Jersey City man wins lottery, Dec. 17, 2014

File photo.

TRENTON — Nearly four dozen New Jersey lottery winners collected their prizes with false Social Security numbers belonging to dead people, according to an audit of the state lottery system.

The audit also found that the lottery missed out on recovering $890,000 that winners owed in taxes and other obligations for the fiscal year that ended last June.

The report, released Wednesday, said 680 people who won at least $600 presented potentially invalid IDs from July 2013 to July 2014.

People are required to list a Social Security or tax identification number and show ID to claim their winnings so the state can withhold state and federal taxes.

"Prize winners of $600 or more who provide invalid identification numbers create a risk of reduced tax withholdings, overpayment of public assistance, and lost collections on child support, defaulted student loans, and other debt owed to the state," the state auditor said.

Carole Hedinger, executive director of the state lottery, responded to the audit noting that the 680 suspicious Social Security numbers "represents a very small portion of all claims," and the auditor was "unable to substantiate whether these 680 'questionable' Social Security numbers were indeed fraudulent."

In the fiscal year ending in June, the lottery received more than 48,000 claims exceeding $600, Hedinger said.

The audit also found that during that time frame the state's lottery division could have recovered an extra $890,000 winners owed in taxes or other obligations.

State law requires that prizes over $600 be paid toward those debts. But the lottery division was only performing deeper checks for money owed in child support, student loans and public assistance overpayments on winnings over $250,000.

While the auditor recommended the state ramp up its checks to include all prize winners of $600 or more, Hedinger said that the division is not legally authorized to use Social Security numbers in that way. And for prizes more than $250,000, the office does manual checks using winners' names and addresses, Hedinger said.

The state's new Cash4Life game that debuted in June wasn't emerging as much of a windfall for the lottery system, the auditor also warned.

Run in partnership with the New York Lottery, the twice-weekly drawing awards prizes of $1,000 per day for life and $1,000 a week for life. This drawing is unique for awarding fixed sums while other game winnings are based on ticket sales, the auditor said.

The payout, while projected to be 55 percent of sales, reached 98 percent for New Jersey, through the end of August. The state paid out $22.8 million of the $23.3 million in sales.

Cash4Life's odds, one in 21 million, are better than a similar New England game with odds of one in 41 million, according to the audit.

Hedinger said the division keeps a close eye on how the game is performing and those early results are likely temporary.

"We expect the game will perform as designed when measured over a period of at least one year, which will tend to level the peaks and valleys of sales and prizes," she said, adding that Pennsylvania and Virginia will be joining with New York and New Jersey in hosting the game in the next few months.

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Samantha Marcus may be reached at smarcus@njadvancemedia.com . Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.