I thank the committee for inviting me to provide an overview of the operations of the national lottery. At the outset, and to put my presentation in context, I consider it useful to set out the respective roles of the operator and the regulator, which are set out in the national lottery Act 2013, and the licence to operate the national lottery. Under the Act, the operator has "the sole purpose of operating the National Lottery in accordance with the terms and conditions of the licence". The operator must report to the regulator on its activities and it must appear before this committee when requested to do so. The Minister for Public Expenditure and Reform awarded a 20-year licence to the operator, Premier Lotteries Ireland, PLI, on 27 February 2014 and PLI began operating the national lottery on 30 November 2014.
I was appointed as the first regulator from 17 November 2014. Prior to that, the Minister acted as regulator. Since establishment, we have put in place an expert team to regulate the market. Our team includes regulatory, risk management, audit, accountancy, psychology and legal expertise. I am an actuary with more than 25 years of experience working in regulatory areas in the private and public sectors. I am joined today by the deputy regulator and head of audit and finance, Mr. Derek Donohoe, who is a former partner in a leading Irish accountancy practice with significant experience of auditing, forensic accounting, corporate governance and compliance.
The functions of the regulator under the Act are to procure the holding of the national lottery; to monitor and enforce compliance by the operator with the Act and the licence; to exercise enforcement rights of any trade mark of the national lottery; to consider for approval certain matters relating to the national lottery, including schemes for national lottery games; and to manage and control the national lottery fund.
In carrying out these functions, the regulator’s objectives are probity, participant protection, sustainability and, subject to the foregoing, maximising returns for good causes. Accordingly, the regulator monitors and enforces compliance by the operator with the Act and the licence and considers - and approves or declines to approve - proposals relating to certain matters received from the operator. Where an operational matter does not require approval and does not breach a term of the Act or the licence, this is a matter for the operator. I hope the committee will understand that, in my presentation, we may at times only be able to speak in general terms. This is because, like other regulators, our role requires that we respect commercially sensitive and confidential information.
In relation to compliance by the operator with the requirements of the Act and the licence, the regulator continuously monitors the activities of the operator.
Such monitoring includes oversight of data and systems of the operator. This is real-time access and includes, for example, monitoring sales and cash flows. It also includes oversight of the independent control system, which duplicates the activities of the operator's business system and provides an important verification tool. We carry out reviews of the operator's processes and controls. For example, we have conducted reviews of the operator's processes for risk management, anti-fraud, prizes management and fitness and probity. We have reviews of specific matters, such as technology outages. We receive and review of regular reports from the operator, including management reports, reports on IT performance and trading reports. We monitor those. We review arrangements for and the output of the operator's internal and external audits. An area on which we are very focused is the ongoing review of online play, including the controls set out in the licence, but also play activity. We get data on this from the operator regularly.
Our oversight informs our considerations when proposals put to us by the operator are being assessed for approval. In doing this work, we have overseen enhancements in a number of areas, including risk management, internal audit, governance of information and communication technology and controls for online play.
With regard to proposals from the operator, we consider requests for approval of certain matters, which, under the Act and the licence, require the approval of the regulator. Such matters include codes of practice for advertising and promotion, sales, participant relations and employee vetting, in addition to proposals relating to schemes for lottery games and third party providers.
In total, the operator has submitted 69 requests for approval. These were considered in accordance with the Act and the licence, and on 60 of the occasions further information was sought by the regulator or the operator chose to submit amended requests for approval, or both. Ultimately, 59 submissions received from the operator have been approved.
A key function of the regulator is to manage and control the national lottery fund. We review weekly detailed financial reports and receive and disburse funds as provided for in the licence. Under the licence, the amount allocated to good causes is equal to 65% of the difference between total net sales and the amount in respect of prizes. In 2016, €218.9 million was transferred for good causes, €7 million of which related to sales in previous years. In 2015, €193.3 million was transferred in respect of good causes.
Reports we have received from the operator in respect of 2016 include the following in regard to the operation of the national lottery. In 2016, 1.4 million people played lottery games on a regular basis, representing more than 40% of the adult population, and almost 70% of the adult population played the game occasionally.
Ticket sales for 2016 amounted to €750 million. The figure for 2015 was €670 million. Sales for draw-based games amounted to €530 million, while scratch card and online instant-win games generated €220 million. With respect to the sales channel, which includes sales for draw-based games and instant games, 95% of sales were retail, while 5% were online.
With regard to the retail estate, the number of retail outlets increased by approximately 1,500 to 5,200 since the commencement of operations under the licence. Around half of the increase relates to the availability of lottery games being extended from approximately one third of post offices to all post offices, including all sub-post offices. It is noted that most of the increased retail estate provides a restricted service in terms of the range of games and the options available. Of course, it is important to note the same controls in respect of probity and player protection and all the rules set out in the licence in respect of retailers apply equally in respect of the new outlets.
With regard to systems availability in 2016, over the whole network, terminals were available to sell tickets 99.9% of the time on average. Availability of website services varied from 99.6% of the time to 99.8% of the time.
I hope that the presentation has been helpful for the committee in providing an overview of the operations of the national lottery and of the role of the regulator of the national lottery. I look forward to answering members questions.