Nebraska state auditor faults ‘lackluster’ oversight of nearly $20 million in casino tax revenues

In a new audit report, he also questioned the Nebraska Racing and Gaming Commission’s ability to successfully carry out that oversight task.

The commission is the state agency charged with regulating Nebraska casinos and collecting taxes equal to 20% of gross gaming revenues from them. The audit, signed by Foley, covers the fiscal year ending June 30, a period comprising the first full year of casino gambling at Nebraska horse racetracks. 

During that year, the commission collected nearly $20 million of casino taxes, most of which goes into property tax credits. The taxes came from the four casinos licensed at that point, in Lincoln, Omaha, Grand Island and Columbus. 

But the audit report said there was no documentation that the commission had reviewed reports from the casinos to verify that the state received the correct amount of revenues, even though the commission’s own regulations required submittal of the weekly, quarterly and annual reports.

When state auditors did their own reviews, they found discrepancies between the amount of taxes collected and the amount that would have been expected based on independent private audits of the casinos. The state collected $279,064 less than expected for WarHorse Casino in Lincoln but took $76,184 more than expected from Harrah’s Columbus.

“There may be reasonable explanations for the variances shown,” the audit said, “nevertheless, prior to the (Auditor of Public Accounts’) inquiries, the Commission made no attempt whatsoever to perform its own reconciliation of the gaming operator taxes received.”

Nor were commissioners able to answer questions about the weekly gaming tax reports that casinos submitted, the audit said. The commission uses those reports to determine the amount of taxes owed for the month. 

“Without such a basic level of understanding, the Commission was woefully unprepared to ensure, with any level of confidence, that the authorized gaming operators were paying the appropriate amount of gaming taxes,” the audit said.

Foley called it “crucial” for the commission to shore up its oversight of the casinos and ensure the state gets the proper amount of gaming tax revenues. He recommended several steps, including the possibility of transferring the responsibility for reviewing the various reports to the auditor’s office.

In a written response, Casey Ricketts, the commission’s executive director, said the agency had only one person for all financial matters until June but has since beefed up the team responsible for review and documentation. She said the agency is working with other jurisdictions to improve understanding of gaming financial information. 

Until recently, the commission only regulated the state’s horseracing industry. When voters approved racetrack casinos in 2020, the commission was given responsibility for regulating the new industry, forcing a major expansion of staff and duties.

Among other problems, the new audit faulted the commission for lax oversight of state vehicle usage by two employees. In particular, the audit found that the former director of enforcement was using his state vehicle to commute from his home in Ceresco to the office in Lincoln and another member of the enforcement staff kept a state vehicle at his home in David City. 

The audit said Ricketts put a stop to both practices, which are in violation of state policy, when she was named interim executive director in March. She got the post on a permanent basis earlier this month. 

In addition, the audit said GPS logs showed that the enforcement director used his state vehicle to make what appeared to be personal stops, including at a Walmart store in northeast Lincoln, a Grumpy Mugs coffee shop in Ceresco and the GI Loan Pawn Shop in Grand Island. The audit also questioned the hours that the enforcement director worked, based on the GPS logs and the number of hours of leave he had taken. 

In its response, the commission noted that the enforcement director no longer worked at the agency. It also said state vehicles now have to be checked in and out, and oversight of the logs has been increased. 

“As a regulatory agency, we must hold ourselves to a higher standard,” the commission said. “Unfortunately, this was not always the case.”