A state audit has found that the Montana Lottery miscalculated its finances by $18.5 million over several years, citing accounting errors and internal control failures that prompted auditors to issue a rare disclaimer on the reliability of the agency’s financial reporting.
The Legislative Audit Division released its findings in June 2026, examining the lottery’s 2023 fiscal year finances. Auditors stressed that the $18.5 million figure represents a combination of overstatements and understatements — not missing funds — and the report did not allege fraud.
What Auditors Found
Among the most significant findings: the Montana Lottery made only three financial transfers to the state in fiscal year 2023, despite state statute requiring four annually. Auditors traced the missed fourth-quarter transfer to the unavailability of Armond Sergeant, the agency’s Financial Services director since 2017, who was needed to calculate net revenues. Sergeant died unexpectedly in March 2025.
A separate 2024 review uncovered additional accounting errors, with compounding inaccuracies in the agency’s ledgers. The problems were significant enough that auditors issued a “disclaimer of opinion” — a formal signal that they could not confirm the completeness or accuracy of the lottery’s financial statements. That designation is rare and indicates auditors lacked sufficient confidence to render a standard opinion on the books.
Auditors also flagged an internal controls problem: three of the lottery’s five accounting staff members had the ability to both log and approve financial entries, creating conditions where errors — or worse — could go undetected. Proper controls typically require those functions to be separated.
Governor’s Office Review Preceded Audit Release
Before the Legislative Audit Division published its findings, the governor’s budget office took its own look at the lottery’s finances. Chet McLean, an accountant with the governor’s budget office, reviewed the agency’s books in March 2026 — several months before the audit was publicly released.
McLean described the review as a process of peeling back layers of problems. “I really had to dig, because I would get into one layer and then realize that there was another layer below it,” he said.
The Montana Lottery Commission, whose members are appointed and removed by the governor, is an executive branch agency. The commission declined to answer questions about the mismanagement identified in the audit.
Legislative Response
The Legislative Audit Committee is scheduled to meet to discuss the findings. Sen. Emma Kerr-Carpenter signaled that the issues are part of a recurring pattern. “Every year there’s a financial audit where there are big things that need to be addressed,” she said.
Her comments reflect broader concerns at the Capitol about whether state agencies are addressing audit findings in a timely and meaningful way. The lottery concurred with the auditors’ recommendations to fix the identified problems, though it has not publicly detailed a remediation timeline.
Context and Next Steps
The audit covers a period when the lottery’s financial operations were heavily dependent on a single key employee. Sergeant’s tenure as Financial Services director spanned nearly eight years before his death in early 2025, and the record suggests the agency may not have adequately cross-trained staff or established redundant controls to handle his absence.
The findings arrive at a moment when Montana’s broader fiscal picture has drawn attention. The state recently ranked among the fastest-growing economies in the nation since 2021, a benchmark the Gianforte administration has highlighted. Financial irregularities at a state-run revenue agency complicate that narrative and are likely to draw scrutiny from legislators preparing for the 2027 session.
The Legislative Audit Committee’s upcoming review will determine whether the lottery’s corrective commitments translate into concrete action, or whether the agency returns to the audit cycle with the same deficiencies flagged again.
