State regulators inspected fewer than half of Indiana's charity bingo games in the past two years, despite several high-profile investigations into cash-skimming.

The Indiana Department of Revenue monitors the games and spends about 10 percent of what it collects in annual bingo license fees -- about $400,000 of the $3.9 million -- on making sure the games operate legally; the rest of the money goes to the state general fund.

Officials say the small number of staff members dedicated to monitoring Indiana's 548 bingo operations makes it tough to visit and audit the operations more frequently.

During the past two fiscal years, Revenue Department investigators contacted 158 bingo parlors, either in person or by telephone, and audited 69, said Larry McKee, the department's deputy director.

Only four investigators, an auditor and a supervisor are assigned to monitor bingo operations statewide. And even bingo operators themselves say oversight is inadequate.

"To catch somebody doing something wrong, you're going to have to do it by being on site," said John Gahan, finance officer for American Legion Post 330 Bingo in New Haven, in northeast Indiana. "You're not going to catch it through (looking at) records."

Indiana's bingo industry, the fourth-largest in the nation, grossed more than $583 million in fiscal year 2002, according to a 2003 report by the National Association of Fundraising Ticket Manufacturers.

But among the 29 states that offer bingo games, Indiana ranks 11th for the percentage of gross receipts that actually go to charity, according to the report.

State revenue from bingo operations comes from the games and bingo license fees. Fees range from $75 to $25,000 (the highest in the nation), based on an organization's gross receipts.

The bingo parlors offer two games -- bingo and pull-tabs, $1 tickets that some say are the paper equivalent of slot machines. Parlors make more money on pull-tabs than on bingo games, and the state collects 10 percent of that income.

Illinois, by contrast, charges $200 for each bingo license and a 5 percent tax on bingo and pull-tab income. In 2001, Illinois collected $869,000 on bingo licenses, $4.9 million in bingo taxes and $7.3 million on pull-tab income, said Mike Klemens, a spokesman for the Illinois Department of Revenue.

But the department doesn't have any investigators devoted to monitoring its approximately 900 bingo parlors, Klemens said.

Arizona charges $50 to $200 for bingo licenses and has two investigators, two auditors and a supervisor to police 192 bingo games, said David Manzer, administrator for the Arizona Department of Revenue special taxes division.

Indiana bingo operations are significant sources of income for churches and church-sponsored schools, fraternal groups and other nonprofit organizations.

Together they netted $54 million from bingo-related games in the past fiscal year.

But some operators have been found cheating the charities they are supposed to serve or operating illegal machine gambling from the bingo sites.

Four Indianapolis bingo parlors were closed in 2001, when a Marion County grand jury investigation found that four people siphoned at least $3.5 million from bingo operations and that the sponsoring charities received only a fraction of the profits.

The closing of those sites led to the Department of Revenue crafting new regulations to stop cash skimming.

Bingo operators say the new rules, which take effect in May, could put honest bingo parlors out of business without stopping illegal activity.

"Our feeling is that their reason for this heavy regulation is to stop skimming, because they don't have the auditors out there," said Candy Marendt, a lobbyist for the Indiana Charitable Alliance, a group of bingo operators.

The new rules require each bingo parlor to set aside a percentage of gross receipts for charity, regardless of expenses such as rent, prizes and supplies. A bingo game that does more than $500,000 of business, for example, would have to give at least 10 percent of its income to charity.

"People want to say gambling makes a fortune," said Michael Broz, bingo manager at Marine Corps League Bingo in Fort Wayne, which gave 10 percent of its $3.1 million income to charity in the past fiscal year.

"But the people who play bingo walk out the door every night with a substantial amount of money that comes into the bingo hall."

When skimming is suspected, the department can ask for help from the state criminal investigations division, but that's a step not taken lightly, said McKee of the Revenue Department.

"We're not going to do something unless we are sure we have a substantial case," McKee said.

Routine checks include surprise visits to watch for tipping or payment of volunteers. Regulators also look for the use of illegal gambling machines and the sale of unregistered pull-tabs or bingo cards.

McKee said the department relies mainly on complaints and suspicions that arise from audits to decide which bingo parlors to investigate. There's no quota for how often a bingo parlor is visited, he said.

The last time a Revenue Department investigator visited American Legion Post 330 in New Haven was more than two years ago, Gahan said.

"If they have problems, they should be going out and looking for them," he said.

McKee said it's likely a Revenue Department investigator visited the parlor unannounced.

"If we had an investigator assigned to each bingo hall every night, it still wouldn't resolve the issue of such things as skimming," McKee said.

"They don't occur in front of everyone. There probably are as many grains of sand as there are ways one could take money from an organization.

"Do we need more investigators? That's something we're going to look at," he said. "This is not the economic time to be able to take that proposal forward."

Rep. Bill Crawford, D-Indianapolis, chairman of the budget-setting House Ways and Means Committee, said he expects charity gaming to pay taxes like any other gambling industry.

"I don't know of any example of anyone who generates that kind of revenue . . . and is exempt from (tax) contributions," Crawford said.

Rep. Matt Whetstone, R-Brownsburg, who has authored several pieces of bingo-related legislation, said he favors spending more money on policing bingo, at least while illegal activity is suspected.

"The only way you can do that is to actually go and see the process, to see it first-hand," he said. "You're not going to catch it with the numbers on a sheet of paper."

Call Star reporter Kristina Buchthal at (317) 444-6399.

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