Update of the


In Compliance with 2 Recommendations
Partial Compliance with 1 Recommendation
Non-Compliance with 4 Recommendations

Performance Evaluation and Research Division
Building 1, Room W-314
State Capitol Complex

(304) 347-4890

October 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 to assure that the Commission's regulations are followed and monitored by Commission staff. However, the Commission placed the security function with Commission auditors and track employed security staff.

The Security Director and inspectors are the law enforcement section of the Racing Commission. Their lack of presence requires the Commission to rely upon track management and on individuals not trained in law enforcement. Security is needed to: deliver notice of hearings; investigate violations; perform shakedowns and; assure that the tracks are complying with the underage gambling prohibition.

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.

Recommendation 1:

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

Level of Compliance:Non-Compliance

The Racing Commission agreed with the Legislative Auditor that it is essential to have their own security positions at the racetracks. The Commission has requested funding for a Security Director in it's Fiscal Year 2000 Budget Appropriation Request. The Commission is unable to hire a Director of Security, more security officers or investigators due to budget constraints. The Secretary of Administration notified the Racing Commission Chairman, regarding the Commission's request for the reinstatement of five security positions, that: A request to add full time equivalents is inconsistent with the overall goal of the Governor to achieve "better, not bigger" government. It is the opinion of the Legislative Auditor that the positions are justified and required by the West Virginia state Code, as amended. The Racing Commission has no persons on staff with the training or education to fulfill the security requirements of their governing statute. This severely limits the Commission's ability to regulate and supervise the industry.

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 annual or sick leave benefits that are provided to all full time state employees because of the Commission's method of wage payment. These employees are members of the state retirement system and participate in the state insurance program.

These employees suffer wage losses when it is necessary for them to be off of work. The employees are not able to apply accrued leave to pay for insurance premiums when they retire. They are also unable to apply accrued leave to their years of service, which increases monthly annuity. The lack of accrued leave has a detrimental impact of the Racing Commission's state employees. The Legislative Auditor is concerned that the integrity of the industry is jeopardized by the lack of benefits. Since employees cannot take a vacation or a sick day without diminishing their pay, a situation exists where Commission employees may become vulnerable to unethical influences.

Recommendation 3:

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

Level of Compliance:Non-Compliance

Additional funding may be needed to provide sick and annual leave benefits to Commission employees. In the event a per diem employee is absent on a race day, the Commission must hire a substitute in order for the races to be legal. The Commission maintains that this requires additional funding since they will pay substitutes and the former per diem employee in the event of an absence.
Recommendation 4:

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

Level of Compliance:Non-Compliance

The Commission reported to the Legislative Auditor that: Our current records could be adapted to indicate daily hours worked. However, the Commission has not adapted these records.
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.

Level of Compliance:In Compliance

The Racing Commission does utilize certified stewards and judges as backups in the event of a regular employees absence.

Issue Area 3:The Racing Commission Lacks the Necessary Controls for Revenues and Expenditures for the WV Breeder's Classic.

The West Virginia Breeder's Classic began in 1987 and is a stakes race program for West Virginia bred or sired horses. The Breeders Classic has received funding form two different sources. Originally, funding came from the unredeemed pari-mutuels account. Since 1997, funding comes from video lottery. The Racing Commission places these funds in a separate, local bank account. From this account, the Commission issues checks related to the West Virginia Breeder's Classic. No expense related to the Breeder's Classic were processed through the State Auditor at the time of the 1999 performance review.

Since 1995, the West Virginia Racing Commission reimburses a non-profit corporation, the WV Breeder's Classic, LTD. for expenses related to the promotion of the Breeder's Classic races. There is no grant agreement or contractual agreement between the West Virginia Racing Commission and the corporation. The Legislative is unable to determine the appropriateness of the expenditures without an agreement in place. If these reimbursements and expenditures were under the oversight of the State Auditor, reimbursement would not be approved without a written agreement specifying the criteria for allowable expenses. The West Virginia Racing Commission has failed to conform to state purchasing guidelines.

The funding for the West Virginia Breeder's Classic races provides the thoroughbred industry with a racing program where purses paid to winners range from $35,000.00 to $150,000.00. The expenditures that are reimbursed to the WV Breeder's Classic, LTD. were determined to be questionable due to the Commission's failure to enter into any type of contractual agreement. The Racing Commission has taken some action to rectify this situation by requesting a budget for 1999 from the Breeder's Classic, LTD.

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 Breeder's 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 Breeder's 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.

Level of Compliance:In Compliance

The Racing Commission complied with the West Virginia Purchasing Division's rules and entered into a written agreement with the West Virginia Breeder's Classic, LTD., in July 1999. The West Virginia Purchasing Division approved the West Virginia Breeder's Classic, LTD. as a sole source vendor in August 1999.

For and during the initial contract year, the Racing Commission agreed to pay the Breeder's Classic, LTD. One Hundred Sixty-eight Thousand Dollars ($168,000.00) for all services rendered. For each contract year in the future, the Racing Commission will pay the Breeder's Classics LTD. One Hundred and Fifty Thousand Dollars ($150,000.00) for services. The Racing Commission will reimburse Breeder's Classic LTD. for necessary third party purchases approved in advance by the Racing Commission. All payments will be made to the Breeder's Classics, LTD. on a monthly basis.

Recommendation 7:

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

Level of Compliance:Partial Compliance

Counsel for the Legislative Rule Making and Review Committee informed the Legislative Auditor that the Commission had not filed rules pertaining to the WV Breeder's Classic or any other stakes race as of August 30, 1999. The Commission's opinion is that the contractual agreement with West Virginia Breeder's Classic LTD. achieves "the desired goals and objectives" of the recommendation.

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 the State Auditor's Office.

Level of Compliance:Non-Compliance

The Commission has not closed the outside bank account, though it did request an opinion from the State Treasurer regarding the Commission's statutory ability to maintain this outside bank account. (See Appendix A) The Commission feels that if the Legislature does not want these funds in an outside bank account, it should amend the Code.