Kohima, July 1: The inquiry committee set up to probe the Rs 38,000 crore Nagaland lottery scam of 1998 has ruled out misappropriation of funds but criticised the functioning of the finance department.

The scam had figured in the comptroller and auditor-general’s report of 1997-98 and several Congress leaders of the state as well as the Northeast had become embroiled in the controversy.

The CAG report had stated that the entire sale proceeds from tickets amounting to Rs 38,297.32 crore had not been deposited in the government account. It had also stated that the government’s agreement with the state sole distributor of lotteries had violated a Supreme Court ruling.

The three-member inquiry committee, led by Nagaland People’s Front legislator Küzholüzo, last week said the CAG report had calculated profit on the face value of the tickets and not on the actual sale.

It rapped the finance department for non-submission of relevant papers to the audit, which created the confusion.