Victoria's previous 10-year deal with the ASX-listed company, which also has 40-year lottery agreements with NSW, South Australia and the NT along with a 65-year deal with Queensland, had been due to expire in 2028.
The licence extension until 2068 was revealed to the stock market on May 5, the same day the Victorian budget was handed down, and followed exclusive negotiations between the parties.
The watchdog found the Victorian government had "sound reasons" for excluding other operators as a competitive process was "unlikely" to deliver a better outcome.
"The agreed premium exceeded the reserve price set by the government," the report said.
In November 2023, the company sent the treasurer and minister an initial proposal to extend the licence by 20 to 40 years in return for a "material up-front payment".
The Victorian government subsequently passed laws to allow backroom negotiations on the lottery licence between the relevant minister and an "invited" applicant.
The government's commercial adviser estimated a theoretical value for the licence of about $1.372 billion.
But the auditor-general cautioned against comparing the final premium with the modelled value as it was subject to inherent uncertainty and a range of assumptions, including discount rates.
"While agencies sought to maximise value within a bilateral framework, it is not possible to know with certainty whether a higher premium could have been achieved under an alternative approach," the report said.
The Victorian budget projected a net operating surplus of $1.05 billion in 2026/27, with state net debt forecast to top $199.3 billion by 2030.
The terms of the deal required the company to pay $1.145 billion to the government in two instalments in 2026/27.
"The up-front payment will improve the state's short-term net debt position and net operating cash flow in the year received," the report said.
The auditor-general did not find any significant probity issues but said the government's approach limited public transparency.
The state's gaming minister, Enver Erdogan, said the process delivered the best return of a licence extension in Australian history.
"The report is clear - this process was conducted properly," he said.
The Victorian opposition continued to maintain Labor changed the rules and kept Victorians in the dark in a "vain attempt" to keep net debt under $200 billion.
"Victorians deserve better than a government that taxes them in secret and signs up to secret deals behind closed doors," an opposition spokesman said.
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