Secretary of State Bill Bradbury on Tuesday criticized what he called $750,000 in questionable travel expenses and perks provided to Oregon Lottery employees last year.

Bradbury issued an audit that found that the Lottery has allowed some employees to fly first class and others to stay in expensive hotels while traveling on Lottery business.

Further, the audit concluded, the state-run gambling enterprise spends too much money sending groups of employees to out-of-state conferences.

There was nothing illegal in any of the expenditures, Bradbury said, but especially in light of tough economic times, that $750,000 would have been better spent on schools, parks and other programs.

"In times when we are laying off teachers, it saddens me to read these latest findings," Bradbury said.

Lottery officials, in response, said most of the expenditures were justified and that the Lottery needs to be able to operate much like a private business.

"We really aren't a typical state agency," Lottery spokesman David Hooper said. "Every other agency spends tax dollars, while we are an agency that actually generates revenue for the state."

The Lottery has turned into a big moneymaker for the state since voters first approved it in 1984. It currently generates $350 million a year in profits for the state, with the money targeted for education, economic development, parks and salmon restoration and gambling addiction treatment programs.

The Lottery is overseen by a five-member commission that establishes broad policy for the Lottery as well as the rules over its day-to-day operations.

That's part of the problem, Bradbury said Tuesday.

"The Lottery has its own set of rules or sometimes no rules at all," he said. "What we need is recognition from Lottery officials that they are spending our funds, not their funds."

Among its findings, the secretary of state's audit criticized the Lottery for:

-- Spending $38,000 on an annual staff meeting at the Oregon State Fairgrounds in Salem for the Lottery's 400 employees.

-- Allowing two employees to fly first class on a dozen trips, which cost $19,000 more than flying coach. The Lottery responded that the two employees have physical disabilities and needed the more spacious airline seating found in first class.

-- Allowing employees on one trip to Boca Raton, Fla., to have food and lodging that was $1,700 more expensive than would have been allowed for other state employees.

-- Regularly sending four or more employees to the same out-of-state meetings when other state agencies limit the number of employees who can attend the same meetings. The Lottery could have saved $11,000 by sending one less person to those meetings, the audit said.

-- Providing gifts such as $235 watches and $200 vases to reward employees for their length of service.

Gov. John Kitzhaber, who's appointed or reappointed all five Lottery commissioners, urged the Lottery to use the audit findings "to re-examine how it manages and oversees the money it spends on administration."

Kitzhaber also said he expects the commission to prepare a report on the issue and have it ready for Gov.-elect Ted Kulongoski when he takes office in January.