Advertising cuts, increases in education funding noted in Missouri Lottery audit

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(The Center Square) – Republican Auditor Scott Fitzpatrick and the Missouri Lottery Commission are scrutinizing advertising expenditures in the same way merchant John Wanamaker did 100 years ago.

“I am convinced that about one-half of the money I spend for advertising is wasted,” Wanamaker is credited with saying, “but I have never been able to decide which half.”

Fitzpatrick’s annual audit of the Lottery Commission highlighted a decrease of 95%, or $16.7 million, in its advertising budget since 2018, and an increase of 16%, or $53 million, in transfers to state education from the agency in the same period. The budget appropriation for advertising was $17.5 million in 2018 and $800,000 in 2023. Transfers to education climbed from $334 million in 2018 to $386 million in 2023.

“The best way to measure the success of the Lottery program is by the amount transferred to support public education each year, and the fact is revenue to education has skyrocketed while advertising expenditures have plummeted,” Fitzpatrick said in a statement. “Allocating taxpayer resources responsibly and to the benefit of Missourians is a solemn task, and I hope the governor and the General Assembly find this report informative.”

The audit recommended the Lottery continue to work with the legislature to evaluate the impact of advertising and sponsorship spending on sales.

In his response letter to the audit, Missouri Lottery Executive Director Lester Elder stated Fitzpatrick’s recommendation on advertising was outside the scope of the audit.

“We understand the importance of the recommendation; however, we do not agree that this recommendation should be characterized as an audit finding,” Elder wrote. “Rather, we consider it an acknowledgement that we are already doing as the report recommends and will continue to do so.”

Fitzpatrick also added national advertising data and how much surrounding states spend on advertising.

“According to national lottery data, Missouri’s current advertising budget of 0.02% of sales is the smallest advertising budget of any of the 46 states that sponsor a lottery,” the audit stated, referring to La Fleur’s World Lottery Almanac as the source. “The remaining states range from a low of 0.08% of sales in Massachusetts to 5.26% of sales in Wyoming. The national average advertising budget is 1.07% and the eight states contiguous to Missouri average 1.31% of sales.”

Approximately two pages of Elder’s three-page response focus on advertising.

“The Lottery acknowledges that there are many factors in achieving that goal, and one of those factors is the ability to advertise Missouri Lottery’s brand and family of products,” Elder wrote. “Advertising and marketing is a best practice for any business, organization or even non-profit. This is especially true when considering the highly competitive retail environment with Lottery offered alongside thousands of other consumer goods. Most competing brands spend 10 to 13% of total sales on advertising.”

Fitzpatrick gave a rating of “good,” indicating the agency is well managed and the audit contains few findings. The audit also recommended improving processes to ensure conflicts of interest policies and procedures are followed. It also recommended processes to require approval for purchases prior to the transaction.

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