Casinos in Pickering, Ajax and Scugog escape criticism but operator does not in scathing Auditor General report
Published December 1, 2022 at 10:00 am
The Ontario Lottery and Gaming Corporation (OLG) has dropped its projected yearly gaming revenue $320 million a year over the next three years because the crown corporation isn’t holding private casino operators to their contract commitments.
Auditor General Bonnie Lysyk cited Great Canadian Gaming – the operators of Durham’s three casinos – for the bulk of the reduced profit loss after OLG re-negotiated a 10-year reduction in revenue share in 2019 from $5.8 billion to $4 billion for the West GTA ‘Elements’ casinos in Flamborough, Brantford, Grand River and Mohawk (Milton).
“There is no reasonable rationale for the OLG to reduce the amounts this private operator contractually committed to in 2018, one year earlier,” said Lysyk in her annual general report. “Further, this contract would have gone to another casino operator if the West GTA casino operator had submitted a $4 billion revenue projection in the first place.”
Great Canadian won the contract in 2018 for the West GTA region with “unrealistic financial projections.” Great Canadian’s bid had the highest gaming revenue and capital investment projections – gaming revenues were 177 per cent higher than OLG’s own estimates for revenues for the region at the time the bids were evaluated. Although the bid contradicted its own reasonable expectations, the report declared, OLG relied on Great Canadian’s unrealistic projections.
“If Great Canadian’s reduced revenue projections had been used by OLG to evaluate the bid instead of the original projections submitted in its winning bid, a competing bid would have been selected.”
The subsequent financial relief negotiated the next year reduced OLG’s revenue share projections by $1.8 billion over 10 years.
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The audit also found that OLG is pinning its hopes for better times on a steady stream of revenue from its lotteries, despite an aging demographic population that plays lotteries, and declining interest from younger people. The report looked at slot machine payouts which, according to Alcohol and Gaming Commission of Ontario (AGCO) standards, should return 85 per cent of wagers as winnings over the life of each machine. It found that neither the AGCO nor the OLG monitors the payouts, instead relying on casino operators to report any problems.
“The AGCO says that with this system of self-monitoring, it is following a modern regulator philosophy,” said Lysyk. “I was surprised that this meant that the physical inspection of slot machines to confirm that they are connected to a monitoring system and are reliably paying 85 per cent over the long-term was no longer part of their regulatory approach.”
Casinos could also improve their anti-money laundering enforcement, Lysyk continued. As part of the audit, mystery shoppers tested how easy it was to launder money, and they were able to obtain casino cheques with large amounts of cash, without anyone confirming where the money came from. The audit also reported that OLG does not, among other things, measure or report on its progress to assure responsible gambling.
The audit report includes 25 recommendations for improvement
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