LOUISVILLE — Charitable gambling revenues are competitive with the Kentucky Lottery and the state's horse racing industry, thanks to some strict regulation imposed recently, officials say.

        Last year, people spent a record $564 million on charitable gambling in Kentucky, the fourth highest amount in the nation. The state's lottery brought in $583 million last year and horse racing brought in $631 million in 1999.

        “Charitable gaming — it is an industry,” said Ray Franklin, commissioner of the state Department of Charitable Gaming, the agency in charge of regulating it.

        The new regulations were created in 1994. Strict accounting standards, limits on cash prizes and requirements on how much money must go to legitimate charities helped clean up abuses that in the mid-1990s sent three major bingo hall operators in Jefferson County to federal prison. The regulation has also helped the smaller, neighborhood bingo games survive.

        “It's put us on a level playing field,” said Ken Kalmey, chairman of the Kentucky Charitable Gaming Association. “What was occurring before was some awfully big bingo giving away a lot of money that didn't appear to be going to charity.”

        About 6.5 percent of this year's proceeds, or about $37 million, will go to charities. The rest goes for prizes and expenses — mainly rent and supplies — plus a small fee that supports the agency created in 1994 to regulate charitable gambling.

        Before 1994, bingo was supposed to be allowed only for charity, with volunteer workers. But laws were vague, abuses were widespread and no single agency was in charge of enforcement.

        In federal court proceedings involving the three bingo hall operators in Jefferson County, details emerged of one operator stuffing bundles of cash in his coat, all-night games with huge cash prizes, “volunteer” workers paid with stacks of cash and an operator caught by Internal Revenue Service agents with $128,000 in his closet.

        “We've come a long way from those days,” said Scott Wegenast, policy analyst for the Catholic Conference of Kentucky, who has worked with the state in developing the charitable gaming laws.

        Under the 1994 law that created the Charitable Gaming Department, 40 percent of proceeds after prize money is paid out must go to groups recognized as a charity by the IRS. Groups that don't consistently meet the 40 percent rule will have their bingo licenses revoked by the state.

        All charities that run bingo games must have a license. The state also requires operators, manufacturers of supplies and distributors to hold state licenses. All are subject to audits and inspections.

        Currently, the state has 799 licensed charitable gaming organizations, 81 bingo halls, 48 distributors and 20 manufacturers.

        Groups that hold bingo games must file quarterly reports with the department and may face criminal penalties for illegally diverting bingo proceeds supposed to go to charity.

        This year, the gaming department had police powers added for its investigators. Officials said that move will help them pursue criminal cases more efficiently.

        “We have to make sure charitable gaming is beyond recrimination and reproach,” Mr. Franklin said.

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