A Maryland audit found the state had no idea whether it collected all the money and taxes it is owed from betting on horse races, months before residents will decide whether to allow thousands of slot machines at racetracks.

State auditors faulted Maryland’s Division of Racing for using the same employee to log cash receipts, keep accounting records of payments and verify that deposits appeared on the state’s financial registers, leaving the system ripe for fraud.

The report, conducted by the Maryland Office of Legislative Audits, said that between July 2007 and February 2008 no independent verifications occurred to ensure that recorded collections were transferred to the Department of Labor, Licensing and Regulation and ultimately deposited.

“As a result of these conditions, there was no assurance that all amounts received by the Division were deposited and recorded in the Division’s and the State’s accounting records,” the audit said.

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The August 2005 to February 2008 study also found that the Division of Racing did not ensure that “wagering” or gambling taxes collected from horse races were transferred from racetracks to the state’s coffers in a timely fashion. On 61 of 62 days of tracking, taxes totaling $105,000 were transferred later than required by state law, which auditors said means the state lost interest income it could have collected if the money were in a bank and further exposed itself to fraud.

Department of Labor, Licensing and Regulation Secretary  Thomas Perez said in a letter to state auditors that changes were made to address both issues. Representatives from Perez’s office did not return requests for comment Friday.

The findings come as Gov. Martin O’Malley is pushing for a massive expansion of the state’s gambling industry. Marylanders will vote in November on whether to allow the state to install 15,000 slot machines at five horse-race tracks around Maryland.

“What the audit suggests to me is there is not currently in place an adequate accounting system or architecture of accountability that is going to need to be there if slots passes,” anti-slots legislator Del. Luiz Simmons said.

Officials with O’Malley’s office said the state’s lottery system would regulate slot machines, if approved.

kmiller@dcexaminer.com