PER-2026-4670

The North Carolina Office of the State Auditor has released a performance audit on the North Carolina Education Lottery (NCEL). While gross sales rose from $4.3 billion in FY 2023 to $6.6 billion in FY 2025, the percentage of sales transferred to the Education Lottery Fund fell from 23% to 16%. Although total transfers increased slightly from $1.02 billion in FY 2023 to $1.09 billion in FY 2024, they declined to $1.08 billion in FY 2025 despite continued sales growth. 

The audit found the decline in percentage transferred to education was primarily driven by changes in product mix. Prize expense increased from 66% of gross sales to 76% of sales due to rapid growth in digital instant games, lower sales of traditional lottery products, and expanded use of higher-payout games. The biggest impact to transfer percentage was the introduction of digital instant games, which have an approximate payout rate of 87%. These games grew from no sales in FY 2023 to $2.60 billion in FY 2025 and represented about 40% of total lottery sales.

Because state lottery laws were not designed with these games in mind, auditors recommended that NCEL work with the General Assembly to clarify whether the lottery’s primary objective should be maximizing dollars transferred to education, maintaining a minimum transfer percentage, or balancing both through a clear policy framework.