The Maryland State Lottery failed to collect tens of thousands of dollars from manufacturers who did not promptly fix inoperable slot machines, state auditors found in their first review of the agency since the start of the state's slots program in 2010.
The audit also found other problems with slots oversight, as well as issues with security protections for the agency's computer networks.
Both Bruce Myers, the legislative auditor, and Stephen Martino, the head of the lottery agency, characterized the issues as small problems for a fledgling slots operation that do not translate into any agency wrongdoing. They also both noted the agency has agreed to resolve all issues raised by the audit.
"They are operational stumbling blocks," Martino said of the audit's findings. "For a new effort like this, where things moved very quickly, the fact that we consider most of these issues very minor, and to have absolutely no impact at all on the integrity and operations of the [casino] facilities, is a positive thing."
The agency audit, released to the public Wednesday by the Office of Legislative Services, covers a three-year period ending in March 2011. Slot machines first began operating in the state at the Hollywood Casino in Cecil County in September 2010 and at the Casino at Ocean Downs in Worcester County in January 2011.
A third facility, Maryland Live Casino at Arundel Mills mall in Anne Arundel County, is set to open June 6.
Each of the casinos is privately operated, but the slot machines are state-owned.
Martino questioned the audit's calculation that his agency had failed to collect $60,000 of damages for inoperable machines. He said his agency had taken "a less punitive approach" with the manufacturers when the casinos first opened, and the real amount was far less.
"We were going to work with them as long as we didn't have egregious malfunctions," he said.
His agency has since charged and collected more than $20,000 in damages for inoperable machines, and things are going smoothly, he said.
"This is a new program, we've got a lot of new personnel, quite frankly we've had a lot of turnover, and I think we're at a point right now where we have really good management top to bottom in our gaming division," he said.
The audit said the agency kept inadequate records of how and when it addressed public complaints and dealt with lottery contractor issues. Other issues included insufficient tracking of machine performance and review of the licensing and registration of casino vendors and contractors.
The audit also found the agency's computer network "was not adequately secured against external threats."
Martino said many of the issues — including the network security concerns — have already been resolved, and the agency has stepped up oversight of casino vendors and contractors.
There have been few public complaints in the casinos, Martino said, and malfunctioning machines have been "extraordinarily rare."
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