The report identified irregularities in the tax revenue received from each of the four racetrack casinos that have begun operations in the nearly four years since voters approved casino gambling in November 2020.

“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 report said.

The state’s four racetrack casinos generated nearly $20 million in taxes during the 2024 state fiscal year, and the audit found that the commission “failed to follow its own administrative rules and regulations, as well as neglected to review adequately the documentation received from authorized gaming operators to ensure that the state was receiving the proper amount of gaming tax revenue.”

The audit also found issues with the travel expenses of several employees.

While the audit mentioned the fiscal year 2024 casino tax revenue, the examination was actually done on fiscal year 2023 revenue.

In that year, the four casinos — WarHorse in Lincoln and Omaha, the Grand Island Casino Resort and Harrah’s Columbus Racing and Casino — paid just over $17.9 million in tax revenue, about $100,000 more than they should have, according to the auditor’s office.

The audit found that the two WarHorse casinos underpaid by nearly $300,000, while both Grand Island and Columbus had a higher tax revenue than expected with about $110,000 and $75,000 respectively.

The report also noted that the Grand Island Resort Casino was audited by a CPA firm that was not licensed in the State of Nebraska. Additionally, the Columbus casino’s revenue was rounded to the millions, which could contribute to the difference noted in the audit.

According to the audit report, there could be reasonable explanations for these variances, but the commission hasn’t made an effort to review the taxes received.

Casey Ricketts, the executive director of the commission, said it appreciated the auditor’s office bringing all the issues to light.

“We had actually requested the auditors to come audit our agency, being a brand-new agency, so we had requested this,” Ricketts said. “Obviously we see that there are areas that we need to improve upon. We are committed to making the necessary changes, and we’d actually already begun implementing some of those changes.”

Ricketts also said the commission will be following up with the auditor’s office in six months with all of its corrections.

The audit also recommended that the commission work with the auditor’s office to find a legislative solution or transfer its responsibility to the state auditor.

The commission isn’t looking at transferring any responsibility, but wants to have a good working relationship with the auditor’s office, Ricketts said.

The auditor’s office highlighted a number of additional concerns, including that the commission did not seem to understand the information reported when it asked about the amounts on the weekly tax reports and the criteria used to generate the monthly gaming tax reports.

The audit also expressed concern that the commission has not provided a review of its license fee structure in an annual report and that commission staff said they could not remember when an annual report was completed. The commission also could not provide documentation that quarterly reports were completed, according to the audit.

The commission said in a response included in the report that it has expanded its team to review the documentation process.

“Until June 2024, we relied on a single individual for all financial matters,” according to the response. “We are now collaborating with other jurisdictions to support our learning (of) gaming financials.”

The commission also said it is reviewing changes to the titles referenced by the report, which the report said the commission violated. The commission also said it would submit its annual report to the governor’s office during the week of Oct. 21. Ricketts said the report has now been submitted.

In addition to the tax revenue issues, the report also found discrepancies in the commission’s vehicle and travel expenses for several employees.

The commission’s former Director of Enforcement Steven Anderson commuted in a state-owned vehicle, keeping it overnight, and was tracked by GPS as going to Walmart, a coffee shop and pawn shops, according to the report.

Anderson gave the auditor’s office alternative reasons for the trips, like fueling the car or stopping for lunch.

Anderson no longer works for the commission, for reasons unrelated to the audit investigation, as of a month ago, Ricketts said.

After Ricketts became interim director in March, she revoked the ability of employees to take the state-owned vehicle overnight and rescinded a request for the four vehicles leased by the commission to have regular license plates instead of the normal state plates used for a state-owned vehicle, according to the report.

“I made the decision that we were no longer going to have take-home cars’” Ricketts said. “We now have pooled vehicles, so little changes like that, that were already previously addressed prior to the audit.”

In addition to Anderson, the report named former Executive Director Tom Sage for his conference travel expenses.

The audit listed eight conferences that Sage attended and listed three occasions where the former director stayed at a conference for extra days, incurring extra travel costs.

Other employees also had expenditures for high lodging costs and other issues, according to the report.

In March, the commission began implementing new policies and approval processes for conferences and trips and will not reimburse for non-work-related days or unapproved travel, according to the commission response in the audit.

The report also mentioned the segregation of duties over revenues and issuance of licenses, expenditure issues, deposit support and other issues.

Ricketts said that the travel and vehicle usage were issues her staff had already begun to address prior to the audit.

“The commission looks forward to taking the feedback from this audit and continue(ing) to make the changes, as well as the changes we’ve already made, and enhance those and move forward,” Ricketts said.