Annual Report - Fiscal Year 2023

Lottery Mission

The mission of the Idaho Lottery is to responsibly provide entertaining games with a high degree of integrity to maximize the dividend for public schools and the Permanent Building Fund.

Table of Contents

Lottery Vision

Chairman’s Message 6

To become the highest performing jurisdiction in North America.

Lottery Operations

The Idaho Lottery is a selffunding and self-governing agency of the State of Idaho.

In-house operations include security, marketing, sales, media relations, warehousing and inventory control, information technology, and fiscal management. The Idaho Lottery operates with 50 full-time staff members.

Governor’s Message 2 Director’s Message 4

Do Good Programs: • Scratch for Schools 7 • Bucks for Books 8 • Classroom Wishlist 9 Draw Games 11 Scratch Games 12 InstaPlay, PullTabs & TouchTabs 13 Charitable Gaming 13 Lottery Retailers & Vendors 14 Independent Auditor’s Report 16 Management’s Discussion & Analysis 18 Financial Statements 28 Notes to the Financial Statements 31

Read to Succeed During a “Back-to-School” Classroom Wishlist visit on a September afternoon in Rexburg, 3rd Grade teacher Remi Burton at Hibbard Elementary School, exemplified the Idaho Lottery’s Do Good programs when she said, “When I was a third grader, my grandma told me, ‘If you read you succeed, if you don’t, you won’t.’ I want to foster that lifelong love of reading in these eight and nine-year-old students. This wish list award makes a difference.”

Dividend Ceremony Brad Little

Governor of Idaho

My Fellow Idahoans, The Idaho Lottery was created by a vote of the citizens over 34 years ago and continues to exceed the expectations set forth at the beginning. This past July, I accepted the largest dividend in the Lottery’s history, $82 million, during a ceremony at Emmett Middle School. For many who hail from Emmett, including me, that building used to be Emmett High School.

This year’s annual dividend ceremony was held at Emmett Middle School in Emmett. The Idaho Lottery presented hometown Governor, Brad Little, with a dividend check for $82 million.

Using their dividend dollars, the Emmett School District removed asbestos while also renovating and upgrading the school’s original 1957 restrooms.

In the summer of 2023, Emmett Middle School was undergoing safety and remodeling efforts funded, in part, by Lottery net revenue from operations. In all 34 years since the Lottery was created, you can see improvements like these in our large and small communities throughout all of Idaho.

One of my goals as Governor is to improve early education literacy in our schools. I am appreciative of all the work done by the Idaho Lottery and the Lottery Commission to improve education where it matters, in the classroom.

Join me in commending the Idaho Lottery for making a difference for Idaho’s schools and students.

Sincerely,

Brad Little

Governor of Idaho

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Baby Chickens

Idaho Lottery Management Team

Idaho 1st grade science standards require students to learn about life science in two different ways; determining patterns in behavior of parents and offspring that help offspring survive, AND, using models to describe that organisms have unique and diverse life cycles, but all have in common birth, growth, reproduction, and death.

To meet the 1st grade science standards, Nicole Weight at Ririe Elementary School introduced her students to baby chicken starter kits in mid-March. After incubation, the baby chickens hatched when the students returned from Spring Break.

Jeffrey R. Anderson Idaho Lottery Director

Dear Friends, When the Idaho Lottery was created 34 years ago, we had a singular Do Good mission to responsibly provide the largest annual dividend for the benefit of Idaho’s public schools and the State’s permanent buildings.

Today, the Lottery’s Do Good initiatives stand at four. In addition to the dividend, we also offer Scratch for Schools, Bucks for Books, and Classroom Wishlist that provide financial and material resources to benefit public school classrooms and libraries.

The Idaho Lottery Management Team members (clockwise from back left): Tony Pittz, Director of Lottery Security Jeff Anderson, Director Larry Polowski, Deputy Director of Sales Becky Schroeder, Chief Operating Officer Sherie Moody-St. Clair, Deputy Director of Marketing

The Idaho Lottery’s Do Good programs touched more Idaho public schools than ever before. This year, beyond our record-setting dividend, the Idaho Lottery and our players made meaningful contributions to 540 school projects for a combined $326,000. These efforts make a difference in the classroom and, more importantly, in the hearts and minds of our educators and students. Our Do Good accomplishments improve student safety and lead to scholastic achievement.

In Idaho, every play pays.

The Idaho Lottery’s successful performance in the fiscal year ended June 30, 2023 comes from the solid relationships we have with our brick-and-mortar retail network, our business relationships with our game vendors, and the voluntary participation of more Idahoans than ever before.

Our continued focus on security, integrity, and responsible play has produced nearly $1.2 billion in contributions to public education since 1989.

Thank you, Idaho, for 34 great years!

Sincerely,

Jeffrey R. Anderson Idaho Lottery Director 3

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Creating a Love for Books When the dismissal bell rang at the end of the school day at Bellevue Elementary, not a single student left to rush home or leave the old farm-style schoolhouse façade that welcomes students to Miss Patti Gilman’s library. Instead, the students were clamoring over one another on who got to read which new book first. “I have a great love of books after 20 years being a librarian. I want to install that love with them. Encourage the love of reading,” said Miss Gilman.

Idaho Lottery Commission The five-member Commission adopts rules for the agency, approves contracts, and monitors all Lottery operations. Its members are appointed by the Governor with each serving a five-year term. The Idaho Lottery Commissioners:

Craig Corbett

Idaho Lottery Commission Chairman

Dear Idahoans,

Craig Corbett Commission Chairman

Skip Smyser

Commissioner

Joni Stright

Commissioner

I have seen firsthand the difference the Idaho Lottery is making for schools, especially in rural Idaho communities. Last year I participated with the Lottery team that delivered a $3,000 Bucks for Books award to Pioneer Elementary in Preston to expand their library’s selection of books for young readers. Later that day, we made a Classroom Wishlist visit to Preston High School where an award benefited the school’s Special Education Program with much needed, program specific furniture.

These special Do Good programs benefit public schools in the Gem State. Idaho is a vast, diverse state with many needs, but one common theme among every community is providing a quality education for their residents. As the Chairman of the Idaho Lottery Commission, I am proud of the contributions the Lottery has made each year to benefit, improve, and enhance the quality of education for Idaho’s students.

In Bellevue, like other communities across Idaho, Bucks for Books is working.

Susan Kerrick Commissioner

Peter Smith

Commissioner

With the dividend we provided this summer, over 34 years the Department of Education has received $680 million. The Permanent Building Fund has now received over half-a-billion dollars. This year they both received their largest checks in Idaho Lottery history.

The tremendous benefits provided to schools like those I visited in Preston, and others around Idaho, are only possible with the continued dedication of the Idaho Lottery’s employees, the commitment from Idaho’s retail establishments who offer their products, and the players who enjoy the fun of the games.

Sincerely,

Craig Corbett

Chairman Idaho Lottery Commission

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North Idaho: When the Idaho Lottery was first created, it had a singular Do Good mission: to provide the largest annual dividend possible to the State for the benefit of public education and the State’s permanent buildings. Benefiting Idaho’s public education and their facilities has been in its DNA since 1989.

Today, the Do Good programs have grown to four. In addition to the annual dividend, the Lottery also offers Scratch for Schools, Classroom Wishlist, and Bucks for Books. These participatory ventures provide specific resources to classrooms and libraries. The combination of Scratch for Schools, Classroom Wishlist, and Bucks for Books reached 540 public schools with a total of $326,000 awarded for individual classroom and program needs.

The Idaho Lottery rigorously manages its budget.This chart reflects how Lottery funds are allocated.

67% 20%

The ladies from Lakes Middle School came prepared for the weather event of 2023. Not the record amount of snowfall that beguiled the Gem State in March, but teachers, administrators, and PTO members who were ready to brave the “Brain Storm” during the Idaho Lottery’s 22nd year of Scratch for Schools.

This year’s Scratch for Schools game was called “Brain Storm” and the ticket was only available at Scratch for Schools venues. This specialized game featured more winning experiences and prizes than ever before.

This past year, the Idaho Lottery’s Bucks for Books program worked with the Idaho Commission for Libraries to provide 19 awards for a total of $50,000 to schools from Priest Lake to Ammon. In just four short years from its inception, Bucks for Books has helped improve early education literacy and bolster school libraries through new book acquisition by making 89 awards and providing $225,000 in funds.

Here is a list of all the schools across Idaho who received Bucks for Books awards in Fiscal Year 2023.

Priest Lake Elementary, Priest Lake = $2,000 Ramsey Magnet School of Science, Coeur d’Alene = $2,000 Southside Elementary School, Cocolalla = $2,000

Clearwater Region:

Kamiah Elementary School, Kamiah = $3,000 Webster Elementary School, Lewiston = $3,000

Treasure Valley:

Frontier Elementary, Boise = $3,000 Jefferson Elementary, Boise = $3,000 Whitney Elementary School, Boise = $1,000 Washington Elementary School, Caldwell = $3,000 New Horizons Dual Language Magnet Elementary School, Nampa = $3,000 Lewis and Clark Elementary, Caldwell = $3,000

South Central Idaho:

Bellevue Elementary School, Bellevue = $3,000 Kimberly Elementary School, Kimberly = $3,000 Sawtooth Elementary, Twin Falls = $3,000

The Idaho Lottery’s long-standing fundraiser, Scratch for Schools, completed one of its most successful series in program history. A total of 441 public schools participated in one of ten events. The participants won more than in any other year as the program returned a record $152,680 to schools for individual classroom needs.

Southeast Idaho:

Donald D. Stalker Elementary, Blackfoot = $3,000 Pioneer Elementary School, Preston = $3,000

East Idaho:

Bridgewater Elementary School, Idaho Falls = $3,000 Monticello Montessori, Ammon = $2,000 Theresa Bunker Elementary, Idaho Falls = $2,000

The events in Nampa, McCall, Salmon, Pocatello, and Twin Falls all had record numbers of schools participating. In all, more than 1,300 school members from all corners of Idaho joined the Lottery for the fun and exciting atmosphere that characterizes these events.

Below is a breakdown of the events and winnings for Scratch for Schools:

6% 4%

1% 2% 7

Dates Venues Nampa - Ford Idaho Center 3/6/23 Lewiston - LCSC Activity Center 3/7/23 Ponderay (Sandpoint) - Best Western Plus 3/8/23 CDA - NIC - Edminster Union 3/9/23 Salmon, Stage Coach Inn 3/14/23 Idaho Falls, ISU Ext 3/15/23 Pocatello, ISU Union 3/16/23 3/27/23 McCall - First Idaho Bank Community Room Garden City (Boise) - Expo Idaho 3/28/23 Twin Falls - CSI Rec Center Courts 3/29/23

Schools Prizes Won 91 $31,105 36 $12,440 18 $6,315 52 $17,590 7 $3,110 48 $16,285 46 $15,690 13 $4,825 61 $19,910 69 $25,410 441 $152,680

Bellevue Elementary Book Delivery

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From incubators and baby chickens to space-age 3D printers and rocketry, the Idaho Lottery’s Classroom Wishlist program was an overwhelming success during the school year, canvassing the Gem State to fund 80 school projects with a total of $123,407.

Started in 2019, this program awards $10,000 every month for a variety of projects to improve classroom and learning environments. The program allows teachers to submit specific requests for needed projects each month.

Wishlists are evaluated and voted on and Lottery’s VIP Club members donate points to help fund the projects.

Ririe Elementary Baby Chicken Starter Kit

North Idaho:

• Betty Kiefer Elementary (Rathdrum), interactive classroom games • Forrest Bird Charter (Sandpoint), writing books • Greensferry Elementary (Post Falls), learning books/games • Kootenai Jr/Sr. High (Harrison), math materials • Pinehurst Elementary, office storage, reading/writing center, greenhouse, shelving units • Southside Elementary (Cocolalla), student shelf organizers • Treaty Rock Elementary (Post Falls), 1st grade reading/writing skill builders • Washington Elementary (Sandpoint), storage/ communication centers, science materials

Palouse Area:

• McSorley Elementary (Lewiston), IXL subscription • Potlatch Elementary, social studies books 9

Victory Middle 36 Scientific Calculators

Webster Elementary - Boogie Board Reusable Tablets

• Webster Elementary (Lewiston), boogie board tablets • Timberline Elementary/Jr/Sr (Weippe), SIPPS reading package

Southwest Idaho:

• Basin Elementary (Idaho City), sensory STEM equipment, outdoor enclosed area for special needs students • Basin School District (Idaho City), storage bins/hangers • Central Canyon Elementary (Caldwell), furniture, organization, learning tools • Columbia High School (Nampa), laptop charging station • Desert Sage Elementary (Boise), reading resources, books, blankets, scarves, hats, gloves, stuffed animals for all kids • Eagle Elementary of the Arts (Eagle), read aloud text • Frontier Elementary (Boise), 36 student chairs • Garden Valley Schools (Garden Valley), reading resources • Lewis and Clark Middle (Meridian), jumbo pencil sets • Mary McPherson Elementary (Meridian), flexible seating • Middleton Heights Elementary, wagons, attendance fees, yoga mats, educational materials • Middleton High School, storage, motivational supplies, Econ business start-up cash register • Mill Creek Elementary (Middleton), books, art supplies • New Plymouth Elementary, kindergarden manipulatives • Parma High, tables and chairs • Project Impact STEM Academy (Meridian), science through art learning materials • Rocky Mountain High (Meridian), national park games • Sawtooth Middle (Meridian), BOB book sets • Spalding STEM Academy (Boise), wiggle chairs, special ed materials, art/organization supplies, sensory kits, creative kits, headphones

• Star Elementary, robotics/electric building engineer kits • Star Middle, hands on CPR curriculum • Sweet Montour (Sweet), 24 new classroom chairs • Syringa Middle (Caldwell), hygiene products and storage • Victory Middle (Meridian), 36 scientific calculators

• JR Simplot Elementary (American Falls), 15 smart phones, educator kit • Leadore School, food store learning center • Midway Elementary (Menan), chromebook cart, class set of chromebooks • Rigby High, thermal cycler, 3D printers • Rigby Middle, hygiene products, storage • Ririe Elementary, incubator, supplies, baby chicken starter kit • Ririe Jr/Sr High, life support, CPR training equipment • Riverside Elementary (Blackfoot), wiggle stools

South Central Idaho:

• Glenns Ferry Elementary, STEM manipulatives • Hagerman Elementary, sensory seating, math manipulatives • Heritage Academy (Jerome), fidget chair bands, book sets • I.B. Perrine Elementary (Twin Falls), reading books • Sawtooth Elementary (Twin Falls), indoor garden kit • Shoshone Elementary, sturdy privacy boards

Leadore School - Food Store Learning Center

Southeast Idaho:

• Marsh Valley High (Arimo), lab supplies, adaptive technology for special needs students • Pocatello Community Charter, literacy manipulatives • Preston High School, special education flexible seating • Preston Junior High, table legs • Tyhee Elementary (Pocatello), flexible seating

Midway Elementary Class Set of Chromebooks

East Idaho:

• Aberdeen Middle (Aberdeen), reading incentives • Arco Elementary (Arco), age appropriate books • Burton Elementary (Rexburg), books • Fox Hollow Elementary (Idaho Falls), Kinnebar 100 foot swings for under desks • Hamer Elementary, flexible seating, learning tools, flexspace mobile book bin storage center • Hibbard Elementary (Rexburg), books, storage, furniture • I.T. Stoddard Elementary (Blackfoot), whiteboard, wall folder, student lesson books

Mill Creek Elementary Books and Art Supplies

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Draw Games™

Scratch Games™

Big jackpot games were popular with Idaho Lottery players and brought big business to Idaho Lottery retailers throughout the year. Three of the five largest jackpots in the history of the world occurred during the fiscal year, with overall sales in the game lineup portfolio realizing a 40% increase from the previous year. It was the most successful year for Draw Game sales in Idaho Lottery history.

The Idaho Lottery’s original game format, Scratch Games, continued a long tradition of providing unique play styles and entertainment for players as 65 games were introduced during the year. From Strike it Rich to Giant Slingo, Scratch Games remained the Idaho Lottery’s top entertainment choice as 130 players got to claim they won the lottery!

Powerball

Idaho’s favorite game enjoyed one of its most successful years. In early November, the Powerball jackpot reached historic levels, setting a new world record for a single jackpot at $2.04 billion with a cash equivalent world record of $997.6 million. During its second significant jackpot run in February, which eventually reached $754.6 million, the Idaho Lottery added the Double Play feature to the game. For an extra $1 per play, using the same numbers, players are entered into a second drawing for a chance to win a $10 million jackpot.

Idaho $1,000,000 Raffle

All 250,000 tickets in the Idaho Lottery’s traditional holiday game, the Idaho $1,000,000 Raffle were sold by the afternoon of Saturday, November 12, 2022. Due in part to increased player activity during the $2 billion Powerball jackpot run in late October through early November, over 200,000 tickets in the game were sold in the first eighteen days of sales.

This year’s game was the fastest selling in the sixteen-year history of the Idaho $1,000,000 Raffle. It was the second time the game sold out before Thanksgiving, lasting only 23 days on the market.

Steve Mitchell - $1,000,000 Raffle Winner

Lucky For Life

9 Long-Time Friends Share $1,000,000 win

Mega Millions Supported by player enthusiasm and the strength of two $1.3 billion jackpot runs during the year, Mega Millions had the most successful year in Idaho in its 13-year history. The Mega Millions jackpot reached $1.337 billion in late July 2022 and then reached $1.35 billion in January 2023. All totaled, Mega Millions sales increased 106% over the previous year. The biggest winners on Mega Millions were dubbed “The Big Friend Group”. The nine long-time friends have played in a pool for twelve years, and won $1,000,000.

Luck that lasts a lifetime was won by two Idaho Lottery players during the year, in consecutive months. Two lucky players won the second-tier Lucky for Life prize of $25,000 a year for life in December 2022 and January 2023. This is the first time the Idaho Lottery has recorded two of these winners in a single fiscal year. The Idaho Lottery also offered successful St. Patrick’s Day promotion on Lucky for Life from mid-February through March 17, 2023. Each day the Idaho Lottery randomly awarded $1,000 to a lucky, Lucky for Life player, just for purchasing a ticket. Sales during the promotion period increased by 55%, trending upward to an overall increase for the year of 13.5%.

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$5 Big Spin

It was the big blockbuster event of the year! The Big Spin excitement exhilarated Idaho players all year as the Lottery introduced three editions of the game. When a player uncovered the BIG SPIN WHEEL symbol, their winning ticket revealed a digital spin displayed on Lottery video monitors at retailers to reveal their prize. Fourteen players won a BIG SPIN EVENT and journeyed to Boise for a LIVE Big Spin Event with the Big Wheel located at Boise Towne Square for the chance to win up to $100,000.

$5 Sweethearts

Sweethearts, the beloved, iconic heart-shaped conversational candies with their sweet sayings centered around love and caring, are best associated with Valentine’s Day. The Idaho Lottery became the first lottery in the world to partner with Spangler Candy and feature the Sweethearts treats on a Valentine’s Daythemed Scratch Game with a $50,000 top prize. When printing Sweethearts, the Idaho Lottery also became the first lottery in the world to produce a $5 Scratch Game with 20 different scenes that included a classic list of the romantic phrases found on the delectable heart-shaped treats, like “Crush on U”, “Love Birds”, “I Luv U”, and “XOXO.” The Idaho Lottery’s Sweethearts game was a finalist for the North American State and Provincial Lottery Association’s Best New Scratch Game of the Year award.

$5 Cabela’s Cash Cooler

The Idaho Lottery had big bucks in their crosshairs with the launch of the Cabela’s® Scratch game and coordinated InstaPlay game! Both games launched on March 7, 2022.

Idahoans love living outdoors, whether it’s hunting in the hills, fishing in the rivers, or camping in the forests; being outdoors is a way of life. The $5 Cabela’s® Cash Cooler Scratch game was a true celebration of Idaho’s outdoor spirit and came loaded cash prizes and $500 Cabela’s® gift cards.

$30 Secret Password Cashword

In a game where secret passwords unlocked secret prizes and hidden treasures, adventure and intrigue abounded with the Lottery’s first-ever $30 Secret Password Cashword Scratch Game. As a favorite among players, every Cashword game after Secret Password Cashword now offers the BonusPlay Cashword feature where players use a second chance app code to play their favorite game on their mobile device, or computer, and win entries for a chance to claim $300 in FREE Cashword tickets every month.

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InstaPlay Games

Retailers and Vendors

The InstaPlay product line continued its success among players, creating more than $13 million in annual sales. These terminalbased, Scratch style games include a family of rolling jackpot games, Idaho Jackpot – the original $5 InstaPlay jackpot game, the $10 Big Money Jackpot game, the $20 Twenty 20s game, and the $20 Ultimate Diamond Jackpot game.

Idaho’s robust economy is reflected in the Idaho Lottery’s performance over the past twelve months as more Idahoans voluntarily participated than ever before. Handling the millions of transactions every day is a network of 1,195 brick-and-mortar retailers.

Lottery retailers help keep proceeds and commissions in Idaho, supporting a workforce and businesses in 165 communities across the Gem State.

During the year, Idaho Jackpot and Ultimate Diamond each recorded three jackpot winners. Big Money Jackpot had two jackpot winners during the Fiscal Year. The newest member, the $20, Twenty 20s game recorded the single largest jackpot winner of the year of $771,920 on a ticket sold in Inkom.

PullTab and TouchTab Games PullTabs games are best enjoyed in social settings and age-controlled environments. They are played using self-service terminals throughout Idaho.

Classic ‘break open’ PullTabs games remain well-liked after thirty-four years in Idaho’s marketplace.

The popularity among players for TouchTabs, digital version of PullTabs has become well established over the past thirteen years due to the variety of fun games and the entertainment value offered by them. These tickets are also less expensive to deliver to retailers and offer added security features.

Charitable Gaming

This year, Idaho Lottery retailers handled a world-record Powerball jackpot run on their way to earning a record $24.7 million in commissions. Since 1989, Idaho’s community of retailers has earned $317.7 million from the sale of Lottery products, one transaction at a time.

The Idaho Lottery is grateful for the continued dedication and support from all our partners.

VENDOR PARTNERS OF RECORD The Idaho Lottery appreciates the creativity, strategic ability, and professional execution of all these companies’ efforts during Fiscal Year 2023.

• Intralot, USA – Terminal, vending and gaming systems operators and developers

Headquarters: Duluth, GA, United States • Pollard Banknote, Inc. – Scratch Games™ developer/printer

Headquarters: Winnipeg, Manitoba, Canada (printing in Ypsilanti, MI) • Scientific Games International, Inc. – Scratch Games™ developer/printer

Headquarters: Las Vegas, NV (printing in Alpharetta, GA), United States • Diamond Game – a Pollard Banknote Company – PullTabs/TouchTabs provider dba in Idaho as International Gamco

Headquarters: Chatsworth, CA, United States • CLM – creative, media, and strategic marketing services partner

Headquarters: Boise, ID, United States

The Idaho Lottery received oversight of Charitable Gaming in 1992. The Lottery is charged with protecting the public from fraudulently conducted operations and to assure that charitable groups and institutions realize the profits from these games. When a non-profit organization or a charity wishes to conduct a bingo game or a raffle in Idaho, they are required by law to obtain a license from the State through the Idaho Lottery. Licenses for bingo and raffle operations are necessary when the annual gross revenue (bingo) or prize value (raffle) exceeds statutory benchmarks.

Each year in December, the Idaho Lottery publishes an Annual Report on Charitable Gaming in Idaho. For more information on charitable bingo and raffles in Idaho, visit https://www.idaholottery.com/charitable-gaming/whats-new.

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Financial Statements

Independent Auditor’s Report To the Director and Board of Commissioners Idaho Lottery Boise, Idaho Report on the Audit of the Financial Statements Opinion We have audited the financial statements of the Idaho Lottery (the Lottery), an agency of the State of Idaho, as of and for the years ended June 30, 2023 and 2022, and the related notes to the financial statements, as listed in the table of contents.

Financial Statements

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the Lottery, as of June 30, 2023 and 2022, and the respective changes in financial position, and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Lottery, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter As discussed in Note 1, the financial statements of the Lottery are intended to present the financial position, the changes in financial position, and cash flows of only that portion of the State of Idaho that is attributable to the transactions of the Lottery. They do not purport to, and do not, present fairly the financial position of the State of Idaho as of June 30, 2023 and 2022, the changes in its financial position, or its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

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In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Lottery’s internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Management’s Discussion and Analysis The following Management’s Discussion and Analysis (MD&A) allows Idaho Lottery (Lottery) management to provide users of the financial statements with an analysis of the Lottery’s financial activities based upon currently known facts, decisions and conditions. Please read it in conjunction with the Idaho Lottery Financial Statements that follow this section.

A key focus of the MD&A is the discussion of the current-year results in comparison with the prior year. While the accompanying financial statements present the financial position of the Idaho Lottery as of June 30, 2023 and 2022, and financial activity for the years then ended, the MD&A also includes information for the year ended June 30, 2021, in order to allow for a broader comparison.

OVERVIEW OF THE ACCOMPANYING FINANCIAL STATEMENTS

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

These required statements offer short and long-term financial information about the Idaho Lottery.

Required Supplementary Information

The Statements of Net Position provides information about the nature and amounts of investments in resources (assets and deferred outflows of resources) and obligations (liabilities and deferred inflows of resources) at the close of fiscal year 2023 and 2022.

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the schedule of employer’s share of the net pension (asset) liability, and the schedule of employer’s contributions as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2023, on our consideration of the Lottery’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Lottery’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Lottery’s internal control over financial reporting and compliance.

The Statements of Revenues, Expenses and Changes in Net Position, measures the success of the Lottery’s operations for fiscal year 2023 and 2022 and the resulting increase or decrease in net position.

The Statements of Cash Flows - The primary purpose of this statement is to provide information about the Lottery’s cash receipts and cash payments during the fiscal year 2023 and 2022. The statement reports cash receipts, cash payments and net changes in cash resulting from operations, investing and financial activities and provides answers to such questions as where cash originated from and where it went during the fiscal years.

The Idaho Lottery is structured as a single enterprise fund with revenues recognized when earned, not when received. Expenses are recognized when incurred, not when paid. Capital assets are capitalized and depreciated over their useful lives. The notes to the financial statement contain, among other information, a description of the Idaho Lottery’s significant accounting policies. The accompanying notes are an integral part of the financial statements.

The reader should refer to the financial statements and the accompanying notes for information on the individual components of the Statements of Net Position. The following analysis is intended to highlight selective changes between 2023 and 2022 and between 2022 and 2021.

Boise, Idaho November 8, 2023

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Management’s Discussion and Analysis // June 30, 2023 and 2022 ASSETS CURRENT ASSETS Cash and cash equivalents Receivables Other Total current assets NON-CURRENT ASSETS Deposits with MUSL Capital Assets, net Right-of-use leased asset, net Other Post Employment Benefit Asset Pension Asset Total non-current assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows pensions LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses Dividend payable Due to MUSL Prizes payable Current portion of capital leases Total current liabilities LONG-TERM LIABILITIES Lease liability, long-term portion Other Post Employment Benefits Net pension liability TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES Deferred inflows pensions NET ASSETS Net investment in capital assets Unrestricted TOTAL NET ASSETS TOTAL LIABILITIES AND ASSETS 19

Management’s Discussion and Analysis // June 30, 2023 and 2022

2023

2022

$87,749,072 2,415,826 280,340 90,445,238

$74,925,426 2,315,894 316,198 77,557,518

$12,823,646 99,932 (35,858) 12,887,720

$74,815,713 3,903,658 115,109 78,834,480

$ 109,713 (1,587,764) 201,089 (1,276,962)

2,667,415 211,172 1,402,832 268,245 4,549,664

2,716,005 242,738 1,988,541 345,017 48,462 5,340,763

(48,590) (31,566) (585,709) (76,772) (48,462) (791,099)

2,973,039 495,565 267,650 3,736,254

(257,034) 242,738 1,492,976 77,367 48,462 1,604,509

1,554,787 $96,549,689

915,402 $83,813,683

639,385 $12,736,006

590,577 $83,161,311

324,825 $652,372

$ 1,743,204 82,000,000 193,848 6,319,191 310,377 90,566,620

$ 1,754,389 73,000,000 200,443 5,156,674 361,456 80,472,962

$

(11,185) 9,000,000 (6,595) 1,162,517 (51,079) 10,093,658

$ 1,541,332 72,500,000 122,634 6,846,571 55,778 81,066,315

$ 213,057 500,000 77,809 (1,689,897) 305,678 $(593,353)

Beginning balance GASB 87 implementation Add: Acquisitions Deduct: net retirements Deduct: depreciation Ending balance

1,003,813 36,594 2,406,843 94,013,870

1,664,893 83,541 82,221,396

(661,080) (46,947) 2,406,843 11,792,474

133,169 40,822 1,481,864 82,722,170

1,531,724 42,719 (1,481,864) (500,774)

LIABILITIES AND NET POSITION

10,743

1,550,322

(1,539,579)

108,169

1,442,153

299,813 2,225,261 2,525,074 $96,549,687

204,930 (162,965) 41,965 $83,813,683

94,883 2,388,226 2,483,109 $12,736,004

306,648 24,324 330,972 $83,161,311

(101,718) (187,289) (289,007) $652,372

* Amounts for year end June 30, 2021 were not restated for the effects of GASB 87.

2021*

Change 2022 to 2021

Receivables The Lottery’s billing week is from Sunday through Saturday. The amount due from retailer transactions (i.e., sales, less commissions and prizes paid by the retailer) are transferred from the retailer’s bank account to the Lottery’s account the following Thursday. Similarly, any amounts due to the retailer from the Lottery are transferred to the retailer’s account on Thursday. The Lottery refers to this transfer as a “sweep”, and this mandatory process between the Lottery and its retailer customers simplifies collections.

Change 2023 to 2022

The receivables balances for 2023, 2022, and 2021, consist of the following: Week ended June 30 sales Accounts to Attorney General for Collection Total

2023 $2,409,913 5,913 $2,415,826

2022 $ 2,313,619 2,275 $2,315,894

2021 $ 3,901,033 2,625 $3,903,658

Ticket Inventory (Other Assets subcategory) Two Scratch Ticket printing contracts were awarded in March 2021 to primary vendor, Pollard Banknote and the secondary printing contract to Scientific Games. The contracts include three, two-year extension options.

PullTab tickets are expensed when the tickets are sold to the retailers. The Ticket Inventory balances on June 30, 2023, 2022, and 2021, consist of any unamortized production costs of scratch tickets.

Property and Equipment, Net The balances shown were derived as follows:

2023 $242,738 72,117 (103,683) $ 211,172

2022 $495,565 (188,684) 54,056 (12,599) (105,600) $242,738

2021 $ 544,971 112,392 (161,798) $495,565

Dividend Payable The dividends declared by the Idaho Lottery Commission for 2023, 2022, and 2021, were $82,000,000, $73,000,000, and $72,500,000, respectively. The dividend is declared on or before June 30th and paid on July 1st or shortly thereafter.

Prizes Payable The increase in prizes payable between 2022 and 2023 of $1,162,517 is primarily due to the increase in the 5 Star Draw jackpot of $463,000, the increase in the Powerball ticket prizes payable of $315,416, and an increase in the Mega Millions prizes payable of $205,310. The decrease in prizes payable between 2021 and 2022 of $1,689,897 is primarily due to the decrease in the Five Star draw jackpot of $571,685 and the decrease in scratch ticket prizes payable.

Total Net Position Net position represents the difference between the Lottery’s total assets and deferred outflows of resources and its total liabilities and deferred inflows of resources. Net position is allocated between the portion which represents the net investment in capital assets (i.e., plant and equipment and other leased assets) and unrestricted net position.

20

Management’s Discussion and Analysis // June 30, 2023 and 2022

Management’s Discussion and Analysis // June 30, 2023 and 2022

REVENUES, EXPENSES AND CHANGES IN NET POSITION

Draw Game Ticket Sales Powerball Relationship Between Announced Jackpot and Sales

Operating Revenues Comparative operating revenues for the four major product sales classifications: Draw tickets, Scratch tickets, PullTab/TouchTab tickets and Other revenue are as follows: 2023

2022

Change 2022 to 2023

$ 39,099,421 2,313,177 28,794,696 1,750,748 5,202,628 3,653,511 2,073,547 2,413,520 79,248 1,063,542 2,500,000 88,944,038

$ 30,242,308 2,346,461 13,885,979 1,647,644 4,586,090 2,586,664 1,707,501 1,901,485 628,926 1,123,620 2,500,000 63,156,678

$ 8,857,113 (33,284) 14,908,717 103,104 616,538 1,066,847 366,046 512,035 (549,678) (60,078) 25,787,360

$ 26,323,815 2,655,481 19,803,804 1,662,420 3,265,888 2,343,635 1,770,082 2,811,900 203,620 591,528 2,500,000 63,932,173

$ 3,918,493 (309,020) (5,917,825) (14,776) 1,320,202 243,029 (62,581) (910,415) 425,306 532,092 (775,495)

Scratch ticket Sales PullTab ticket Sales TouchTab ticket Sales Total Sales

252,967,146 2,151,713 78,435,101 422,497,998

234,832,327 2,030,150 76,295,737 376,314,892

18,134,819 121,563 2,139,364 46,183,106

241,246,461 2,009,407 64,834,117 372,022,158

(6,414,134) 20,743 11,461,620 4,292,734

Data Line Charges Other revenues Total operating revenues

649,825 49,666 $423,197,489

650,338 50,739 $377,015,969

(513) (1,073) $46,181,520

665,300 29,625 $372,717,083

(14,962) 21,114 $4,298,886

Draw Game Sales Powerball Pick 3 Mega Millions Weekly Grand Lucky for Life Lotto America Idaho Cash 5 Star Draw 2by2 Pick 4 Raffle

Total Draw Game Sales

2021

Change 2021 to 2022

Draw Game Ticket Sales The Powerball game is sold in forty-five states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. These lotteries contribute a fixed percentage of their Powerball sales revenue to a consolidated Jackpot prize. There are three Powerball drawings a week with a minimum-starting jackpot of $20 million. Each time the jackpot is not won it rolls into the next draw and thus the jackpot grows until it is won. Selling for close to 30 years, Powerball is still the most recognizable brand and game offered by the Idaho Lottery. Current odds of winning the Powerball jackpot are 1:292,201,338.

Big game sales are very jackpot driven; the higher the announced jackpot, typically the higher the sales. While Powerball enjoys a consistent core group of players, as half-a-billion dollar or higher jackpots become more common place, more casual lottery players wait to join the game until it reaches near-record levels. While larger jackpot runs have generally tended to make big game sales trend up, it is important to be aware of the relationship of the jackpot and sales as illustrated in the following chart.

2023 2022 2021 2020 2019 2018 2017 2016 2015 2014

Average Announced Jackpot Per Draw $ 239,288,462 $ 214,013,986 $ 152,447,619 $ 108,490,385 $ 200,451,923 $ 176,504,762 $ 166,451,923 $ 160,275,143 $ 105,336,538 $ 117,846,154

Average Sales Per Draw $ 250,637 $ 204,340 $ 250,703 $ 194,258 $ 288,163 $ 316,170 $ 271,443 $ 406,027 $ 282,027 $ 351,215

$ $ $ $ $ $ $ $ $ $

Annual Sales 39,099,421 30,242,308 26,323,815 20,397,045 30,257,158 33,197,811 28,501,559 42,632,859 29,330,831 36,526,313

In 2010, the Idaho Lottery began selling Mega Millions with Megaplier. The Mega Millions game is similar to Powerball but holds drawings on Tuesday and Friday. Mega Millions was originally launched and sold by states NOT selling Powerball. All states came together in 2010 to agree on a cross selling initiative which allowed all states to sell both of the “big games” across borders.

Mega Millions is sold in forty-seven localities – forty-five states plus the District of Columbia and the U.S. Virgin Islands, with odds of winning the jackpot 1:302,575,350.

As with Powerball, there is typically a strong relationship between the jackpot and resulting sales.

Mega Millions Relationship between Announced Jackpot and Sales

2023 2022 2021 2020 2019 2018 2017 2016 2015 2014

Average Announced Jackpot Per Draw $ 275,847,619 $ 143,564,356 $ 166,576,923 $ 136,914,286 $ 219,259,615 $ 146,490,385 $ 78,152,381 $ 101,730,769 $ 93,752,381 $ 98,259,615

Average Sales Per Draw $ 274,235 $ 133,519 $ 190,421 $ 125,834 $ 224,098 $ 130,040 $ 89,755 $ 99,912 $ 107,577 $ 128,645

Annual Sales $ 28,794,696 $ 13,885,979 $ 19,803,804 $ 13,212,519 $ 23,530,337 $ 13,524,177 $ 9,334,536 $ 10,390,885 $ 11,295,562 $ 13,379,076

The smaller jackpot games, both in-state and multi-state games are as sensitive to jackpots as Powerball and Mega Millions.

Both games have a consistent player base, although players will sometimes shift their buying habits from both games to Powerball and Mega Millions when jackpots are unusually large. The Lottery offers the following Draw games: Powerball, Mega Millions, Lucky for Life, Lotto America, Weekly Grand, Idaho Cash, Pick 3, Pick 4, 5 Star Draw and a fall Raffle game.

The Draw games, with higher profit margins than Scratch, increase profits in the Draw category.

21

22

Management’s Discussion and Analysis // June 30, 2023 and 2022

Management’s Discussion and Analysis // June 30, 2023 and 2022

Scratch™ Ticket Sales Sales are up 7.7% in Scratch games from fiscal year 2022 to 2023. The ongoing goal when managing the Scratch game portfolio is to introduce fun, easy to play themes in all price points. The lower priced games typically have a lower pay out and are more profitable. The more expensive games generally offer more interesting and longer play features than the simple “match three” format of many the one and two-dollar games. As a result, some players feel the higher priced tickets offer more entertainment value. Keeping the perfect Scratch Ticket Game portfolio is a challenge, as higher priced tickets are less profitable, so the mix is important and an inordinate number of higher price point sales can skew profit results dramatically.

TouchTab Sales

In FY15, the Lottery launched a new product line, InstaPlay, which are played like a Scratch ticket, with predetermined odds, but printed from the Lottery terminal without having to wait for a drawing like a Draw game. Players are loving the fun play action and sales continue to reflect their interest in these games.

Scratch ticket sales by price point for the fiscal years 2023, 2022, and 2021 are as follows: One-dollar games Two-dollar games Three-dollar games Five-dollar games Ten-dollar games Twenty-dollar games Twenty-five dollar games Thirty-dollar games Fifty-dollar games InstaPlay Total Sales Increase (decrease) over prior year

2023 $ 4,613,886 7,100,596 13,278,600 54,886,595 49,268,980 40,896,820 30,402,990 39,307,750 13,210,929 $252,967,146 $ 18,134,819

% Change -12.3% 13.0% -3.7% 2.1% -6.6% -0.8% -100.0% -30.7% 640.8% 5.2% 7.7%

2022 $ 5,263,853 6,284,228 13,794,615 53,751,790 52,774,530 41,212,780 (225) 43,882,170 5,306,300 12,562,286 $234,832,327 $ (6,414,134)

% Change -20.7% -18.1% -17.3% -5.9% 3.1% -16.2% 13.4% -10.8% -2.7%

2021 $ 6,638,927 7,676,976 16,683,744 57,109,025 51,174,940 49,199,380 38,682,060 14,081,409 $241,246,461 $ 55,679,751

% Change 2.8% 3.2% 6.9% 23.7% 21.2% 20.4% 0.0% 16.0% 0.0% 5.8% 100.0%

PullTab Ticket Sales PullTab tickets, which are sold mainly in restaurants and bars, historically make up less than 2% of the Lottery’s total annual sales.

Although these games fight competition from illegal gaming machines, annual sales were $2,151,713 in fiscal year 2023, an increase of $121,563 from fiscal year 2022 sales of $2,030,150. 2022 fiscal year saw an increase of $20,743 from fiscal year 2021 sales of $2,009,407. The sales increase is anecdotally correlated to reduced access to other entertainment options during the COVID-19 pandemic.

Concentrated efforts between the Lottery and our PullTab vendor, International Gamco are ongoing and while the paper PullTab product continues to hold with steady sales, we conservatively seek out additional selling locations and increased sales in the coming fiscal year. As of February of 2018, vendor International Gamco is wholly owned by Pollard Banknote. In May of 2019, the Lottery Commission approved a subcontract agreement between International Gamco and Diamond Game (another wholly owned subsidiary of Pollard Banknote) and in 2020 an extension was granted for five years – extending the contract term to June 30, 2026. With the extension comes a revised revenue share formula that will yield an estimated $1,000,000 extra in net revenue to the Idaho Lottery.

23

Together with our PullTab vendor partner International Gamco, the Idaho Lottery launched a pilot project from 11/2010 to 6/2011 to introduce a new TouchTab dispensing device to retailers around Idaho. The TouchTab dispensing device is co-located with our paper ticket vending machines (TabBOXX), and only offered in age-controlled environments (bars and taverns). TouchTab games are nearly identical to paper PullTabs; each game is played just like the paper version; with a predetermined number of tickets; odds are finite with winning tickets randomly seeded throughout the number of tickets in the game; and prizes must be claimed by the selling retailer.

Subsequent phases, after the successful pilot, added additional age-controlled locations that have passed our criminal and financial background checks. While the Idaho Lottery expects to deliver enhanced dividends from this product going forward, the payout to the player for this product is higher than other offerings, the resulting profit margin is lower.

At $78,435,101 in fiscal year 2023, TouchTab sales increase by $2,139,364 over fiscal year sales 2022 of $76,295,737, which was an increase of $11,461,620 from 2021 sales of $64,834,117.

Interest Income on Funds Held at the State All idle cash with the State Treasurer is invested in a variety of securities. The Lottery is an involuntary member of this pool.

Estimated interest accrued is reflected in the Lottery’s financial statements. The interest earned is offset by a transfer to the State of Idaho General Fund.

Interest income earned on the funds held at the state by the Lottery for 2023 and 2022 were was $1,375,899, an increase from 2022 interest income of $208,410, and 2021’s interest income of $136,287.

Operating Expenses 2023, 2022, and 2021 operating expenses are as follows:

Prizes, net of unclaimed prizes Retailer commissions Gaming system services Scratch tickets PullTab tickets Advertising Salaries and benefits Depreciation Amortization Telephone and data line costs Professional services Office and equipment Shipping costs Supplies Tribe compact Other costs Total operating expenses

2023 $ 285,564,486 24,704,242 9,638,519 2,711,752 4,806,423 4,607,132 4,421,737 103,683 320,247 26,630 163,742 124,463 801,929 115,290 182,851 390,371 $ 338,683,497

2022 $ 257,122,291 22,102,833 8,601,643 2,677,098 4,650,410 4,031,845 2,965,345 105,600 394,325 30,623 140,644 30,612 715,967 122,099 189,962 329,600 $ 304,210,897

Change 2022 to 2023 $ 28,442,195 2,601,409 1,036,876 34,654 156,013 575,287 1,456,392 (1,917) (74,078) (3,993) 23,098 93,851 85,962 (6,809) (7,111) 60,771 $34,472,600

2021 $252,890,557 21,912,532 8,493,120 3,729,786 4,062,490 4,285,868 3,408,038 161,798 28,418 135,000 442,526 698,309 69,886 190,964 262,121 $ 300,771,413

Change 2021 to 2022 $ 4,231,734 190,301 108,523 (1,052,688) 587,920 (254,023) (442,693) (56,198) 394,325 2,205 5,644 (411,914) 17,658 52,213 (1,002) 67,479 $ 3,439,484 24

Management’s Discussion and Analysis // June 30, 2023 and 2022

Management’s Discussion and Analysis // June 30, 2023 and 2022

Operating Expenses continued ...

Prizes, Net of Unclaimed Prizes continued ...

Generally, the changes in expenses during the three fiscal years reflect the change in the level of sales as well as a shift in the product sales mix, i.e., the relative percentage that each product group (Draw, Scratch, PullTab, and TouchTab) represents of total sales. Sales levels and mix for each of the years is represented below:

Prize expense, net of unclaimed prizes, consisted of the following for the years 2023, 2022, 2021:

Draw sales Scratch ticket sales PullTab ticket sales TouchTab ticket sales Total Sales Increase (decrease) over prior year

$ 86,444,038 252,967,146 2,151,713 78,435,101 $ 419,997,998 $ 46,183,106

% Change

2022

% Change

2021

% Change

20.6% 60.2% 0.5% 18.7% 100.0%

$ 60,656,678 234,832,327 2,030,150 76,295,737 $373,814,892 $ 1,792,734

16.2% 62.8% 0.5% 20.4% 100.0%

$ 63,932,173 241,246,461 2,009,407 64,834,117 $372,022,158 $ 94,419,667

17.2% 64.8% 0.5% 17.4% 100.0%

Certain cost categories, namely advertising, salaries and benefits, depreciation and amortization, telephone and data line costs, professional services, office and equipment, supplies and other costs are only minimally affected by sales increases or shifts in the sales mix. However, the change in sales level or mix does impact prizes, retailer commissions, gaming system services, Scratch and PullTab ticket costs, as well as shipping, detailed in the following information which outlines prize expense percentages. The increase in depreciation and amortization and the decrease in office and equipment expense from 2021 to 2022 is the result of GASB 87 classification.

Prizes, Net of Unclaimed Prizes Each of the three product types, Draw games, Scratch games (including InstaPlay), and PullTabs (including TouchTabs) have differing average prize expense percentages associated with that product. The average prize percentage for each category depends upon the prize percentage of the individual games within that product type. For example, Powerball has a prize percentage of 50% (so 50% of the sales go to the prize fund for Powerball); Pick 3 also has a 50% prize percentage, while Mega Millions has a prize percentage of 51%. The overall average prize percentage for the suite of Draw game products depends upon the sales mix for the games. Similarly, most Scratch and PullTab games have different prize percentages, although they average in the range of 58-78%, with higher price point tickets generally offering a higher prize payout percentage. TouchTab games have a prize percentage of between 78-82%.

Two other factors are considered in computing prize expense. The first factor is the prize expense associated with second chance draws. Second chance draws are held in conjunction with Draw or Scratch games, where the drawing entry is normally a nonwinning ticket. The second factor is unclaimed prizes. The value of all prizes not claimed within the statutory 180-day claiming period is offset against and reduces that year’s total prize expense.

The product mix and resulting sales can significantly skew the overall prize payout.

2023 Draw ticket sales Scratch ticket sales Raffle sales PullTab ticket sales TouchTab ticket sales Second Chance draws Unclaimed prizes

Sales $ 86,444,038 252,967,146 2,500,000 2,151,713 78,435,101

Prize % 51.22% 71.46% 52.00% 70.16% 80.07%

Prizes $ 44,275,293 180,773,284 1,300,000 1,509,592 62,800,027 133,507 (5,227,217) $ 285,564,486

2022 Draw ticket sales Scratch ticket sales Raffle sales PullTab ticket sales TouchTab ticket sales Second Chance draws Unclaimed prizes

Sales $ 60,656,678 234,832,327 2,500,000 2,030,150 76,295,737

Prize % 52.21% 70.83% 52.00% 70.16% 80.09%

Prizes $31,667,317 166,335,412 1,299,980 1,424,351 61,106,724 150,835 (4,862,328) $ 257,122,291

2021 Draw ticket sales Scratch ticket sales Raffle sales PullTab ticket sales TouchTab ticket sales Second Chance draws Unclaimed prizes

Sales $ 61,432,173 241,246,461 2,500,000 2,009,407 64,834,117

Prize % 52.38% 70.72% 52.00% 70.03% 80.12%

Prizes $32,180,895 170,602,865 1,300,050 1,407,174 51,948,156 274,007 (4,822,590) $ 252,890,557

Retailer Commissions, Scratch and PullTab Ticket Costs Changes in these cost categories generally reflect and are related to the corresponding change in sales.

Draw Game Contractor Fee The Lottery contracts with INTRALOT as the draw game vendor. INTRALOT provides the Lottery with critical hardware and software, network communications, and support personnel.

25

26

Management’s Discussion and Analysis // June 30, 2023 and 2022 OUTLOOK FOR THE FISCAL YEAR ENDED JUNE 30, 2024 In Fiscal Year 2023, the Idaho Lottery turned in the best performance in 34 years of operation. Sales, transfers to beneficiaries, commissions paid to retailers, and prizes paid to players were all the highest ever.

The two big draw games, Powerball and Mega Millions, produced very large jackpots that created player excitement and ticket sales. As is always the case when there are big jackpots in these games, the entire portfolio receives a lift from the additional footfall at retail. A repeat performance of the big games in Fiscal Year 2024 is statistically unlikely, but possible.

The forecast for Powerball and Mega Millions in Fiscal Year 2024 is a sales decrease of $21,533,000. Overall sales are forecast to be down $17 million from Fiscal Year 2023, resulting in a $3 million decrease to $79 million in transfers to beneficiaries.

The Idaho Lottery focuses on the games in the product portfolio that can be influenced with special offerings and promotions for players and retailers. This strategy has a proven track record of success over the years and remains essential to continuing to deliver for those who count on the Lottery for needed funding, Idaho Public Schools and Permanent Building.

Contacting the Idaho Lottery This financial reporting is designed to provide a general overview of the Idaho Lottery’s finances and to demonstrate accountability for money earned by the Idaho Lottery. If you have questions about this report or need additional financial information, contact Becky Schroeder, Chief Operating Officer, Idaho Lottery, P.O. Box 6537, Boise, ID 83707-6537, or call 208.334.2600.

Financial Statements // Statements of Net Position // June 30, 2023 and 2022 Assets and Deferred Outflows of Resources Current Assets Cash and cash equivalents Receivables Other Total current assets

2023 $ 87,749,072 2,415,826 280,340 90,445,238

2022 $ 74,925,426 2,315,894 316,198 77,557,518

2,667,415 211,172 1,402,832

2,716,005 242,738 1,988,541

268,245 4,549,664

345,017 48,462 5,340,763

1,554,787 $ 96,549,689

915,402 $ 83,813,683

2023 1,743,206 82,000,000 193,848 6,319,191 310,377 90,566,622

2022 $ 1,754,389 73,000,000 200,443 5,156,674 316,456 80,472,962

1,003,813 36,594 2,406,843 3,447,250 94,013,872

1,664,893 83,541 1,748,434 82,221,396

10,743

1,550,322

299,813 2,225,261 2,525,074 $ 96,549,689

204,930 (162,965) 41,965 $ 83,813,683

Non-Current Assets Deposits with MUSL Capital assets Right-to-use lease asset, net Other post employment benefits asset Pension asset Total non-current assets Deferred Outflows of Resources Deferred outflows - pensions

Liabilities, Deferred Inflows of Resources, and Net Position Current Liabilities Accounts payable and accrued expenses Dividend payable Due to MUSL Prizes payable Lease liability, current portion Total current liabilities Long-Term Liabilities Lease liability, long-term portion Other post employment benefits liability Net pension Total long-term liabilities Total liabilities Deferred Inflows of Resources Deferred inflows pensions Net Position Net investment in capital assets Unrestricted Total net position

$

See Notes to Financial Statements 27

28

Financial Statements // June 30, 2023 and 2022

Financial Statements // June 30, 2023 and 2022

Statements of Revenues, Expenses, and Changes in Net Position Operating Revenues Scratch ticket sales Draw ticket sales PullTab ticket sales TouchTab ticket sales Raffle sales Data line charges Other Operating Expenses Prizes, net of unclaimed prizes Retailer commissions Gaming system services Scratch tickets PullTab/TouchTab tickets Advertising Salaries and benefits Depreciation Amortization Telephone and data line costs Professional services Office and equipment Shipping costs Supplies Tribe compact Other

Total operating revenues

Total operating expenses Operating Income Nonoperating Revenues (expenses) Gain on disposal of capital assets Interest income Interest income on funds held at the State Interest expense Total nonoperating revenues Income Before Transfers Transfers State Permanent Building Fund State Public Schools Building Fund State Bond Equalization Fund State general fund- interest earnings Total transfers Change in Net Position Total Net Position, Beginning of Year Total Net Position, End of Year

See Notes to Financial Statements 29

Statements of Cash Flows

2023 $252,967,146 86,444,038 2,151,713 78,435,101 2,500,000 649,825 49,666 423,197,489

2022 $234,832,327 60,656,678 2,030,150 76,295,737 2,500,000 650,338 50,738 377,015,968

285,564,486 24,704,242 9,638,519 2,711,752 4,806,423 4,607,132 4,421,737 103,683 320,247 26,630 163,742 124,463 801,929 115,290 182,851 390,371 338,683,497 84,513,992

257,122,291 22,102,833 8,601,643 2,677,098 4,650,410 4,031,845 2,965,345 105,600 394,325 30,623 140,644 30,612 715,967 122,099 189,962 329,600 304,210,897 72,805,071

-

1,375,899 (30,883) 1,345,016 85,859,008

38,700 3,168 208,410 (135,946) 114,332 72,919,403

(30,750,000) (30,750,000) (20,500,000) (1,375,899) (83,375,899) 2,483,109 41,965 $ 2,525,074

(27,375,000) (27,375,000) (18,250,000) (208,410) (73,208,410) (289,007) 330,972 $ 41,965

Operating Activities Ticket sales Prizes paid to winners Commissions and payment to retailers Paid to vendors for goods and services Paid to vendors for promotions Paid to employees for service Net Cash from Operating Activities Noncapital Financing Activities Transfers to State Permanent Building Fund Transfers to State Public Schools Building Fund Transfers to Bond Equalization Fund Transfers to State General Fund - interest earnings Net Cash used for Noncapital Financing Activities Capital and Related Financing Activities Purchase of capital assets Proceeds from sale of capital assets Principal paid on leases Interest paid on long-term debt Net Cash used for Capital and Related Financing Activities Investing Activities Interest income Change in deposit with MUSL Net Cash from Investing Activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year Reconciliation of Operating Income to Net Cash from Operating Activities Operating income Adjustment to reconcile operating income to net cash from operating activities Depreciation Amortization Other post employment benefit adjustment Pension expense adjustment Changes in assets and liabilities Receivables Other assets Accounts payable and accrued expenses Due to MUSL Prizes payable Net Cash from Operating Activities Supplemental Disclosure for Cash Flow Information Non Cash Investing, Capital and Financing Transactions Vehicles and equipment financed by leasing arrangements

2023 $ 423,097,557 (284,408,564) (24,704,242) (19,014,821) (4,607,132) (4,038,046) 86,324,752

2022 $ 378,603,732 ( 258,734,379) (22,102,833) (17,540,619) ( 4,031,845) (3,349,060) 72,844,996

(27,375,000) (27,375,000) (18,250,000) (1,375,899) (74,375,899)

( 27,187,500) ( 27,187,500) ( 18,125,000) (208,410) (72,708,410)

(72,117) (446,696) (30,883) (549,696)

(54,056) 38,700 (344,183) (135,946) (495,485)

1,375,899 48,590 1,424,489 12,823,646 74,925,426 $ 87,749,072

$

208,410 260,202 468,612 109,713 74,815,713 74,925,426

$

$

72,805,071

$

84,513,992 103,683 320,247 29,825 276,340

105,600 394,325 (34,648) (412,998)

(99,932) 35,858 (11,183) (6,595) 1,162,517 86,324,752

1,587,764 (201,089) 213,059 77,809 (1,689,897) 72,844,996

-

$

$27,951

See Notes to Financial Statements 30

Notes to the Financial Statements NOTE 1– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Authorizing Legislation The Idaho Lottery (the Lottery), an agency of the State of Idaho (the State), was established in November 1988 with the enactment of Title 67, Chapter 74 of the Idaho Code (the Act). The purpose of the Act is to establish a lottery to generate revenue for the State. Revenues generated by the Lottery, after allowances for prizes and expenses, are distributed to the State Permanent Building, Public School Building, and Bond Equalization Funds.

The financial statements of the Idaho Lottery are intended to present the financial position, the changes in financial position, and the cash flows attributable to the Lottery. They do not purport to, and do not present fairly the financial position of the State of Idaho (of which the Idaho Lottery is a self-governing agency) as of June 30, 2023 and 2022, and the changes in its financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis of Presentation The Lottery is accounted for and reported as a proprietary-type enterprise fund of the State.

Basis of Accounting The financial statements are prepared on the accrual basis of accounting.

Multi-State Lottery Association State statutes authorize the Lottery to participate in the Multi-State Lottery Association (MUSL). MUSL is a non-profit, government benefit association that administers low odds draw games with other participant state lotteries. The Lottery contributes to the related prize pools based on weekly draw ticket sales. MUSL holds daily drawings for prize amounts determined by ticket sales.

Cash and Equivalents Cash and equivalents include liquid investments with original maturities of three months or less. The Lottery’s excess funds are held in the State of Idaho’s investment pool. Funds held in the pool are generally available to the Lottery within 90 days.

Accounts Receivable The Lottery provides credit in the normal course of business to its customers and performs a thorough credit evaluation of each customer before approving a license to sell lottery products. The Lottery sweeps accounts receivables directly from its customers’ accounts weekly and will place customers’ accounts on hold if there are insufficient funds after two weeks. Since the Lottery identifies bad accounts quickly, the credit losses, when realized, have been within the range of the Lottery’s expectations and, historically, have not been significant. Consequently, no allowance for doubtful accounts has been established.

Other Assets Other assets are comprised of prepaid expenses and ticket inventory. Ticket inventory consists of Scratch tickets which are recorded at a fixed cost related to ticket designs. The fixed costs of the scratch tickets are amortized over the estimated total sales of the games, with any remaining unamortized amount being expensed to operations at the end of the game.

Deposits with MUSL Two percent of the payments to MUSL for multi-state draw games are accumulated in a deposit account with MUSL until the account balance has reached a level established by the MUSL Board.

Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful life ranging from three to five years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the results of operations in the period of disposal.

Leases As a lessee, the Lottery recognizes a lease liability and a right to use lease asset at the commencement of the lease term, unless the lease is a short-term lease, or it transfers ownership of the underlying asset. The lease liability is measured at the present value of payments expected to be made during the lease term (less any lease incentives received). The lease asset is measured at the amount of the initial measurement of the lease liability, plus any payments made to the lessor at or before the commencement of the lease term and certain direct costs.

Compensated Absences Employees earn the right to be compensated during absences for vacation and illness. Within limits established by law, unused vacation benefits are paid to employees upon separation from State service and are the responsibility of the State entity employing the individual at the time of their separation from State service. Accumulated unused sick leave is paid upon the employee’s retirement and is the responsibility of the State. Accumulated benefits for compensated absences are based on the period of service with the State and are accrued at current salary rates.

Accordingly, the Lottery assumes the liability for benefits accumulated for employees who transfer to the Lottery from other State agencies. The Lottery will be relieved of liability upon the transfer of an employee to another State agency.

Dividends Dividends are recorded on the date they are declared, in June of each year, by the Idaho Lottery Commission.

Deferred Outflows/Inflows of Resources In addition to assets, the statements of financial position includes a separate section for deferred outflows of resources. This separate financial statement element, deferred outflow of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The Lottery has one item that qualifies for reporting in this category: the employer pension obligations.

The pension obligations results from changes in the assumptions or other inputs in the actuarial calculation of the Lottery’s net pension liability.

In addition to liabilities, the statements of financial position includes a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Lottery has one item that qualifies for reporting in this category: the employer pension obligation.

The employer pension obligation results from the differences between the expected and actual experience and the net difference between projected and actual earnings on pension plan investments derived from the actuarial calculation of the Lottery’s net pension liability. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.

31

Pensions For purposes of measuring the net pension liability and pension expense, information about the fiduciary net position of the Public Employee Retirement System of Idaho Base Plan (Base Plan) and additions to/deductions from the Base Plan’s fiduciary net position have been determined on the same basis as they are reported by the Base Plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Revenue Recognition Lottery tickets are sold to the public by contract retailers. Revenue from the sale of draw tickets is recognized at the time of the draw. Revenue from the sale of scratch tickets is recognized when retailers “settle” scratch ticket packs.

“Settling” occurs either after the retailer sells the scratch tickets to players, or upon delivery of the pack. The timing is determined by retailer policy but settling at the time the pack goes on sale is encouraged.

Commissions Retailers receive a commission of 5% on ticket sales. Additional discretionary commissions of up to 1% may be awarded to retailers and as a result, commission expense will be closer to six percent of revenue. In addition, retailers selling a winning draw or scratch ticket with a prize amount of $1,000 or greater receive a selling bonus of 10% of the prize amount, up to a predetermined limit.

Prizes In accordance with the Act, at least 45% of Lottery revenues must be returned to players in the form of prizes.

Scratch™ Games Scratch - Prize expense for scratch games is recognized as ticket packs are settled by retailers based on a predetermined prize structure for each game.

InstaPlay Games – Idaho InstaPlay Games were launched in October of 2014. They are instant play-style games generated through the Lottery terminal. Every InstaPlay Game ticket is generated at the time of purchase with a set of numbers/symbols on it. Players simply match their play numbers/symbols to see if they won. There are no drawings to wait for. Winning tickets are validated through the Lottery terminal just like any other Idaho Lottery game. Average payout for InstaPlay games is between 70-72%.

Draw Games: Powerball – The Powerball game is sold in forty-five states along with the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Prize expense represents 50% of revenues recognized for the game. Prizes are paid out over a twenty-nine year annuity (thirty payments) or as a single cash payment.

Mega Millions – The Mega Millions game is sold in forty-five states along with the District of Columbia, and the U.S. Virgin Islands. Sales began in Idaho on January of 2011 and prize expense represents 50% of revenues recognized for the game. Prizes are paid out over a twenty-nine-year annuity (thirty payments) or as a single cash payment.

Lucky for Life - Lucky for Life launched in Idaho in January 2015 along with 15 other US jurisdictions, and offers an actual FOR LIFE prize as its jackpot prize. The game has since grown to 23 US lotteries and continues to be a popular option in Idaho. The prize expense is budgeted at 59.4% of game revenues, but are adjusted in the financial statements to reflect the actual prize expense.

Raffle – Idaho’s Million Dollar Raffle is a game developed by the Idaho Lottery and played only in Idaho.

The first version of the Million Dollar Raffle launched November 2007 and sales end when all available tickets are sold out or when an established draw date commences. There is only one draw annually. Prize expense represents 52% of revenues recognized for the game. The one jackpot prize is paid out as a single cash payment.

Idaho Pick 3 – Sales of Idaho Pick 3 began in June 2000. Prize expense is budgeted at 50% of game revenues, but are adjusted in the financial statements to reflect the actual prize expense for the reporting period. Prizes are paid out as single cash payments.

Idaho Pick 4 – Sales of Pick 4 is an Idaho only game launched in January 2021. Prize expense is budgeted at 50-51% of game revenues but are adjusted in the financial statements to reflect the actual prize expense for the reporting period. Prizes are paid out as single cash payments Weekly Grand – Weekly Grand is an Idaho only game launched in August 2011. Weekly Grand has proven to be a popular replacement to Double Play Daily™. Players can win $1,000 a week for a year, with the Idaho Lottery paying all of the required withheld taxes. The game pays out on Match 5 ($1,000/ week for a year), Match 4 ($200), Match 3 ($25), and Match 2 (free ticket) prize levels, but also offers a second chance draw each month for $100 per week for a year. Prize expense is budgeted at 58.5% of game revenues, but are adjusted in the financial statements to reflect the actual prize expense for the reporting period.

Lotto America – Lotto America is a multi-state game available to play in 13 jurisdictions. Lotto America was launched in November 2017 to replace Hot Lotto and takes its name from the original Lotto America which was offered from 1988 to 1992. Prize expense represents 50% of revenues recognized for the game.

Idaho Cash – Sales of Idaho Cash is an Idaho only game launched in February 2017. Prize expense is budgeted at 54% of game revenues, but are adjusted in the financial statements to reflect the actual prize expense for the reporting period. Prizes are paid out as single cash payments.

5 Star Draw – Sales of 5 Star Draw is an Idaho only game launched in October 2019. Prize expense is budgeted at 68% of game revenues, but are adjusted in the financial statements to reflect the actual prize expense for the reporting period. Prizes are paid out as single cash payments.

2by2 – Sales of 2by2 launched in Idaho in April 2021 joining four other US jurisdictions, Kansas, North Dakota, Nebraska and Wyoming. The prize expense is budgeted at 51% of game revenues but are adjusted in the financial statements to reflect the actual prize expense. Due to the game not meeting sales expectations, it was ended on August 26, 2022.

PullTab Games

Notes to the Financial Statements Unclaimed Prizes Prizes may be claimed for a period of 180 days after the drawing for draw games or 180 days from the declaration of the end of game for scratch games. Unclaimed prizes are offset against that fiscal year’s prize expense.

Budget The appropriation for administrative costs is limited to 15% of revenue. Modification of the administrative appropriation must be approved by the State Division of Financial Management. In addition, the Lottery prepares and monitors an operating budget. The budget does not meet the definition of a legally adopted budget for financial reporting purposes. Accordingly, no budget is presented within the financial statements.

Estimates Management uses estimates and assumptions in preparing financial statements and considers all available information related to estimates up to the date of the report. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Significant estimates include those assumed in determining the prizes payable and the net pension liability and the related deferred inflows and outflows of resources. It is at least reasonably possible that the significant estimates used will change within the next year.

Implementation of GASB Statement No.96 As of July 1, 2022, the Lottery adopted GASB Statement No. 96, Subscription Based Information Technology Arrangements. The objective of this Statement is to improve the identification of subscription purchasing activities for accounting and financial reporting purposes and how those activities should be reported. Lottery evaluated the subscriptions currently active at the Lottery and has determined there were no material subscriptions that met the requirements for reporting under this Standard.

NOTE 2 – CASH AND EQUIVALENTS

$

240,506 120,000

87,388,566

72,183,099

$87,749,072

$74,925,426

The cash in banks is invested in highly rated financial institutions and may, at times, exceed FDIC insurance limits.

As of June 30, 2023 and 2022, $0 and $2,372,327, of the Lottery’s deposits at financial institutions were uninsured or uncollateralized, respectively.

Fair Value The Lottery categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on valuation inputs used to measure fair value of the asset. Level 1 inputs are quoted prices in the active markets for identical assets. Level 2 inputs are significant other observable inputs. The Lottery did not hold any investments at fair value at June 30, 2023. The State’s Investment Pool is required to report its investments at fair value because the weighted average maturity of the investments is greater than 90 days and thus, the Lottery is required to report its deposits at fair value. However, the Lottery has reported these deposits at cost plus accrued interest which approximates fair value.

NOTE 3 – CAPITAL ASSETS

Retirements

$ 22,542 -

Vehicles

264,881

49,575

-

314,456

Leasehold improvements

263,646

-

-

263,646

-

$ 444,566 687,190

1,637,741

72,117

-

1,709,858

Less accumulated depreciation Computer equipment

(334,845)

(34,258)

-

(369,103)

Office furniture and equipment

(619,954)

(25,735)

-

(645,689)

Vehicles

(191,627)

(36,992)

-

(228,619)

Leasehold improvements

(248,577)

(6,698)

-

(255,275)

(1,395,003)

(103,683)

-

(1,498,686)

$ 242,738

$ (31,566)

-

$ 211,172

Total accumulated depreciation

-

$ 422,024 687,190

Vehicles

344,598

-

(79,717)

264,881

Leasehold improvements

263,646

-

-

263,646

1,663,402

54,056

(79,717)

1,637,741

Total depreciable capital assets Less accumulated depreciation Computer equipment

(300,801)

(34,044)

-

(334,845)

Office furniture and equipment

(590,047)

(29,907)

-

(619,954)

Vehicles

(223,794)

(34,951)

67,118

(191,627)

Leasehold improvements

(241,879)

(6,698)

-

(248,577)

Total accumulated depreciation Property and equipment, net

(1,356,521)

(105,600)

67,118

(1,395,003)

$ 306,881

$ (51,544)

$ (12,599)

$ 242,738

Depreciation expense for the years ended June 30, 2023 and 2022, was $103,683 and $105,600, respectively.

$

Deferred draw sales Accounts payable and accrued expenses

2023

2022

491,183

$ 725,050

259,108

205,795

234,156

209,943

758,759

613,601

$ 1,743,206

$ 1,754,389

NOTE 5 – LEASES The Lottery has entered into various lease agreements for vehicles for their Lottery Sales Representatives. The leasing agreements have varying interest rates between 5.00% - 7.22%. Payments on the vehicle lease agreements range from $2,190/year - $10,794/year and mature during fiscal year 2023 through fiscal year 2026. Total right-touse lease assets were $108,932 as of June 30, 2023 and 2022.

The Lottery entered into a lease agreement for copiers in June 2020. The terms of the lease agreement call for annual payments of $35,932, for both principal and interest, with an annual interest rate of 6.24%. The terms of the lease agreement end in August of 2025. Total right-to-use assets were $120,300 as of June 30, 2023 and 2022.

In November 2016, the Lottery entered into a lease agreement for the use of office space in Boise, Idaho. A right-touse asset in the amount of $1,720,334 and $2,153,634 was recognized as of June 30, 2023 and 2022, respectively, with an annual interest rate of 6.13%. Annual payments for both principal and interest are approximately $406,802.

The schedule below summarizes the changes in right to use assets and the related accumulated amortization for the years ended June 30, 2023 and 2022:

June 30, 2023

$ 422,024 687,190

Property and equipment, net

$ 15,172 38,884

A summary of the activity for leasing arrangements is as follows:

Capital asset activity for the years ended June 30, 2023 and 2022, was as follows:

Total depreciable capital assets

$ 406,852 648,306

Trade accounts payable Personnel costs payable Accrued compensated absences

The Lottery is required to keep excess cash on deposit in the State of Idaho’s General Fund. The State Treasurer’s Office acts as the State’s bank, receiving and disbursing all monies. In accordance with Idaho Code, Section 67-1210 and 67-1210A, all idle cash deposited with the State Treasurer is invested in a variety of securities. The Lottery is an involuntary member of this pool, and the Lottery receives no interest or investment income on its cash and equivalents. Further disclosure of the State’s Investment Pool is located in the State of Idaho’s Comprehensive Annual Financial Report.

Additions

June 30, 2022

$ 2,622,327 120,000

Total cash and equivalents

July 1, 2022

Retirements

Accounts payable and accrued expenses consisted of the following at June 30, 2023 and 2022:

2022

Investment Pool, at cost, which apporoximates market

Depreciable capital assets Computer equipment Office furniture and equipment

Additions

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Cash and cash equivalents consisted of the following at June 30, 2023 and 2022.

2023 Cash in banks Cash on deposit with State Controller Investments in the State of Idaho’s General Fund

July 1, 2021 Depreciable capital assets Computer equipment Office furniture and equipment

July 1, 2022 Right-to-use lease asset Vehicles Copiers Office space

Accumulated amortization Vehicles Copiers Office space Total right-to-use asset, net

$

108,932 120,300

Additions

Retirements

June 30, 2023

-

-

$ 108,932 120,300

2,153,634

-

(433,300)

1,720,334

$ 2,382,866

-

$ (433,300)

$ 1,949,566

July 1, 2022

Additions

Retirements

June 30, 2023

$(27,392) (32,100)

$ (29,420) (32,100)

-

$

(56,812) (64,200)

(334,833)

(258,727)

167,838

(425,722)

$ (394,325)

$ (320,247)

$ 167,838

$ (546,734) $ 1,402,832

PullTabs – PullTab tickets are traditional paper, break-open style tickets sold in age-controlled, social environments. Prize expense for PullTab games range from 69-71%.

TouchTabs – TouchTab tickets are dispensed via a touchscreen monitor for plays to open windows electronically to reveal winning and non-winning combinations. Prize expense for TouchTab games range from 77-82%.

32

Notes to the Financial Statements July 1, 2022 Lease liability Vehicles Copiers

$

Additions

Retirements

57,281 98,071

-

$ (30,318) (30,680)

June 30, 2023 $

26,963 67,391

1,870,997

-

(651,161)

1,219,836

$2,026,349

-

$ (712,159)

$ 1,314,190

July 1, 2021

Additions

Retirements

June 30, 2022

Office space

Accumulated amortization Vehicles Copiers

-

$ (27,392) (32,100)

-

$ (27,392) (32,100)

Office space

-

(334,833)

-

(334,833)

-

$(394,325)

-

Total right-to-use asset, net

$

Office space

Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience Changes in assumptions or other inputs Change in proportionate share

$ 264,665 392,388 -

$

62,048 126,899

Additions $

2,153,634 $ 2,342,581

$

Retirements

June 30, 2022 $

57,281 98,071

10,743 -

Net difference between projected and actual investment earnings on pension plan investments

553,786

-

Lottery contributions subsequent to measurement date

343,948

-

$1,554,787

Deferred Outflows of Resources

June 30, 2022 Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings

27,951 -

$ (32,718) (28,828)

-

(282,637)

1,870,997

on pension plan investments

27,951

$ (344,183)

$2,026,349

Lottery contributions subsequent to measurement date

$

71,402 556,281 -

1% Decrease (7.35%)

$ 1,684,641

$ (48,462)

$(1,469,122)

4.50% 4.90%

PERSI issues a publicly available financial report that includes financial statements and the required supplementary information for PERSI. That report may be obtained on the PERSI website at www.persi.idaho.gov.

$

Domestic Fixed

20%

-0.25%

TIPS

10%

-0.30%

Real Estate

8%

3.75%

Private Equity

8%

6.00%

28,169 1,522,153

287,719

-

$ 915,402

$1,550,322

279,638

17,142

296,780

135,910

8,677

144,587

The average of the expected remaining service lives of all employees that are provided with pensions through the System (active and inactive employees) determined for measurement periods ended June 30, 2022 and 2021 is 4.6 years.

$ 1,314,190

$ 80,662

$ 1,394,852

Pension Liability (Asset), Pension Expense (Expense Offset), and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions - The Lottery reported a liability for its proportionate share of the net pension liability (asset) as of June 30, 2023. The Lottery reported an asset for its proportionate share of the net pension liability (asset) as of June 30, 2022. The net pension liability (asset) was measured as of June 30, 2022 and 2021, and the total pension liability (asset) used to calculate the net pension liability (asset) was determined by an actuarial valuation as of that date. The Lottery’s proportion of the net pension liability (asset) was based on the Lottery’s share of contributions in the Base Plan pension plan relative to the total contributions of all participating PERSI Base Plan employers. At June 30, 2022, the Lottery’s proportion was 0.06110666 percent. At June 30, 2021, the Lottery’s proportion was 0.06136141 percent, a decrease of the 2020 proportion which was 0.06381480 percent. For the year ended June 30, 2023 and 2022, the Lottery recognized pension expense (expense offset) of $2,141,569 and ($254,154), respectively.

Current Discount Rate (6.35)%

10%

2029

Member and Employer Contributions - Member and employer contributions paid to the Base Plan are set by statute and are established as a percent of covered compensation. Contribution rates are determined by the PERSI Board within limitations, as defined by state law. The Board may make periodic changes to employer and employee contribution rates (expressed as percentages of annual covered payroll) that are adequate to accumulate sufficient assets to pay benefits when due. The contribution rates for employees are set by statute at 60% of the employer rate for general employees. As of June 30, 2022 and 2021, it was 7.16% for general employees. The employer contribution rate as a percent of covered payroll is set by the Retirement Board and was 11.94%. The Lottery’s contributions were $343,948 and $287,719, for the years ended June 30, 2023 and 2022, respectively.

1% Decrease (5.35%)

June 30, 2022

15%

2028

The benefit payments for the Base Plan are calculated using a benefit formula adopted by the Idaho Legislature.

The Base Plan is required to provide a 1% minimum cost of living increase per year provided the Consumer Price Index increases 1% or more. The PERSI Board has the authority to provide higher cost of living increases to a maximum of the Consumer Price Index movement or 6%, whichever is less; however, any amount above the 1% minimum is subject to review by the Idaho Legislature.

$ 900,033

Emerging Markets Equity

$287,719 was reported as deferred outflows of resources related to pensions resulting from employer contributions subsequent to the measurement date was be recognized as a reduction of the net pension liability (asset) in the year ending June 30, 2023.

Pension Benefits - The Base Plan provides retirement, disability, and death and survivor benefits of eligible members or beneficiaries. Benefits are based on members’ years of service, age, and highest average salary.

Members become fully vested in their retirement benefits with five years of credited service (5 months for elected or appointed officials). Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. The annual service retirement allowance for each month of credited service is 2.0%.

$2,406,843

International Equity

$ 330,607 325,316 297,562

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense (expense offset) as follows:

457,495

$4,247,843

Pension plan fiduciary net position - Detailed information about the pension plan’s fiduciary net position is available in the separately issued PERSI financial report.

$ 20,230 17,832 16,781

2027

Employer’s Proportionate share of the net pension liability

4.50% 4.70%

$ 310,377 307,484 280,781

$ 286,987 311,522 144,092

1% Decrease (7.35%)

Deferred Inflows of Resources

2024 2025 2026

2024 2025 2026

Current Discount Rate (6.35)%

0% 18% 11%

Total

Plan Description - The Lottery contributes to the Base Plan which is a cost-sharing multiple-employer defined benefit pension plan administered by Public Employee Retirement System of Idaho (PERSI or System) that covers substantially all employees of the State of Idaho, its agencies and various participating political subdivisions. The cost to administer the plan is financed through the contributions and investment earnings of the plan. PERSI issues a publicly available financial report that includes financial statements and the required supplementary information for PERSI. That report may be obtained on the PERSI website at www.persi.idaho.gov.

The capital market assumptions are as of January 1, 2022:

1% Decrease (5.35%)

Cash Large Cap Small/Mid Cap

10,743

Interest

Years Ended June 30

The best-estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation.

June 30, 2023

Target Allocation

$

Principal

NOTE 6 – PENSION PLAN

Even though history provides a valuable perspective for setting the investment return assumption, the System relies primarily on an approach which builds upon the latest capital market assumptions. Specifically, the System uses consultants, investment managers and trustees to develop capital market assumptions in analyzing the System’s asset allocation. The assumptions and the System’s formal policy for asset allocation are shown below.

The formal asset allocation policy is somewhat more conservative than the current allocation of System’s assets.

Long-Term Expected Real Rate of Return

$343,948 was reported as deferred outflows of resources related to pensions resulting from employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability (asset) in the year ending June 30, 2024.

$ 1,988,541 July 1, 2021

Lease liability Vehicles Copiers

(394,325)

June 30, 2023

$1,200,096

Asset Class

Employer’s Proportionate share of the net pension liability (asset)

At June 30, 2023 and 2022, the Lottery reported no payables to the defined benefit pension plan for legally required employer contributions and for legally required employee contributions which had been withheld from employee wages but not yet remitted to PERSI.

NOTE 7 – OTHER POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS

The Lottery contributes to the Retiree Healthcare, Long-Term Disability, Long-Term Disability Income (Health and Disability) Sick Leave Insurance Reserve Fund (Sick Leave) other postemployment benefits (OPEB) plans.

The capital market assumptions are as of January 1, 2021: Capital Market Assumptions from Callan 2021 Long-Term Expected Nominal Rate of Return (Arithmetic)

Long-Term Expected Real Rate of Return (Arithmetic)

1.80% 8.00% 8.25%

(0.20%) 6.00% 6.25%

Assumed Inflation - Mean

2.00%

2.00%

Assumed Inflation - Standard Deviation

1.50%

1.50%

Portfolio Arithmetic Mean Return

6.18%

4.18%

Portfolio Standard Deviation

12.29%

12.29%

Portfolio Long-Term (Geometric) Expected Rate of Return

5.55%

3.46%

Assumed Investment Expenses

0.40%

0.40%

5.15%

3.06%

Target Allocation

Asset Class Core Fixed Income Broad US Equities Developed Foreign Equities

30.00% 55.00% 15.00%

The Retiree Healthcare and Long-Term Disability plans are single-employer defined benefit plans administered by the Idaho Department of Administration in accordance with Idaho Code Section 67-5761. The plans are funded on a pay-as-you-go basis; the State does not set aside any assets in a trust as defined by GASB Statement 75, paragraph 4. The State does not issue a publicly available financial report.

The Sick Leave plan is a cost sharing, multiple-employer defined benefit plan administered by the PERSI in accordance with Idaho Code Sections 67-5333, 33-1216, 59-1365, and 33-1228, and covers substantially all employees of the State of Idaho, its agencies and various participating political subdivisions. Plan assets are set aside in a trust, as defined by GASB Statement 75, paragraph 4, and comingled with assets from other plans for investment purposes. The PERSI issues a publicly available financial report that includes financial statements and the required supplementary information for the PERSI. At June 30, 2023 and 2022, the Lottery has recorded an OPEB asset related to Sick Leave of $268,245 and $345,017, respectively. At June 30, 2023 and 2022, the Lottery has recorded an OPEB liability related to Health and Disability of $36,594 and $83,541, respectively. There were no deferred outflows or inflows of resources related to the OPEB asset and liability as of June 30, 2023 and 2022.

Details of the plans can be found in the Comprehensive Annual Report of the State of Idaho, which may be obtained as follows:

Portfolio Long-Term (Geometric) Expected Rate of Return

Actuarial Assumptions - Valuations are based on actuarial assumptions, the benefit formulas, and employee groups. Level percentages of payroll normal costs are determined using the Entry Age Normal Cost Method. Under the Entry Age Normal Cost Method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated as a level percentage of each year’s earnings of the individual between entry age and assumed exit age. The Base Plan amortizes any unfunded actuarial accrued liability based on a level percentage of payroll. The maximum amortization period for the Base Plan permitted under Section 59-1322, Idaho Code, is 25 years.

The total pension liability (asset) in the June 30, 2022 and 2021, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation

2.30 percent

Salary increases including inflation Investment rate of return Cost of Living (COLA) adjustments

3.05 percent 6.35 percent, net of pension plan investment expense 1.00 percent

Mortality rates were based on the RP – 2000 combined table for healthy males or females as appropriate with the following offsets: • Set back one year for all general employees and all beneficiaries Economic assumptions were studied in an experience study performed for the period 2015 through 2020.

Demographic assumptions, including mortality were studied for the period 2011 through 2017. The Total Pension Liability (Asset) as of June 30, 2022 and 2021, is based on the results of an actuarial valuation date of July 1, 2022 and 2021.

The long-term expected rate of return on pension plan investments was determined using the building block approach and a forward-looking model in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Net of Investment Expenses Investment Policy Assumptions from PERSI November 2019 Portfolio Long-Term Expected Rate of Return, Net of Investment Expenses Portfolio Standard Deviation

4.14% 14.16%

Economic/Demographic Assumptions from Milliman 2021

NOTE 8 – CONTRACT WITH INTRALOT

Valuation Assumptions Chosen by PERSI Board Portfolio Long-Term Expected Rate of Return, Net of Investment Expenses Assumed Inflation Long-Term Expected Geometric Rate of Return, Net of Investment Expenses

Office of the Idaho State Controller 700 W State Street, 4th Floor Boise, ID 83702 P.O. Box 83720 Boise, ID 83720-0011 www.sco.idaho.gov

4.05% 2.30% 6.35%

Discount Rate - The discount rate used to measure the total pension liability was 6.35% for the years ended June 30, 2023 and 2022. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate. Based on these assumptions, the pension plans’ net position was projected to be available to make all projected future benefit payments of current plan members.

Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The long-term expected rate of return was determined net of pension plan investment expense but without reduction for pension plan administrative expense.

Sensitivity of the Employer’s proportionate share of the net pension liability to changes in the discount rate – The following presents the Employer’s proportionate share of the net pension liability calculated using the discount rate 6.35 percent for 2023 and 2022 as well as what the Employer’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate:

Like most U.S. lotteries, the Idaho Lottery contracts with a gaming contractor to provide the Lottery with critical hardware and software, network communications, and technical support personnel necessary to efficiently operate the lottery gaming systems. The Lottery entered into a contract with INTRALOT to provide these services with a contract period of October 1, 2017 to October 1, 2027; with an option for the Lottery to extend the contract.

This contract includes an all-in price based upon a percentage of sales, which is 2.26% of Total Net Sales for the initial 10 year portion of the contract period. The contract does include two five year extension options, not to exceed a total of 20 years. The contract includes terminals, ticket checking devices, scratch and draw game automated vending machines and electronic jackpot signs.

NOTE 9 – CONTINGENCIES AND COMMITMENTS Prize Annuities The Lottery purchases annuity contracts in the name of individual jackpot prize winners. Although the annuity contracts are in the name of the individual winners, the Lottery retains title to the annuity contracts. The Lottery remains liable for the payment of the guaranteed minimum prizes in the event the insurance companies issuing the annuity contracts default. The guaranteed minimum prize payments for which annuity contracts have been purchased are due in varying amounts through March 2034. The specified payments were $7,112,000 and $7,804,000, for the years ended June 30, 2023 and 2022, respectively.

At June 30, 2023 and 2022, the Lottery reported deferred outflows of resources and deferred inflows of resources

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related to pensions from the following sources:

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Required Supplementary Information PERSI- Base Plan Last 10 - Fiscal Years*

Measurement Period of July 1,

Employer’s portion of the net pension liability (asset)

Employer’s proportionate share of the net pension liability (asset)

2022 2021 2020 2019 2018 2017 2016 2015 2014

0.06110666% 0.0613614% 0.0638148% 0.0684102% 0.0688296% 0.0691772% 0.0670535% 0.0672688% 0.0716557%

$2,406,843 $ ( 48,462) $ 1,481,864 $ 780,883 $ 1,015,250 $ 1,087,348 $ 1,359,277 $ 885,821 $ 527,498

Employer’s coveredemployee payroll $ 2,224,989 $ 2,202,110 $ 2,199,057 $ 2,252,306 $ 2,217,591 $ 2,064,242 $ 1,900,483 $ 1,819,119 $ 1,812,989

PERSI- Base Plan Last 10 - Fiscal Years*

Employer’s proportionate share of the net pension liability (asset) as a percentage of it’s coveredemployee payroll

Plan fiduciary net position as a percentage of the total pension liability (asset)

108.17% -2.20% 67.39% 34.67% 45.72% 52.68% 71.52% 48.70% 29.10%

83.09% 100.36% 88.22% 93.79% 91.69% 90.68% 87.26% 91.38% 94.95%

Years Ended June 30, 2023 2022 2021 2020 2019 2018 2017 2016 2015

Statutorily required contribution

Contributions in relation to the statutorily required contribution

Contribution (deficiency) excess

$343,948 $ 287,719 $ 273,417 $ 271,321 $ 254,736 $ 244,738 $ 221,998 $ 219,749 $ 213,289

$ 265,664 $ 265,664 $ 262,932 $ 262,567 $ 255,412 $ 241,269 $ 234,085 $ 215,515 $ 206,288

$ 78,284 $ 22,055 $ 10,485 $ 8,754 $ (676) $ 3,469 $(12,087) $ 4,234 $ 7,001

Employer’s coveredemployee payroll

Contributions as a percentage of the coveredemployee payroll

$ 2,224,990 $ 2,224,989 $ 2,202,110 $ 2,199,057 $ 2,252,306 $ 2,127,591 $ 2,064,242 $ 1,900,483 $ 1,819,119

Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Commissioners Idaho Lottery Boise, Idaho

11.94% 11.94% 12.42% 11.87% 11.31% 11.50% 10.75% 11.56% 11.72%

We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the Idaho Lottery (the Lottery), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Lottery’s basic financial statements and have issued our report thereon dated November 8, 2023.

*GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10-year trend is compiled, the Lottery will present information for those use for which information is available.

Reporting on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Lottery’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Lottery’s internal control.

Accordingly, we do not express an opinion on the effectiveness of the Lottery’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified.

Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Lottery’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance.

Accordingly, this communication is not suitable for any other purpose.

Boise, Idaho November 8, 2023

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Benefiting Idaho Public Schools and Buildings.

P.O. Box 6537, Boise, ID 83707-6537 | idaholottery.com