AUDITOR GENERAL DEPASQUALE RELEASES AUDIT ON THE STATE RACING FUND
By Rachel Hursh
Auditor General DePasquale held a press conference to announce the release of a special performance audit of the State Racing Fund, discuss the audit’s findings, and make recommendations.
The State Racing Fund, DePasquale explained, is used to pay for the personnel and operating costs of the Horse and Harness Racing Commissions, Equine Laboratories, the PA Fair, and other personnel and operating costs directly related to the industry. Created in 1981, he said, the fund was “…designed to make sure we have fair racing at the tracks, the tracks are in fair condition, and that the horses that are running on these tracks are appropriately protected.” The fund supports its regulations, and is sustained by six different revenue sources: waging taxes, uncashed tickets, license fees, breakage fees, admission taxes, and other miscellaneous revenue.
In highlighting the economic impact of the horse racing industry and the 23,000 jobs dependant on the industry, DePasquale noted that there are 547 breeders in Pennsylvania and six different tracks that provide employment to breeders, jockeys, stable managers, and personnel that work in laboratories at the Department of Agriculture. Further, the industry is one of Pennsylvania’s largest agriculture industries. “When we say agriculture is the largest industry in Pennsylvania, know that the horse racing industry is part of that calculation,” he said. Horse farms across the state and the industry generate $1.6 billion in annual economic activity. More than three million people attend race track events and wager more than $1 billion each year, he added.
“Similar to other challenges in Pennsylvania right now, this fund is increasingly challenged, and our audit found out that if significant steps aren’t taken in the very near future the horse racing industry is in jeopardy in Pennsylvania,” DePasquale stated. “This is a billion dollar industry in Pennsylvania and it is at risk of a catastrophic shut down if measures are not taken to increase revenue and stop the diversion of racing funds to plug holes in the state’s budget.”
The recently released special performance audit, DePasquale explained, revealed that the Department of Agriculture overbilled the fund by $873,206 for three years to cover budget shortfalls and directly billed another $5.2 million over four years for personnel costs it could not appropriately document. Specifically, the audit found that the Department of Agriculture overbilled the State Racing Fund $716,535 between 2011 and 2012 and 2012 and 2013 for formula based administrative shared services such as legal, human services, and communications. In addition the department charged more than $177,000 to the State Racing Fund for a special agriculture advisor to the governor, including a salary of $101,264 in the 2012-2013 budget. Not only is balancing the department’s budget with State Racing Fund monies not allowed under current law, DePasquale shared, but concern was raised when conflicting reports on the advisor’s role were received. Initially the audit team was told the advisor was only working on items related to the fund, but later discovered the person served as an ambassador to the governor to the rural communities and agriculture communities.
The audit found that because of the misappropriation of fund monies, coupled with an increase in expenses and declining revenue, the fund would have been bankrupt this spring had the legislature not passed Act 30 of 2014, which transferred $4.2 million from the Slots Fund to the Pennsylvania Racehorse Development Fund. “It is in trouble because funds that provide necessary oversight in the industry are being diverted to plug budget holes,” DePasquale said. “The money from the Horse Racing Fund is not going to purses. It is used to make sure the animals are protected, the tracks are appropriate and making sure the drugs administered to the horses are done appropriately.”
Three recommendations were made in response to the audit. Specifically:
· Prohibit the Department of Agriculture from using the State Racing Fund to make up for budget reductions, or charging the Fund for personnel expenses not directly related to the horse racing industry
· Update occupational license fees and other fees that were implemented in 1981. For example, DePasquale shared, the licensing fees, which are renewed every three years, are capped at $100. This recommendation would take legislative action
· Add funding options, developed by the Department of Agriculture
DePasquale clarified that the State Racing Fund is located within the Department of Agriculture and is separate from the Horse Racing Development Fund. The Horse Racing Development Fund, he said, was created to generate larger purses to attract better horses and better races and generate more gaming and economic activity. He noted that the Horse Racing Development Fund was not part of the audit, but suggested that if State Racing Fund isn’t viable a Horse Racing Development Fund wouldn’t exist because there wouldn’t be any horse races.