A review by the Legislative Audit Council found that an employee of the South Carolina Education Lottery embezzled over $200,000 from April 2010 to August 2012 even though there were controls in place to prevent such fraud.
“They had policies in place to detect and prevent that type of fraud, but they didn’t follow them and so that kind of allowed the fraud to happen.” LAC director Perry Simpson told South Carolina Radio Network.
“In addition to following their policies they’ve implemented some additional controls to detect and prevent fraud in the future.” he added.
The State Law Enforcement Division arrested 52-year-old Anthony McNeil, a former accountant and fiscal analyst for the lottery, after an investigation in November 2012. McNeil was fired in October of that year after the discrepancies were found. According to investigators, McNeil embezzled over $226,000 from April 2010 to August 2012. The report also said that the affected money was on the finance side, and did not involve the games.
A deposition provided by SLED accused McNeil of manipulating and altering invoices that went out to various retail stores which sold lottery tickets. The deposition states that an internal audit found several invoices were manipulated so that certain retailers were not charged the required fees, while others were overcharged to make up the difference. Investigators say McNeil would then contact those retailers that had not paid and told them that a system error caused the confusion. He would then instruct those retailers to deposit the required funds into a separate account that he controlled.
Simpson said there were complaints made by the retail stores who suspected they were being overcharged, but the complaints were made to the very employee committing the fraud. The investigation did not begin until were made to other lottery employees.
McNeil has not yet had his day in court. He faces up to 10 years in prison.
The audit found McNeil recorded all of the bank account number changes in the system audit logs, but management did not review the logs. The report noted that since McNeil was authorized to make the changes and only made them sporadically, it may not have alerted management to the fraud.
Since the fraud was discovered, lottery officials have implemented a policy that prevents accountants from making changes to the bank accounts of retailers for which they are responsible. Now, a primary processor who does not have responsibility for any accounts will make any required changes. The Chief Financial Officer is also required to approve any changes to bank information before it can be entered in the computer system.