The State Ombudsman released a report today critical of the Iowa Lottery security measures for preventing fraud — while the new leader of the Lottery says the issues are mainly philosophical differences. Ombudsman William Angrick has been reviewing the Iowa Lottery’s security measures for a year-and-a-half after problems turned up in other states and Canada.

His key conclusion is that the Lottery has "failed to protect customers." Angrick says they are concerned that the Lottery has a "weak reactive" system to respond and anticipate possibilities of scams. He says they looked at three years of specific files and "found some significant deficiencies" in those files.

"So it’s a combination of not having a proactive preventive system and also the quality of the investigations as we reviewed them," Angrick says. The report details customers who said they had tickets that had been tampered with, and also nine cases in particular where Iowa retailers and store employees collected five or more "high-tier" prizes.

Angrick says each individual case needs to be looked at by the Lottery to determine if there is a scam, and he says when you have a successful scam artist a customer is not going to notice if they have been scamed, so prevention is important.

Angrick’s report lists 60 recommendations for improving security. "I think that having a culture change and being more proactive, or preventive is the paramount message that I want to get across," Angrick says.

He says the lottery needs to have the techniques and systems in place to identify scamming and to educate the customers are all part of the recommendations, and there is not one recommendation that would stand alone.

The Iowa Lottery has made some recent changes, which Angrick says he applauds, but says more needs to be done. Angrick says he’s "very encouraged" by the Lottery’s "sting" programs that test whether retailers are paying out the right prizes, and he says the program requiring customers to sign tickets is one that will help.

He say he would like to see terminals where customers could check their own tickets. Angrick says the discussions have been ongoing with the Lottery over changes.

Terry Rich became the new director of the Iowa Lottery in February and he says he’s pleased to see the Ombudsman’s report released. "The information in the document though, does not support the title, nor the conclusion," Rich says. Rich says the Iowa Lottery conducts 148 million transactions each year and the report finds no wide-spread fraud.

Rich says if you look at the odds of being taken advantage of by a retailer versus the number of transactions that people do in a year, you are more likely to be struck by lightening.

"Now saying that, if you’re struck by lightening, obviously it’s a big deal. And we are looking at the cases that they would like to have us review," Rich says. He says there’s also a new vice president of security and as the new sheriff’s in town they will take the report "very seriously."

Rich says there have been three issues in the ongoing debate over lottery security. Rich says one is player security, two is game security, and the third is "intrusion, red tape and impractical business applications which create rules that are impractical to enforce." He says the third issue is the one that will get the most debate.

Rich says as you look at what’s being done and what he’s done since taking over, it has been very proactive and close to what the Ombudsman has talked about. Rich says the intrusion into the lottery retailers’ business is a key philosophical point that remains under debate.

Rich says the Iowa Lottery views the tickets as a product sold to retailers like any other product, and once they are on the premises, it is up to the employer to determine how to handle their theft of misuse.

Rich says the Iowa Lottery will help out if the local retailer wants help, but he says many businesses prefer to handle the issues themselves because of the litigation involved in firing employees. Rich says that is the right of the businesses to handle.

Rich says the Iowa Lottery plans to replace its terminals withing two years and is looking at terminals that would allow customers to read their own tickets. He says it would be spending money twice to buy such readers now and then replace them again.

Rich says he looks forward to the continuing discussion, and says customers should continue to feel confident in the Iowa Lottery. "It’s absolutely safe, don’t be worried," rich says. He says the best way to avoid any problems is to sign your ticket when you go to your retailer and all the problems go away. You can see the Ombudsman’s full report here .