An audit found that the company that is the sole provider for D.C.’s legal sports betting app is behind on its commitment to hire local businesses.
In 2019, the D.C. Council approved a $215 million, no-bid contract for Intralot. Most District contracts more than $250,000 require that at least 35% of contract expenditures go to certified business enterprises, or CBEs.
CBEs are small, DC-based businesses given preferences in District procurement.
The Office of the District of Columbia Auditor found that during the first year of DC Lottery’s five-year contract with Intralot, the CBE Intralot hired — Veterans Service Corp, or VSC — had only two employees, “raising questions about who actually performed the duties expected of VSC,” an ODCA news release said.
“We wanted to know who did the work for which VSC was paid,” D.C. Auditor Kathy Patterson said in a statement.
The audit also alleges that neither the Department of Small and Local Business Development (DSLBD) nor the Office of Lottery and Gaming (OLG) monitored the work performed by CBEs on the contract between OLG and Intralot.
“Each agency contends it is the responsibility of the other to ensure CBEs are actively participating on the contract and performing meaningful work,” ODCA said. The audit reviewed D.C. law and found that there was a lack of guidance regarding CBE oversight.
Auditors said that DSLBD awarded credit toward the 35% CBE participation goal for work not performed by two CBEs, and that it allowed Intralot to violate the law by using a subcontractor, DC09, to pay CBEs. DC09 is jointly owned by Intralot and VSC.
The amount of credit has been reduced since ODCA identified the issue.
“The CBE compliance rate is less than 1% one year into a five-year contract,” the audit said; and neither DC Lottery nor DLSBD could document that the work for which CBEs were paid had actually been performed by employees of the CBEs.
Citing confidentiality, Intralot did not provide information when asked for documentation on who did the work and how the funds moved from Intralot to DC09 and then to subcontractors, ODCA said.
Among the report’s recommendations are a clear definition of what “managerial functions” and “independently controlled and operated” means with verifiable and measurable language; delineation of responsibilities of the contracting agency, as well as DSLBD in ensuring CBEs are doing the work; and for DC Lottery to not approve invoices without supporting documentation for all work performed, including that of CBEs.
D.C. Council member Elissa Silverman requested the audit in 2019.