The Commission Lacks Required Security At The Race Tracks

Racing Commission Employees Are Not Receiving Annual and Sick Leave

Internal Controls are Needed For Expenditures Concerning The WV Breeder's Classic

Performance Evaluation & Research Division
Building 1, Room 314-W
State Capitol Complex
(304) 347-4890

January 1999

Issue Area 1: The Racing Commission lacks security due to the Absence of a Director of Security or an Inspector at each Track

The purpose of the West Virginia Racing Commission is to regulate the industry and to assure confidence in clean races. Integrity is essential for the success of the racing industry. The Code empowers the Commission to employ necessary law enforcement positions to assure that the Commission's regulations are followed and monitored by Commission staff. The Commission has placed this law enforcement function with the Commission's auditors and non-commission, track employed security staff, which provides security for the independent track's management.
§19-23-5(b) of the west Virginia Code states:
...the racing commission shall employ, direct and define the duties of a chief clerk, director of security, director of audit, chief chemist, stewards to represent the racing commission, supervisors of the pari-mutuel wagering conducted under the provisions of this article, veterinarians, inspectors, accountants, guards and all other employees deemed by the racing commission to be essential in connection with any horse or dog race meeting...

As the chief regulator of the racing industry, security is a major responsibility of the West Virginia Racing Commission . The West Virginia state Code §19-23-6 , as amended, gives the Racing Commission full jurisdiction and supervision over all race meetings and all persons involved in the holding or conducting of race meetings. The Commission's Legislative Rules, §178-1-61 and §178-2-46, deal with a State Security Officer for horse and dog race tracks. In addition to working in conjunction with the state license clerk to determine that all individuals coming into contact with the animals at the race track hold a West Virginia license, the Security Officer has several other responsibilities. The security officer is to conduct morning, afternoon and evening security checks of the gates and the barn area. The security officer is also to assist state stewards in all "shake downs". The Racing Commission is in violation of the statute by not employing a Director of Security or an Inspector at each site.
Other States

Racing Commissions in eight states were surveyed to determine where the responsibility for security was assigned. Three out of eight Racing Commissions employ their own security or investigative personnel. One state has a state police unit headquartered at each track for providing background checks on licensees. The remaining four states require the tracks to maintain the security personnel. The states, number of tracks in jurisdiction and party responsible for security is available in Table One. Regulation of the racing industry varies between states. Louisiana, which has the same number of tracks as West Virginia has an employee at each track who is responsible for security.

Washington state's Racing Commission, with three tracks, has two to four security officials at each track. New Mexico's Racing Commission, which oversees five tracks, has its own racing investigators. Other states leave security concerns to the independent franchises, thus allowing the industry to police itself.

Table 1 - Security Responsibilities - West Virginia Compared to Other States
StateNumber of Tracks Entity Providing Security
Arkansas2Race Tracks
Louisiana4Racing Commission
Maine 2Race Tracks
Massachusetts6State Police and Race Track
Michigan 8Racing Commission
Montana7Racing Commission and Race Track
New Mexico5Racing Commission
Washington3Racing Commission
West Virginia4Race Tracks
Source: 1998 PERD survey of Racing Commissions in other states.

Reorganization And Elimination of Security Positions In 1989

In 1989, the Implementation of the Reorganization of West Virginia Government Project Team proposed a cut in Racing Commission staff from 40 authorized employees to 30 authorized employees. At each dog racetrack the Task Force recommended combining the license clerk position with one security guard function. However, the Commission terminated all security positions at the two dog tracks and the two horse tracks. Prior to 1989, each of the four tracks had: an auditor; a security person and a licensing clerk. Completion of the reorganization eliminated the position of security and licensing clerks at the dog tracks. The auditors at the two horse tracks were assigned the duties of security. Currently, the Commission employs 33 Full Time Equivalent Employees, compared to 40 in 1989.
The Security Director and Inspectors are the law enforcement section of the Racing Commission. Their lack of presence requires the Commission to rely heavily on the track's security or rely on individuals who are not trained in the area of law enforcement. The critical duties of security positions are, among others, deliver notice of hearings; investigate violations; perform shakedowns in the jockeys' area and the tack room of trainers.

Currently, all security officers at Mountaineer Race Park are hired and employed by track management. They perform shakedowns (surprise visits to check for prohibited substances or devices) and conduct the Criminal Background Checks required by statute. They also monitor surveillance from the 166 security cameras located at the track and the lodge which both house video lottery terminals. Charles Town Horse Track, Tri-State Greyhound Park and Wheeling Downs Greyhound Park requires the auditor position to perform a dual role as auditor and security officer for the Commission. Table 2 shows the job title as required by the Code and the number of employees for the four tracks.

Table 2 - Racing Commission's Staffing And Location

Job Title
Wheeling DownsTri-State GreyhoundPNGI Charles TownMountaineer Race Parks
Racing StewardsN\AN\A22
Racing Judges11N\AN\A
License Clerk0011
Test Barn Supervisor0011
Test Barn Worker0022
Office Assistant0010
Director of Security0000
Supervisors of
* Indicates tracks where auditors are to assume the roles of license clerk and security.
**Indicates tracks where auditors are to assume the role of security.
Source: 1998 PERD review of information supplied by the West Virginia Racing Commission.

Use of Inspectors for Enforcement of Racing Laws

The West Virginia Code, §19-23-15, as amended, allows the Racing Commission's stewards to suspend or revoke permits for any reason authorized by reasonable rules and regulations promulgated by the Racing Commission. The Commission issues rulings of racing violations through its stewards and judges. These rulings should be made on information obtained by the Commission's inspectors. All violations do not occur only on the track during races. Violations occur in the paddock area, the jockeys' quarters, trainers' tack rooms and other areas of the track. The role of the Commission's security is to oversee these areas and respond immediately to violations. The current organizational structure requires the auditor at the Charles Town and Tri-State to perform the duty of monitoring the pari-mutuel area, the kennels, the barns and all areas mention above. The Commission relies solely on Mountaineer Park's security to police the Commission's area of responsibility. Table 5 summarizes the number of violations and rulings issued for each track for the last thirteen years.

Table 3 - Commission Rulings, by track and year
Charles Town PNGIMountaineer RacetrackWheeling DownsTri-State Greyhound Total Rulings per year
Source: 1998 PERD Analysis of West Virginia Racing Commission Rulings

Some examples of typical violations at horse and dog racetracks include: weighing in dogs overweight; bringing a dog to the weigh-in with an incorrect tag; removing a dog or a horse from the grounds without the permission of the Commission; having dogs doubled in kennel crates; failure to maintain a straight course upon leaving the starting gate; failure to have an animal in the paddock area on time and; failure to pay jockey fees. Many rulings on violations occur because of simple human error, fines for these are typically between $25.00 and $100.00. However, some of the more serious rulings can result in a lifetime suspension for the trainer involved.

The Racing Commission changed testing laboratories and now requires horses to have blood as well as urine tested for unallowable substances in their systems. The blood tests provide far more accurate readings in identifying abnormalities such as the use of stimulates or any other drug that increase the horse's natural ability to win a race. The President of the Association of Racing Commissioners International stated in a letter to the Legislative Auditor that "Integrity is vital to the success of pari-mutuel racing and high-level drug testing is vital to achieving and maintaining integrity".

The Racing Commission's use of auditors to fulfill its security responsibilities creates a breakdown in internal and statutory controls. The auditor's role is to collect and deposit all monies and to submit reports and summaries of live and simulcast races. The primary focus of the position centers on oversight and monitoring of the pari-mutuel wagering activities, encompassing computer room operations and pari-mutuel ticket issuing machines. The auditor is responsible for the state's share of revenue. The Racing Commission's security function should: oversee the individual track's security; determine that personnel carries out its functions, such as background checks and; perform investigations into allegations of illegal activity on the track grounds. Security should also have arrest power in order to effectively enforce the laws governing racing in West Virginia..

Contracting With the WV State Police
On November 1, 1998, the Racing Commission implemented blood testing in addition to the urine testing. The change in testing resulted in a horse testing positive for cocaine at the Mountaineer Race Park. This offense not only violated racing rules, it was a criminal offense. The track failed to notify any law enforcement agency of the offense. The Hancock Sheriff's department wrote a letter dated November 23,1998 notifying the Commission of their dissatisfaction of not being notified of the offense that had occurred at the track. If the Commission had employed the statutorial required security officer, the properly trained individual would have notified the proper authorities and an investigation would have been promptly instituted. (See Appendix A for the Hancock County Sheriff's statement.)

The Racing Commission should discuss the issue of employing state troopers for security with
the West Virginia State Police. This would provide the stewards with individuals trained in the area of law enforcement and procedures for conducting investigations. The approach for funding this area could be similar to the funding for troopers stationed with the WV Turnpike Authority. The Authority reimburses for the cost of personal services, which include salary, retirement and insurance benefits and sick and annual leave accruals. The Authority also provides transportation, office space and secretarial personnel. We requested the state police provide PERD with a cost estimate for one trooper stationed at each track. The cost estimate was $ 344,680 per year.

A track identifier is the individual who checks the horse's tattoo in order to assure that the correct animal is racing. It was reported to the Legislative Auditor that in October 1998, a horse was allowed to enter a race. However, the test barn determined on their check of the tattoo that the incorrect animal had raced and subsequently the identifier was terminated. The cause was determined to be human error, however without the escort from the track to the test barn being monitored, it is not beyond the realm of possibility that the horse was switched.

When the Racing Commission consolidated the position of security and auditor in the Greyhound industry, the primary focus of the position became oversight and monitoring of the pari-mutuel wagering activities. This encompasses the computer room operations, the pari-mutuel ticket issuing machines, and the environment involving patrons and their participation. All statutes and rules applicable to pari-mutuel wagering are enforced through this position, including the compilation of all statistics and data to ascertain that all pari-mutuel wagering pools.

In the thoroughbred industry, the consolidation of positions took place when simulcasting occurred on a limited basis. Simulcasting is when patrons at West Virginia tracks wager on races taking place throughout North America. Now, simulcast racing takes place seven days a week, year round. With the regular duties assigned to the auditor, there is no significant time available to perform the important and necessary security duties.

In order for the racing industry to be successful and profitable, consumer confidence is essential. Security which is employed by the Commission provides another layer of assurance to the wagering public and allows other Commission employees to carry out their duties effectively and with confidence.

1978 Legislative Auditor's Report

The Legislative Auditor's Office recognized the importance of security for each track in a 1978 audit report. The audit report found that the four security inspectors employed by the Racing Commission had a vital role and each track should be continuously monitored to ensure consistent protection. Some alternatives which may be considered for improving security are: 1.) Employ an additional security Inspector at each track and; 2.) Require a periodic review of the tracks' security by an independent investigating agency. Since 1978, significant changes have occurred in the West Virginia racing industry. Track ownership and management has changed. Simulcast racing was introduced and expanded. Video lottery terminals were also installed. The Racing Commission's need for improved security is critically important to the West Virginia racing industry.

Recommendation 1:

The Racing Commission should hire security officers and investigators as required by the West Virginia Code, as amended.

Recommendation 2:

The Legislature should consider transferring the security function to the West Virginia State Police.

Issue Area 2: Racing Commission Employees are not receiving Annual or Sick Leave

Employees of the Racing Commission are full time state employees and are paid a per diem for each day of work. These employees do not receive sick and annual leave benefits that are provided to all full time state employees because of the Commission's method wage payment. These employees are members of the state retirement system (PERS) and participate as members in the state insurance program (PEIA).

The Division of Personnel's Legislative Rules 15.3(d) Coverage states;
30-day emergency, per diem, student, seasonal or 90-day exempt employees shall not accrue annual leave...Annual leave accrued by provisional, intermittent, irregular part-time and temporary (appointed from the register) employees shall be computed in proportion to hours worked during the pay period not to exceed the full time work schedule of the employer.
The Legislative Auditor's Office reviewed the personal services expenditure schedule required by the Legislative Auditor's Office and found that these employees are listed as full time equivalents (FTE) and their wages are listed as salaries and not per diems. Also, the expenditure schedule of benefits listed that thirty employees were covered by the $331,553 to be paid in fiscal year 1999, however, the employees will not earn and accrue sick leave or annual leave during this same time period.

State Retirement and State Insurance Programs Definition of Employee
The West Virginia Public Employees Retirement Act, Chapter 5, Article 10, Section 2(6), an amended, defines an employee as:
any person who serves regularly as an officer or employee, full time, on a salary basis, whose tenure is not restricted as a temporary or provisional appointment, in the service of, and whose compensation is payable, in whole or part, by any political subdivision, or an officer or employee whose compensation is calculated on a daily basis and paid monthly or on completion of assignment...

In addition, the West Virginia Public Employees Insurance Act, Chapter 5, Article 16, Section 2(4) as amended defines employees as...
any person, including elected officers, who works regularly full time in the service of the state of West Virginia...

Work Schedule of Per Diem Employees

The Commission's employees are required to be at the track for each day of racing and each track is required to have at least 210 days of racing per year. State employees who receive sick and annual leave benefits work approximately seven to eight hours per day, 240 days per year. The Legislative Auditor's Office could not acquire data for the number of hours worked for those days because the employees are not required to complete any time record for hours worked. The Legislative Auditor issued a report in 1986 recommending time sheets be submitted for employees in accordance with the West Virginia Labor Commissioner's Administrative Policy. This apparently was not implemented or it was discontinued.

Cause and Effect

The Racing Commission chooses to pay certain staff a per diem instead of the state bi-monthly salary. This wage payment method deprives these employees from receiving the same benefits allowed other full time state employees.

These employees suffer loss of wages when it is necessary for them to be off work. The long term effect occurs when employees qualify for retirement. The typical full time state employee who receives sick and annual leave may apply accrued leave to pay insurance premiums when they retire. State employees may also apply accrued leave to increase their years of service which increases their monthly annuity. The lack of sick and annual leave has a detrimental impact for the Racing Commission's state employees. The Legislative Auditor is concerned that the integrity of racing is jeopardized by the lack of benefits. Since employees cannot take a vacation or see a doctor without diminishing their pay, a situation exists where Commission employees may become vulnerable to unethical influence.

Recommendation 3:
The West Virginia Racing Commission should change the current per diem employees to bi- monthly, salaried employees so they are able to accrue to sick and annual leave.

Recommendation 4:
The Racing Commission should require all employees to complete time sheets.

Recommendation 5:
The West Virginia Racing Commission should train other employees to substitute for stewards and judges in the event that an absence is unavoidable.

Issue Area 3: The Racing Commission Lacks The Necessary Controls For Revenues And Expenditures For The WV Breeder's Classic

West Virginia Code §19-23-13, as amended, gives the West Virginia Racing Commission authority to expend excess moneys from unredeemed horse racing pari-mutuel tickets as purse money in any race conditioned exclusively for West Virginia bred or sired horses. The West Virginia Breeder's Classic race began in 1987. In 1987 through 1997, $300,000 of excess unredeemed pari-mutuel funds were transferred into a separate account and were used for promotional activities and purses for stakes races for the West Virginia Breeder's Classic. Beginning in 1997, video lottery proceeds established in §29-22A-10 of the Code allows the first $800,000 deposited into the separate account "shall be used by the commission for promotional activities, advertising, administrative costs and purses for the West Virginia thoroughbred breeders classics..."

The Breeder's Classic has received funding from two sources: First, prior to September 1997, the Unredeemed Pari-Mutuels Account provided funding. The unredeemed pari-mutuel money shall be deposited into a special account established under section §19-23-13 of the Code. §19-23-13(a) states in part:

All such moneys shall be deposited by the racing commission in a banking institution of its choice in a special account to be known as "West Virginia Racing Commission Special Account-Unredeemed Pari-Mutuel Tickets".

A second source of funding, beginning in July 1997, came from the video lottery. West Virginia Code §29-22A-10(6), as amended, gives the Breeder's Classic one per cent of net terminal income to be used for purses. §29-22A-10(6) states:

The West Virginia thoroughbred breeders classic shall receive one percent of the net terminal income which shall be used for purses. The moneys shall be deposited in the separate account established for the classic under section thirteen [§19-23-13], article twenty-three, chapter nineteen of this code;

That Code section, §19-23-13(6), states:

beginning on the first day of July, one thousand nine hundred ninety-seven, those funds deposited into the separate account previously dedicated solely to the West Virginia thoroughbred breeders classic...

WV Thoroughbred Breeder's Classic Local Bank Account Questioned

The separate account as required by §29-22A-10(6) and §19-23-13(6) for the lottery proceeds is titled WV Thoroughbred Breeder's Classic and is maintained in a local banking institution in Martinsburg. (West Virginia Racing Commission has 33 separate accounts in various banking institutions. See Appendix A). The Code is clear in §19-23-13(a) that allows the Commission to establish a local bank account in a "banking institution of its choice" for depositing unredeemed pari-mutuels. However, the Code [§19-23-13(6)] does not specify the lottery proceeds for the Breeder's Classic be deposited into a "banking institution of its choice". The Code states the moneys will be deposited into a "separate account".

The Legislature used explicit language, specifically "banking institution of its choice" authorizing the Commission to establish other local bank accounts. The statute's silence regarding the depositing of lottery proceeds into a local bank account for the Breeder's Classic leaves the Legislative Auditor questioning the use of a local bank account. The Legislative Auditor believes the lottery proceeds for the Breeder's Classic should be deposited into a state account established by the State Auditor's Office.

Costs for Promotional Services Questionable - Lack of Written Contract or Agreement

The Code §19-23-13(6)(A) provides $800, 000 for expenditures for the Thoroughbred Breeder's Classic. The Code states in part;

eight hundred thousand dollars deposited in the separate account...shall be used by the commission for promotional activities, advertising administrative costs and purses for the West Virginia thoroughbred breeders classic...

The West Virginia Racing Commission issues checks from the local bank account for the Breeder's Classic expenditures. The checks are signed by the Commission Chairman and Executive Secretary. Checks are issued for Breeder's Classics Purses and for promotion and broadcasting of the Breeder's Classic Races.

The Legislative Auditor reviewed meeting minutes, bank records and canceled checks to determine; (1). the Commission approved an agreement or contract pertaining to the WV Breeder's Classic, LTD., a non-profit corporation; (2.) the amount of agreement and specifications for reimbursement of expenditures and; (3). if reimbursements for expenditures exceeded what was approved by the Racing Commission.

The review of the documents indicated there is no grant agreement or contractual agreement in place between the Racing Commission and the WV Breeder's Classic, LTD. The WV Breeder's Classic, LTD. is reimbursed for: salaries; rent; administration costs; air time for advertising; business travel and entertainment; association dues; office supplies and expenses; subscriptions; postage; and taxes. This corporation submits invoices and receipts to the Racing Commission with its requests for reimbursements. Without a written grant agreement or contractual agreement between the West Virginia Racing Commission and the WV Breeder's Classic, LTD., the Legislative Auditor is unable to determine the appropriateness of these reimbursements for expenditures. If these reimbursements for expenditures were under the oversight of the State Auditor's Office, reimbursement would not be approved without a written agreement specifying criteria for allowable expenditures.

The Director of the Department of Administration's Purchasing Division informed the Cabinet Secretary of the Department of Tax and Revenue on June 27, 1997 that:

"...funds [which] are distributed to the Breeder's Cup group for the purpose of sponsoring a race(s) is not required to be processed through the Purchasing Division. We view this transaction as a Grant..." According to the Purchasing Procedures Manual, Section 1.9F, a grant permits a state agency to receive or direct funds to another organization with specific instructions defined by the originating agency as to how the funds are to be utilized. The state agency granting the funds must not receive a finished deliverable product, or receive a direct service benefit.

The state Code, as amended, does not give the West Virginia Racing Commission the authority to issue grants.
However, meeting minutes from September 9, 1997 state that "All advertisements and promotions for the West Virginia Breeders Classics must conform to the required state purchasing procedures." The 1998 Purchasing Manual states:

All grants that are issued to 'non-profit' or 'not for profit' entities shall be processed by using a grant contract. On the WVFIMS cover sheet, the grant should be identified as Class IV, an unlimited dollar amount transaction. This cover sheet will be attached to the contract and invoice. The order must clearly be labeled a "GRANT."

The West Virginia Racing Commission has failed to conform to required state purchasing procedures, even though the necessity of conforming to them was discussed in meetings. No contract has been produced by the West Virginia Racing Commission for review by the Legislative Auditor. Purse money is paid directly to the host track (PNGI Charles Town Races) by the Commission. The race is aired on the ESPN network. Promotional fees for the Breeder's Classic were paid for in yearly reimbursements to a non-profit corporation, West Virginia Breeder's Classics, LTD. beginning in September 1995. Amounts and dates of reimbursements are listed in Table 4.

Table 4 - Reimbursements To WV Breeders Classics, LTD.
DateCheck Number AmountSupporting Invoices
Source: 1998 PERD analysis of Racing Commission documents.

Expenditures for the West Virginia Breeder's Classic appear in Appendix B.

Review of Minutes And Correspondence

The Breeder's Classic, LTD. group works in conjunction with the track management's Racing Secretary Office by setting up the conditions for the Breeder's Classic races, set up the program and set entry and nomination fees. The first request by WV Breeder's Classic, LTD. for reimbursement of expenses incurred in August 1990. According to the West Virginia Racing Commission's Director of Audits:
This reimbursements of requests began in 1990 or 1991. [The WV Breeders Classic, LTD.] submitted invoices to the Racing Commission requesting reimbursements for expenses in connection with the Breeder's Classic. In a letter from the Director of Audits to the president of the WV Breeder's Classic, LTD., dated August 22, 1990, the Director states:
Since the Racing Commission is the steward and overseer of this three hundred thousand dollar annual fund and is a state agency subject to the state's guidelines on making expenditures for goods and services and hiring personnel, it cannot reimburse the [non-profit corporation] for their expenditures.
In a letter from the president of the WV Breeders Classic, LTD. to the Chairman of the West Virginia Racing Commission, dated March 25, 1991, the president states:
As you are aware, [the Director of Audits] will not reimburse us for money spent unless you advise him to do so. Therefore I am asking your help to get whatever needs to be done completed so that everybody will be satisfied.

The Commission decided to reimburse these requests beginning in 1995 against the advice of its Director of Audits. There is no written contract or grant agreement between the West Virginia Racing Commission and this non-profit corporation. The following is an excerpt from the December 18, 1987 Racing Commission meeting minutes:

A thorough discussion was then held relative to the West Virginia Breeder's Cup and its continuance in the year 1988. After thorough discussion of all matters, upon motion duly made, seconded and carried, it was resolved that $250,000 from the unredeemed pari-mutuels account be allocated for the Breeder's Classic for the year 1988, and the Chairman was directed to communicate this information to [name deleted], President of the West Virginia Breeders Classic, LTD.

It is not clear in the minutes what role the non-profit organization would take in the Breeder's Classic. According to meeting minutes from January 9, 1989:

A thorough discussion was held relative to the West Virginia Breeder's Cup and its continuance in the year 1989. After a thorough discussion of all matters, upon motion duly made, seconded and carried, it was resolved that$250,000 from the unredeemed pari-mutuel account be allocated for the Breeders' Classic for the year 1989.

No discussion referred to the non-profit corporation in this or following years. During the March 9, 1990 meeting, the Commission held a discussion relative to the Breeders' Classic. "It was resolved that...and $250,000 for the Breeders Classic and $50,000 for ESPN would come from the unredeemed pari-mutuels account." Again during the January 10, 1991 meeting:

A thorough discussion was then held relative to the West Virginia Breeders' Cup and its continuance in the year 1991. After a thorough discussion of all matters, upon motion duly made, seconded and carried, it was resolved that $250,000 from the unredeemed pari-mutuel account be allocated for the Breeders' Classic for the year 1991. Also $50,000 will be allocated for the ESPN for the Breeders' Classic race for 1991.
No mention is made in the minutes of this meeting of the WV Breeders Classic, LTD.'s March 26, 1991 request for reimbursement.

During the September 9, 1993 Commission meeting, the WV Breeders Classic, LTD. was again mentioned. Recorded meeting minutes show that:

A discussion was then held on the West Virginia Breeders Classics. Upon Motion duly made, seconded and carried it was agreed that Joseph Cuomo, Director of Audits would prepare a letter to Mr. [name deleted], President of the WV Breeders Classic, LTD. on the estimated amount of money that will be available next year.

During the January 18, 1995 meeting, the Racing Commission's discussion on invoices submitted by the non-profit corporation's president were incomplete. Apparently, the Commission did approve $55,000 for the ESPN fee. The amount of the check to be submitted by the Commission, to the WV Breeders Classic, LTD. is unclear.

During the April 23, 1996 Racing Commission meeting:
The WV Breeders Classic, LTD. submitted a letter stating intention to expend $142,500.00 for advertising and promotions for the 1996 event. Upon motion, seconded and carried, it was directed that a letter be sent stating that a detailed breakdown of the amount is required before the Racing Commission can further consider the matter. Also, no expenditures can be made or reimbursed unless all state bidding and/or purchasing requirements are met, as well as subjecting all proposed expenditures to the Racing Commission for prior approval.

The April 1996 Racing Commission meeting is the first time the Commission discussed state requirements for purchasing. It is also the first time the Commission requested documentation from the WV Breeder's Classic, LTD. for reimbursement of expenses in meeting minutes. The meeting minutes state several times, that thorough discussions were held regarding the Breeders Classic, however, the content of these discussions were not recorded.


The funding for the West Virginia Breeder's Classic Races provides the thoroughbred industry with a racing program where the purses paid to winners range from $35,000 to $150,000. The expenditures that are reimbursed to the WV Breeder's Classic, LTD. are currently questionable due to the Commission's failure to enter into an agreement or contract with the WV Breeders's Classic, LTD. detailing what cost will be reimbursed. The Racing Commission has taken some action to account for these reimbursements by requesting a budget for the year of 1999 from the Breeder's Classic, LTD. However, the Racing Commission needs to determine: what type of agreement is needed (grant, contractual and professional or promotional); the types of allowable costs to be reimbursed to WV Breeders Classic, LTD. and; the maximum amount the WV Breeders Classic, LTD. will be reimbursed for their services. All state agencies are required by the State Purchasing Division to have written agreements or contracts that clearly state what is expected by the vendor when the amount exceeds $10,000.

The Code [§19-23-13] allows the use of a local banking institution for the unredeemed pari-mutuels funds. The Commission has interpreted that the video lottery proceeds also qualify to be deposited into a local banking institution. However, the Legislative Auditor believes the Code does not authorize the lottery proceeds dedicated to the Breeder's Classic be deposited into a banking institution of its choice. The funds should be deposited into a state account established by the State Auditor's Office .

Recommendation 6:

The West Virginia Racing Commission should immediately comply with the West Virginia State Purchasing Division's rules and enter into a written agreement with the West Virginia Breeders Classic, LTD. The Racing Commission should contact the Purchasing Division of the Department of Administration to determine if the promotional services rendered by the West Virginia Breeders Classic, LTD. qualify as a sole source vendor. If the services provided by the vendor do not qualify as a sole source, then the Racing Commission should be required to seek bids for the services.

Recommendation 7:

The West Virginia Racing Commission should promulgate Legislative Rules pertaining to promotional expenditures for the West Virginia Breeders Classic or any other expenditures for stakes races paid from any funds controlled by the Commission.

Recommendation 8:
The Racing Commission should immediately close the local bank account for the Breeder's Classic funds and transfer the balance and any future proceeds into a state established account with State Auditor's Office.

Recommendation 9:

If the Legislature wishes for the Racing Commission to be allowed to deposit the lottery proceeds for the Breeder's Classic into a banking institution of its choice, then the Legislature should consider amending §19-23-13(6) to so allow.