Editorial: A harbinger of stolen funds if slots are passed

A new audit from the Department of Legislative Services shows the Department of Labor, Licensing and Regulation can’t follow basic accounting rules.

The person logging and preparing receipts for deposit was also the same person responsible for recording the payments in accounting records. Nothing in the audit accuses this person of defrauding the state. But at the very least, it leaves the state vulnerable to fraud. And lax oversight of wire transfers allowed racetracks to send in tax payments sometimes weeks past deadline, forcing the state to lose interest income.

The state collected $5.1 million in betting taxes and unredeemed winning tickets in 2007. So how does it expect to correctly process the up to $800 million the governor said slots could generate for the state treasury? That amount is likely grossly exaggerated. Tight credit markets and fewer dollars being spent on gambling due to the economy are the culprits. But even $400 million would overwhelm a state government ignorant of basic accounting principles. As the parable of the silver talents illuminates, those who cannot be trusted with small amounts should not be trusted with any amount.

Voters have not yet spoken on slots. But if the referendum passes in November, the state could be handling millions in new tax revenue by 2010.

To help slots pass, the governor must assure taxpayers controls will be in place for processing that money before the first coin hits the, uh, slot. It wouldn’t hurt to audit the personal financial records of employees who directly handle that money on a yearly basis too, to ensure compliance to the highest auditing standards. Doing so would have snagged the Washington tax officials caught last year cutting themselves checks for more than $30 million over at least seven years.

What’s clear is that without an overhaul on how the state collects its gambling money, the question is not if, but when, unscrupulous state employees defraud the taxpayers.