped other areas of state gambling regulation.
The Racing Commission, which regulates Canterbury Park, was lauded for its "thorough and multilayered oversight" of horse racing, but was criticized for not sufficiently supervising Canterbury's card club.
The Alcohol and Gambling Division was cited for not effectively using its authority to inspect Indian casinos, though the audit said tribal and federal government regulation mostly makes up for the limitations of state inspection.
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