This is a status update of ongoing and special projects in Administration, Finance and Operations.

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1 MARYLAND LOTTERY Montgomery Park Business Center 1800 Washington Boulevard, Suite 330 Baltimore, Maryland Phone: TTY users call Maryland Relay Martin O Malley, Governor Stephen Martino, Director TO: FROM: DIVISION: Maryland Lottery Commission Stephen Martino, Director Gina M. Smith, Deputy Director/CFO Administration, Finance and Operations DATE: August 16, 2012 SUBJECT: Report for the August Commission Meeting I. CUSTOMER RESOURCE CENTER This is a status update of ongoing and special projects in Administration, Finance and Operations. The Customer Resource Center is responsible for processing winner claims. The Lottery has two claim centers, one in Baltimore at the headquarters location and one in Lanham. In addition to processing winner claims, the claim centers are responsible for processing the W-2G paperwork for claims that were cashed by the agent plus locations. The Lottery has approximately 193 agent plus locations that are authorized to cash up to $5,000 in winnings. These locations, in turn submit completed claim forms to the Lottery so that the related W-2G can be processed. Data concerning the number of winners claims processed by the Lottery and the number of agent plus claim forms processed by the Lottery is noted below: Location JULY JULY Amount YTD YTD Amount Baltimore 698 $1,021, $ 1,021, Lanham 149 $644, $ 644, Agent Plus 3,647 $2,031, ,647 $ 2,031,

2 SUBSCRIPTIONS PROCESSED: The Lottery s Customer Resource Center is also responsible for processing subscriptions for Multi-Match and Mega Millions. Multi-Match subscriptions can be purchased for 26, 52 or 104 weeks for one to 3 games. Mega Millions subscriptions can be purchased for 26, 52 or 104 weeks for $1 or $2 per game. Data concerning subscriptions processed is noted below: Multi-Match As of 07/1/12 9,860 As of 7/31/ ,613 JULY 2012 YTD New Applications Internet Renewal 1,289 1,289 Mega Millions As of 07/1/12 24,937 As of 7/31/ ,054 JULY 2012 YTD New Applications Internet Renewal 1,520 1,520 JULY 2012 YTD Child Support $33, $33, Restitution $128, $128, Agent Resource 07/01/2012 7/31/2012 # OF AGENTS 4,260 4,264 # OF AGENT TERMINALS 5,040 5,043 # AGENT PLUS LOCATIONS

3 II. BUDGET FISCAL YEAR 2014 The budget for 2014 is due to the Department of Budget and Management in early September. FISCAL YEAR 2013 The Department of Budget and Management completed the budget allowance as follows: Lottery Program: $ 54,341,759 VLT Program: Special Funds $184,745,750 General Funds $ 72,856,632 Total Budget $311,944,141 FISCAL YEAR 2012 Lottery Program: $ 53,909,306 VLT Program: Special Fund $139,400,338 General Funds $ 29,296,288 Total Budget $ 222,605,932 The FY2012 close out is well underway. GAAP Statements are due to the State by October 1, FISCAL YEAR 2011 All encumbrances were liquidated with the exception of one totaling $50,000. encumbrance will be carried forward into Fiscal Year This III. ACCOUNTING/FINANCE The May financial statement is included in your package. 3

4 IV. PROCUREMENT During July, a total of 62 new small procurements (up to $25k) were initiated. Procurement works closely with all Divisions to support the Lottery s daily operations to include, but not limited to, procurement of printing of newsletters and POS materials and various information sheets/brochures to support all games; promotional items, sponsorship agreements for events; and supplies/equipment for the Lottery s internal use, as well as the processing of all payments under $5, using the State P-Card and monthly reconciliation of bank statement. It s a Wonderful Life/Paramount Licensing LLC Licensing Contract (# ) with Pollard Banknote Limited Partnership.: Sole Source no-cost contract to use the title, trademarks, characters, names and still images from the motion picture It s A Wonderful Life and the names and likenesses of the Late Donna Reed and The Late James Stewart from the motion picture for a holiday theme Instant Ticket Game. In accordance with the renewal option for the Instant Ticket Games and Related Services Contract (# ) with Pollard, which was approved by the BPW 5/5/2010, the Contractor shall provide one licensed game during each Contract year at no additional cost to the Lottery. The Procurement Director attended the bi-monthly meeting of the Senior Procurement Advisory Group conducted by the Department of Budget & Management on July 19. Topics included updates on procurement related legislation, a review of various BPW and DBM policies, and presentations by MCE and Maryland Works. The BPW also presented an overview of the new Veteran-Owned Small Business Enterprise ( VSBE ) Program which requires each agency to structure its procurement procedures to try to achieve an overall minimum of 0.5% of the unit s total dollar value of procurement contracts to be made to veteran-owned small business enterprises. This program is in addition to the existing MBE program and agencies may establish both a VSBE goal and an MBE goal for the same contract. The following end of FY reports were submitted by the Lottery: 1) The FY 12 MBE Waiver Report was submitted to the BPW and the Governor s Office of Minority Affairs in accordance with BPW Advisory which requires agencies to report all requested and granted MBE participation waivers. The Lottery had no reportable waivers for Contracts for FY 12, but had 3 waivers for Notices to Proceed for the Anne Arundel y VLT Facility (IGT, ShuffleMaster & Speilo) under the Video Lottery Terminals & Related Services Master Contract (# ) 2) The FY 12 Interagency Agreements Report was submitted to DBM in accordance with BPW Advisory and DBM directive which requires agencies to report any Agreements involving the expenditure of more than $100k between State agencies and/or public institutions of higher education. The Lottery had no reportable Interagency Agreements for FY 12. 4

5 Regulations: Status of Regulations approved by the Commission at its meeting on: 1) May 17, 2012: Declaratory Rulings; Amendment submitted to AELR as permanent regulations on May 23; published in Register on June 29 and anticipate submission for Final Action on August 13 upon expiration of 45 day approval period. 2) July 26, 2012: Hearings, and Transportation; Amendments submitted to AELR as permanent regulations on July 30. Upon expiration of 15 day waiting period and approval by AELR, anticipate submission to DSD on approx. August 15 and publication in Register by early September. VLT Program At the Video Lottery Facility Location Commission meeting held on July 31, 2012 the following items were approved: 1) RFP for "Video Lottery Operation License in Baltimore City # ": The VLT License Application submitted by CBAC Gaming, LLC was approved by the Location Commission, subject to contingencies: 1) Finalization of the Land Disposition Agreement and Ground Lease Agreement with the City of Baltimore to be approved by the Baltimore City Board of Estimates within sixty days; and, 2) submission of evidence of acceptable construction financing. The License award is for 3,750 VLTs and CBAC anticipates opening the Facility in the second quarter of ) RFP for "Video Lottery Operation License in Allegany y # ": The VLT License application submitted by Evitts Resort, LLC, was approved by the Location Commission at its April 26 meeting, subject to four contingencies: 1) Completion of the buy-out transaction between original Evitts principals (Lakes Entertainment and Paragon); 2) BPW approval of the ground lease with DNR and the purchase agreement for the Rocky Gap Resort; 3) final settlement of the purchase of the Resort and related transactions within 45 days of BPW approval; and, 4) submission of evidence of acceptable construction financing by Evitts. Contingency #1 and #2 have been completed. Due to its inability to obtain sufficient construction financing, Evitts presented an alternate plan for the Facility. Instead of constructing a new 50,000 square foot facility to accommodate 850 VLTs as previously approved, Evitts now proposes to reduce the VLT count to 500 and to install the VLTs within the existing Lodge conference area. Under this plan Evitts would have sufficient out of pocket assets to proceed with the closing on the Lodge and Resort as scheduled on August 3, This amended Proposal submitted by Evitts was approved by the Location Commission, subject to contingencies: 1) Final settlement on the purchase of the 5

6 Lodge and Resort on August 3, 2012; 2) Review and final approval of the revised site and design plans by DNR; and, 3) Replacement of the conference space as soon as feasible and no later than 36 months of license issuance. Evitts anticipates opening the Facility by approximately May 1, 2013 with 500 VLTs. MBE/SBR Activities: 1) Events attended or scheduled by the Procurement and MBE/SBR staff in accordance with the Lottery's Annual MBE/SBR Strategic Plan as required by GOMA: a) GOMA MBE Liaison and Procurement Officers meeting held August 2, wherein the new Veterans Small Business Enterprise Program was reviewed and procedures for the year-end annual MBE Report were discussed. 2) A summary of the Lottery's MBE participation to date including both Lottery and VLT operations will be provided at the Commission meeting on August 23. (MBE reports are not yet available from the Contractors at the time of preparation of this report) V. HUMAN RESOURCES - Recruitment Report The following activity occurred regarding Personnel: Lead Computer Operator- Recruitment is underway. Interviews are being scheduled. Part-time Drawing official- Recruitment is underway. Interviews are being scheduled. Accountant Advanced- Recruitment is underway. Interviews are being scheduled. Budget Director Recruitment is underway. Open until filled. Contractual Receptionist-Customer Service Representative. Recruitment is underway. Closing date is August 17, Interviews will be scheduled in the near future. Support Services vacancy position posted internally to provide promotional opportunities to current employees. Account Advanced position will be posted in the near future. VI. WAREHOUSE The instant ticket warehouse is responsible for packing all of the instant tickets that are shipped to lottery retailers. Orders are placed through our Tel Sell operation which is run 6

7 by our on-line vendor. Once the order is placed, it is sent to the warehouse for fulfillment. Once fulfilled, the orders are shipped out through UPS for overnight delivery to the agent locations. In addition to fulfilling the orders, the warehouse is responsible for monitoring UPS to ensure proper billing and delivery. Instant ticket shipping activity is as follows: # of orders July 2012 # of packs July 2012 YTD orders 7/1/12 YTD packs 7/1/12 9,981 90,517 9,981 90,517 VII. FACILITIES Daily departmental support. VIII. LEGISLATIVE UPDATE A second Special Session convened on August 9 and details about the expanded gaming bill will be presented at the meeting. 7