Saturday, August 29, 2009

Proposal revamps how bingo is run

August 22, 2009

Ky. wants centralized purchasing, computerized record keeping

By Gregory A. Hall

RANKFORT, Ky. — Bingo halls and charities face an accounting nightmare — keeping records by hand — that results in lost supplies and revenues as they work with more than 20 distributors and manufacturers lining up supplies to put on fundraising games.

The state Department of Charitable Gaming wants to centralize purchasing for bingo and pull-tab supplies and computerize the charities' record keeping. The agency believes the steps will reduce prices, improve accountability and leave charities with more money to support their causes.

What exists now is very archaic and a burden, said Henry Lackey, the state commissioner of charitable gaming.

Based on audits of some of its charities, the department estimates that $100 million a year –— about a fifth of the total amount accounted for in charity games — goes unreported because of theft and clerical errors.

The state also estimates charities lose $600,000 a year from accepting bad checks and have to pay $300,000 for bookkeeping to deal with the current paperwork.

The proposed system would verify that checks are good, state bingo officers said.

Kentucky regulators want to seek proposals for suppliers of record-keeping software bingo equipment and pull tabs.

The state also wants to take bids to distribute the supplies purchased at the state-contracted prices.

Assuming the bids show the system would save money, state officials would seek legislation in January granting authority to implement the new system by fall 2010.

Some in the charitable gambling industry –— which in Kentucky saw $509million wagered in 2007, more than the $470million bet in the state on horse racing — question whether the proposed system would achieve those goals.

State charitable gambling officials expect a fight from distributors and manufacturers, some of whom stand to lose out if purchasing is centralized.

“I think this is a train wreck for the department to get involved in free trade,” said Kaven Rumpel, president of the Kentucky Charitable Gaming Association and owner of the Highview bingo hall, who said that the changes could result in less competition and higher prices for supplies — even though he likes some of the computerized record keeping that is proposed.

Charitable gambling officials declined to provide any financial estimates, which they say would tip off potential bidders and hurt the process.

The savings is expected to be sufficient to pay for the new system, in addition to allowing more money for the charities.

“We feel pretty confident in our number crunching or we wouldn't do this,” said Leah Cooper Boggs, director of the Division of Licensing and Compliance in the Department of Charitable Gaming.

Boggs said that competition among manufacturers largely would remain the same, and that manufacturers selected by the state could still subcontract with other manufacturers for certain games, if desired.

“We're not taking away the competitive process,” she said. Manufacturers are “still going to want to compete with each other because one manufacturer is still going to want to outsell another manufacturer. The only way they can do that is by putting the games in the market and taking out the games that they don't sell anymore just like they do now. That is not going to change.”

Boggs said competition would be removed from the distribution system.

Lackey said “ideally” there would be two distributors in the state, compared with 23 now.

“I think we need more information,” said Robert Castagna, executive director of the Catholic Conference of Kentucky, the public policy arm for the four Roman Catholic dioceses in Kentucky.

He said a meeting is set for this week between the department and the finance officers of the dioceses.

Castagna said his first reaction was positive, but “I think we need more details.”

Catholic groups, he said, are the single biggest group of licensees in the state.

The other two major entities in the charitable gambling world are volunteer fire departments and veterans groups, Lackey said.

Oliver Barber, an attorney who represents the Catholic Conference, the Kentucky Soccer Association and the Louisville Soccer Association, asked during a meeting of the Charitable Gaming Department's advisory board last week whether the changes could be made without legislative approval. He later said he fears other changes that could be made in the charitable gambling law if it's revisited by legislators.

“I think it's two-thirds great if they can figure out how to do it,” he said after that meeting. He said the plan would be easier to see if the state provided its estimates, but he said he agrees with its estimates of the cost of bad checks and accounting.

Others affiliated with the industry question whether it will work at all. “This sounds too good to be true,” said John Wilson, who represents the Kentucky Charitable Gaming Association on the department's advisory board, which unanimously endorsed the proposal last week.

Kevin Mills, leader of the St. Gabriel Catholic Church bingo, which is conducted in Jeffersontown, said that he also questions whether the plan will work because he believes manufacturers will be able to get a better price through the bidding than they would by ongoing competition in the current system.

“What they're basically doing is ruining all the competition, and … there's nothing anybody can do about it,” Mills said.

Reporter Gregory A. Hall can be reached at (502) 582-4087.

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