A performance audit of the Arizona Racing Commission

              STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
A PERFORMANCE AUDIT
OF THE
ARIZONA RACING COMMISSION
MARCH 1982
A REPORT TO THE
ARIZONA STATE LEGISLATURE
REPORT 82- 2
DOUGLAS R. NORTON. CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
Members of the Arizona L e g i s l a t u r e
The Honorable Bruce Babbitt, Governor
R r . Chet E. Johns, Chairman
Arizona Racing Commission
Transmitted herewith is a report of the Auditor General, A Performance
Audit of the Arizona Racing Commission. This report is i n response t o a
September 11, 1980, r e s o l u t i o n of the J o i n t L e g i s l a t i v e Budget Committee.
The blue pages present a summary of t h e r e p o r t ; a response from the
Arizona Racing Commission is found on the yellow pages preceding the
appendix.
My s t a f f and I w i l l be pleased t o d i s c u s s o r c l a r i f y items i n the report.
Respectfully submitted,
~ o u ~ y Ra. s N orton
Auditor General
S t a f f : William E. Thomson
Dawn S i n c l a i r
Mary 0 ' Connor
Samuel L. Harris
William A. Wright
Enclosure
1 1 1 WEST MONROE @ SUITE 600 PHOENIX, ARIZONA 85003 ( 602) 255- 4385
O F F I C E OF THE AUDITOR GENERAL
A PERFORMNCE AUDIT OF THE
ARIZONA RACING COMMISSION
A REPORT TO THE
ARIZONA STATE LEGISLATURE
REPORT 82- 2
TABLE OF CONTENTS
SUMMARY
INTRODUCTION AND BACKGROUND
FINDINGS
FINDING I
Problems e x i s t i n the procedures and operations of
the S t a t e ' s r a c e t r a c k s which could a f f e c t t h e i n t e g r i t y
of racing.
Track Operations - Commercial Horse Tracks
Track Operations - County F a i r Race Meets
Track Operations - Dog Tracks
CONCLUSIONS
RECOMMENDATIONS
FINDING I1
Comaission c o n t r o l over t h e mutuel function could be
increased and c o s t s reduced by $ 37,000 if needed
changes are made.
CONCLUSION
RECOMMENDAT IONS
FINDING 111
The S t a t e may l o s e approximately $ 150,000 t h i s year
i n revenues because s a l e s t a x is n o t a s s e s s e d on
animals s o l d i n c l a i m i n g r a c e s .
CONCLUSION
RECOMMENDATIONS
FINDING I V
Commission d i s c i p l i n a r y hearings a r e not conducted
i n a timely manner. A s a r e s u l t , undesirable persons
a r e allowed t o p a r t i c i p a t e i n racing.
Page
i
1
CONCLUSION
RECOMMENDATION
FIIJDING V
Page
3 7
Controls over the licensing process have been s i g n i f i c a n t l y
improved. However, some additional improvements are
still needed.
C ONC LUSI ON
RECOMMENDATIONS
FINDING V I
The Commission has not taken timely action t o recover
funds it granted improperly.
CONCLUSION
RECOMMENDATIONS
FINDING V I I
Actions have been taken t o correct deficiencies i n the
Commission's programs to control i l l e g a l drugs.
CONCLUSION
REC Om43NDATIONS
FIIJDING V I I I
Action has been taken to improve compliance with the
Open Meeting Law and the Workmen's Compensation Law.
However, the Commission may now be violating s t a t u t e s
pertaining to the destruction of public records.
CONC LUSI ON
RECOMMENDATION
WRITTEN RESPONSE TO THE AUDITOR GENERAL REPORT
AP PEN DI X
Legislative Council memorandum 0- 82- 3,
February 18, 1982
SUMMARY
The Office of the Auditor General has conducted a performance a u d i t o f t h e
Racing Commission i n response t o a September 11, 1980, r e s o l u t i o n of the
J o i n t L e g i s l a t i v e Budget Committee and i n accordance with the provisions
of Arizona Revised S t a t u t e s ( A. R. S.) S41- 1279 e t seq.
The Racing Commission was c r e a t e d by t h e L e g i s l a t u r e i n 1949. The
Commission is comprised of f i v e Commissioners who serve without pay.
Commissioners a r e appointed by t h e Governor and serve six- year terms.
The p r i n c i p a l functions o f t h e Commission a r e the l i c e n s i n g of r a c i n g
personnel, granting of r a c e permits f o r commercial greyhound and horse
race meets and g r a n t i n g of horse r a c i n g permits t o county racing
a s s o c i a t i o n s .
The commission was previously reviewed by t h e Office o f t h e Auditor
General i n Report 81- 5 A Performance Audit of t h e Arizona Racing
Commission, which was released i n April 1981. A t t h a t time it was noted
t h a t Report 81- 5 was t o be t h e first of two r e p o r t s on t h e Commission and
t h a t work on t h e second r e p o r t would commence as a u d i t staff resources
became a v a i l a b l e . This r e p o r t c o n s t i t u t e s t h a t second report.
During t h e course o f t h e a u d i t we reviewed the procedures used by t r a c k
and Commission o f f i c i a l s i n a number of o p e r a t i o n a l a r e a s , as w e l l as
Commission policy and a c t i o n s concerning t r a c k o p e r a t i o n s , t o determine i f
a c t u a l p r a c t i c e was i n compliance with s t a t u t e s and a d m i n i s t r a t i v e r u l e s
and r e g u l a t i o n s . T h i s review encompassed the t r a c k operations of
- Commercial horse t r a c k s ;
- County f a i r race meets; and
- Dog t r a c k s .
Each a r e a was found t o have procedures t h a t 1 ) do not comply with r u l e s
o r r e g u l a t i o n s o r 2) need improvement t o ensure the i n t e g r i t y of r a c i n g
i n Arizona.
Corrective a c t i o n is needed i n t h e operations of t h e two commercial horse
t r a c k s we observed. In order t o prevent improper a c t i o n s by jockeys, the
Commission should 1) amend its a d m i n i s t r a t i v e r u l e s t o p r o h i b i t jockeys
from b e t t i n g on days they r i d e , except through the owners of and on the
horses they r i d e and 2) ensure t h a t permittees d o n o t allow improper
contact between jockeys and t h e public at one of the t r a c k s . ( see page 5)
Procedures f o r weighing jockeys a r e not i n compliance with Commission
r u l e s a t e i t h e r t r a c k . F u r t h e r , the stewards at one t r a c k a r e aware of
the noncompliances but have f a i l e d t o t a k e c o r r e c t i v e a c t i o n . F i n a l l y ,
s c a l e s used t o weigh jockeys at both t r a c k s were u n c e r t i f i a b l e by the
Department of Administration - Weights and Measures Division, and one
s c a l e may have been tampered with. We recommend t h a t t h e Commission take
the necessary a d m i n i s t r a t i v e actions-- including d i s c i p l i n a r y a c t i o n
a g a i n s t stewards f a i l i n g t o enforce Commission rules-- to c o r r e c t the
problems i d e n t i f i e d . ( s e e page 5)
S i g n i f i c a n t problems e x i s t e d i n t h e t r a c k operations of t h e county f a i r
race meets with regard t o the procedures used f o r weighing jockeys.
However, t h e Commission has s i n c e taken c o r r e c t i v e a c t i o n s on t h i s
matter. Security a t the receiving barn still needs t o be improved by
developing formal g u i d e l i n e s f o r the county f a i r race meets explaining the
d u t i e s and r e s p o n s i b i l i t i e s o f t h e peace o f f i c e r s . ( see page 11)
Commission a c t i o n is needed a t t h e dog t r a c k s t o see t h a t an adequate
amount of samples from winning dogs a r e obtained i n a secure a r e a and
submitted f o r t e s t i n g . Postrace sampling procedures should be implemented
t o supplement prerace sampling, including enforcement of the
a d m i n i s t r a t i v e r u l e t h a t r e q u i r e s permittees t o provide a receiving p i t
area. The p r a c t i c e of n o t s u b m i t t i n g a l l samples obtained from winning
dogs should a l s o be reviewed t o determine i f it meets Commission i n t e n t .
F u r t h e r , the Commission needs t o ensure t h a t weigh- in weights a r e posted
a t Tucson Greyhound Park and should consider amending its r u l e r e q u i r i n g
c e r t i f i c a t i o n of s c a l e s t o allow s e r v i c i n g by r e g i s t e r e d s e r v i c e agencies
t o s u f f i c e . ( s e e page 14)
The Commission's use of f u l l - t i m e mutuel s u p e r v i s o r s a t t h e seven t r a c k s
with f u l l y automated t o t a l i s a t o r equipment is a m i s a l l o c a t i o n of
resources. The t r a d i t i o n a l d u t i e s performed by t h e s u p e r v i s o r s do not
provide needed c o n t r o l s over the computerized operations and a r e , i n f a c t ,
d u p l i c a t i v e of functions performed by t h e computers. Appropriate review
procedures could be performed by a person with t h e necessary background i n
reviewing computer c o n t r o l s , t h u s e l i m i n a t i n g mutuel supervisor p o s i t i o n s
a t t h e t r a c k s with f u l l y automated t o t a l i s a t o r systems, at a net savings
of $ 37,000. ( see page 21)
The S t a t e is f a i l i n g t o a s s e s s s a l e s t a x on claiming races d e s p i t e t h e
f a c t t h a t such s a l e s may f a l l under the s t a t u t o r y provisions f o r these
taxes. F a i l u r e t o a s s e s s t h i s t a x may c o s t t h e S t a t e approximately
$ 150,000 t h i s year i n l o s t revenue and the Department of Revenue is now
reviewing the matter. To e l i m i n a t e any question on t h e i s s u e , we
recommend s t a t u t o r y changes be made t o s p e c i f i c a l l y provide f o r c o l l e c t i n g
s a l e s t a x on claiming races. A t l e a s t 14 other s t a t e s c o l l e c t s a l e s t a x
on claiming r a c e s . ( see page 27)
The Commission has f a i l e d t o t a k e timely a c t i o n on c a s e s r e f e r r e d t o it by
the stewards. A s a r e s u l t , i n d i v i d u a l s d i s c i p l i n e d by the stewards f o r
s e r i o u s v i o l a t i o n s a r e allowed t o resume racing before f i n a l d i s p o s i t i o n s
a r e reached. We recommend t h a t t h e L e g i s l a t u r e 1 ) amend A. R. S. S5- 104,
subsection E, t o allow stewards t o suspend l i c e n s e s f o r up t o 60 days
and/ or 2) a p p r o p r i a t e funds t o allow t h e Commission t o appoint a hearing
o f f i c e r . Such funds could l a r g e l y be derived by e l i m i n a t i n g unneeded
mutuel p o s i t i o n s . ( see page 31)
One o f t h e most s e r i o u s findings o f t h e previous performance a u d i t was
t h a t the Commission was not f u l f i l l i n g its s t a t u t o r y r e s p o n s i b i l i t y t o
r e g u l a t e racing p a r t i c i p a n t s through the l i c e n s i n g process. Since t h e
time of t h a t r e p o r t , c o n t r o l s over the l i c e n s i n g process have been
s i g n i f i c a n t l y improved, although some f u r t h e r improvements a r e still
needed. S p e c i f i c a l l y , t h e Commission needs t o 1 ) more f u l l y implement
the procedures a v a i l a b l e t o prevent unlicensed a c t i v i t y and 2) ensure
t h a t - a l l l i c e n s i n g procedures a r e followed. ( see page 37)
iii
Auditor General Report 81- 5 disclosed t h a t t h e Commission had improperly
granted approval t o permittees t o withhold c a p i t a l improvement funds and
had, i n the past y e a r s , made i l l e g a l loans t o l i c e n s e e s . Also, the
Commission had never determined whether funds from t h e county f a i r s and
r a c i n g breeders1 award fund should be used t o pay f o r t h e s a l a r y o f a
manager- supervisor. Once n o t i f i e d of these problems, t h e Commission did
not take timely a c t i o n t o recover the funds o r c o r r e c t the s i t u a t i o n s .
( see page 41)
The previous review a l s o found a number of d e f i c i e n c i e s i n t h e
Commission's programs t o c o n t r o l i l l e g a l drug usage i n race animals. The
Commission has taken a c t i o n t o c o r r e c t d e f i c i e n c i e s i n t h e procedures used
t o 1 ) o b t a i n samples, 2) t a k e blood samples, and 3) s e l e c t and evaluate
t h e c o n t r a c t chemist. Due t o inadequate records we could n o t e v a l u a t e
Commission a c t i o n s t a k e n w i t h regard t o t h e t a k i n g o f a d d i t i o n a l samples.
We recommend t h a t t h e Commission 1 ) improve its records regarding drug
t e s t s and 2) continue t o monitor the performance o f t h e o f f i c i a l racing
chemist. ( see page 45)
Auditor General Report 81- 5 found t h a t 1 ) stewards' hearings did not
comply with the public n o t i c e requirements of the Open Meeting Law, and
2 ) the Commission did not enforce an a d m i n i s t r a t i v e r u l e concerning the
Workmenls Compensation Law. Although the Commission has s i n c e taken
a c t i o n t o improve compliance i n both a r e a s , Commission employees may now
be v i o l a t i n g S t a t e s t a t u t e s by not r e t a i n i n g tape- recorded minutes of the
stewards1 hearings. These minutes should be e i t h e r 1) r e t a i n e d
i n d e f i n i t e l y o r 2) t r a n s c r i b e d before the tape recordings a r e erased.
( see page 49)
INTRODUCTION AND BACKGROUND
The Office o f the Auditor General has conducted a performance audit of the
Racing Commission i n response t o a September 11, 1980, resolution of the
Joint Legislative Budget Committee and i n accordance with the provisions
of Arizona Revised S t a t u t e s ( A. R. S.) $ 41- 1279 e t seq.
The Racing Commission was created by the Legislature i n 1949. The
Commission is comprised of f i v e Commissioners who serve without pay.
Commissioners are appointed by the Governor and serve six- year terms.
The principal functions of the Commission include t h e l i c e n s i n g of racing
personnel, granting o f racing permits f o r commercial greyhound and horse
race meets and granting o f horse racing permits t o county racing
associations.
The Commission is funded by appropriations from the Legislature.
Expenditures f o r f i s c a l years 1976- 77 through 1980- 81 and estimated
expenditures f o r f i s c a l year 1981- 82 are shown i n Table 1.
TABLE 1
ACTUAL EXPENDITURES FOR RACING COMMISSION FOR
FISCAL YEARS 1976- 77 THROUGH 1980- 81 AND ESTIMATED EXPENDITURES FOR FISCAL YEAR 1981- 82 a
Full- time equivalent
positions 16.5, 17.5 - 20.0 - 20.0 36.4 40.9
Expenditures :
Personal services $ 356,175 $ 377,810 $ 434,175 $ 461,315 $ 577,100 $ 693,700
Employee- related 49,491 62,541 71,388 71,726 98,500 130,400
Professional and outside
s e r v i c e s 91,630 104,636 105,956 140,684 171,600 268,500 •
Trave 1 :
In- State 59,340 63,719 56,602 72,098 99,700 107 , 500
Out- of- State 1,700 4,607 5,500 4,822 4,400 5,500
Other operating expenses 26,127 36,420 35,938 40,890 53,900 59,200
Equipment
Total
* Excludes expenditures o f $ 15,100 i n 1980- 81 and estimated
expenditure of $ 53,700 i n 1981- 82 . f o r county f a i r racing
administration. These are nonappropriated funds representing
0.5 percent of t o t a l r e c e i p t s i n the County Fairs Racing and
Breeders Award Fund. The County Fairs Racing Administration
program supervises the funds d i s t r i b u t e d t o county f a i r s t o
ensure t h a t subsidies are spent i n accordance with Commission
guidelines.
The Commission was previously reviewed by the Office of the Auditor
General i n Report 81- 5 A Performance Audit of the Arizona Racing
Commission, which was released i n April 1981. A t t h a t time it was
noted t h a t Report 81- 5 was t o be the first of two reports on the
Commission and t h a t work on the second report would commence a s
audit s t a f f resources became a v a i l a b l e . This report c o n s t i t u t e s
t h a t second report.
In reviewing areas not previously addressed i n Report 81- 5, we found
improvements a r e needed with respect t o
1. Daily operations of the race tracks;
2. Supervision of mutuel a c t i v i t i e s ;
3. F a i l u r e t o c o l l e c t t r a n s a c t i o n p r i v i l e g e taxes on t h e s a l e s of
horses through claiming r a c e s ; and
4. Timeliness o f t h e Commission's d i s c i p l i n a r y processes.
The Commission has made s i g n i f i c a n t progress i n c o r r e c t i n g the majority of
the d e f i c i e n c i e s i d e n t i f i e d i n t h e previous r e p o r t . Nevertheless, some
areas still need improvement, and it appears t h a t the Commission
unnecessarily delayed some c o r r e c t i v e a c t i o n s .
The Auditor General expresses g r a t i t u d e t o the Racing Commission and its
s t a f f f o r t h e i r cooperation and a s s i s t a n c e during t h e course o f t h e a u d i t .
FINDING I
PROBLEMS EXIST I N THE PROCEDURES AND OPERATIONS OF THE STATE'S RACE TRACKS
WHICH COULD AFFECT THE INTEGRITY OF RACING.
During t h e course of t h e a u d i t we reviewed t h e procedures used by t r a c k
and Commission o f f i c i a l s i n a number of o p e r a t i o n a l a r e a s , as well a s
Commission policy and a c t i o n s concerning t r a c k o p e r a t i o n s , t o determine i f
a c t u a l p r a c t i c e was i n compliance with s t a t u t e s and a d m i n i s t r a t i v e r u l e s
and r e g u l a t i o n s . This review encompassed t h e t r a c k operations of
- Commercial horse t r a c k s ;
- County f a i r r a c e meets; and
- Dog t r a c k s .
Each a r e a was found t o have procedures t h a t 1 ) do not comply with r u l e s
o r r e g u l a t i o n s o r 2) need improvement t o ensure the i n t e g r i t y of r a c i n g
i n ~ r i z o n a .
TRACK OPERATIONS - COMMERCIAL HORSE TRACKS
During the time of our a u d i t two commercial horse t r a c k s , Turf Paradise
and R i l l i t o Downs, were i n operation. Reviewing the operations of these
t r a c k s we noted t h e following d e f i c i e n c i e s :
- The Commission r u l e governing b e t t i n g by jockeys does not
adequately c o n t r o l a g a i n s t improper a c t i o n s ;
- Jockeys a r e not properly i s o l a t e d from contact with t h e public a t
R i l l i t o Downs;
- Jockeys a r e n o t p r o p e r l y weighed before races at R i l l i t o Downs
and the stewards have knowingly allowed t h i s p r a c t i c e ;
- Jockeys a r e not properly weighed- out a f t e r r a c e s at e i t h e r Turf
Paradise o r R i l l i t o Downs;
- Weight variances a r e not properly posted o r announced; and
- Scales used t o weigh jockeys at both t r a c k s were u n c e r t i f i a b l e by
t h e Department of Administration - Weights and Measures
Division. F u r t h e r , one s c a l e may have been tampered with.
Betting by Jockeys
Betting by jockeys is r e s t r i c t e d by Rule R4- 27- 203. Q which s t a t e s :
" No jockey s h a l l bet on any race except through the
owner of and on t h e horse which he rides...."
According t o t h e Commission, t h i s r u l e a p p l i e s only t o the time p r i o r t o
f u l f i l l m e n t of the jockeyts engagements. Jockeys a r e allowed t o bet on
any race a f t e r f u l f i l l i n g t h e i r engagements and on days on which they do
not r i d e .
The Commission's c u r r e n t r u l e does not c o n t r o l a g a i n s t jockeys improperly
a f f e c t i n g t h e outcome of a race. According t o t h e Commission chairman,
r e s t r i c t i o n s on b e t t i n g p r i o r t o f u l f i l l i n g r i d i n g engagements a r e
intended t o prevent jockeys from b e t t i n g on horses o t h e r than t h e i r own
which might r e s u l t i n t h e " throwingn of a race. Permitting jockeys t o bet
a f t e r f u l f i l l i n g t h e i r engagements c r e a t e s t h e p o t e n t i a l f o r a jockey t o
receive money and place b e t s f o r other jockeys who have - not f u l f i l l e d
t h e i r engagements. Since jockeys a r e supposed t o be i s o l a t e d from
c o n t a c t s with other persons during the races only other jockeys who have
f i n i s h e d t h e i r races could place b e t s f o r them. ( see page 7 )
F i f t e e n of the twenty- seven s t a t e s r e g u l a t i n g h o r s e r a c i n g have g r e a t e r
r e s t r i c t i o n s on jockeys b e t t i n g than does Arizona:
- - Six s t a t e s ( Arkansas, New Hampshire, New Mexico, Oregon, South
Dakota and Wyoming) do n o t a l l o w jockeys t o b e t on any r a c e s ;
- Eight s t a t e s ( Colorado, Idaho, I l l i n o i s , Montana, New York,
Pennsylvania, Washington and Delaware) o n l y a l l o w jockeys t o bet
on h o r s e s t h e y a r e r i d i n g ; and
- - One s t a t e ( ~ e r m o n t ) o n l y a l l o w s jockeys t o bet on days they a r e
not r i d i n g .
Jockeys Are Not Properly I s o l a t e d
From Contact With the Public
Administrative Rule R4- 27- 203. B p r o h i b i t s jockeys from leaving t h e jockey
room p r i o r t o f u l f i l l i n g t h e i r engagements except t o r i d e i n a race.
Access t o t h e jockey room is r e s t r i c t e d t o t h e jockeys, t h e i r a t t e n d a n t s
and the r a c i n g o f f i c i a l s . These procedures a r e designed t o prevent
jockeys from b e t t i n g o r placing b e t s through other persons. Jockeys a r e
allowed t o leave the room t o watch the races from c e r t a i n designated a r e a s
i n which t h e r e should be no opportunity f o r communication with the public.
A t R i l l i t o Downs, jockeys watch t h e r a c e s i n an a r e a near the dismount
s c a l e . This a r e a is separated by only a chain l i n k fence from t h e a r e a
where the public watches the r a c e s . On s e v e r a l occasions jockeys were
observed speaking with the public from t h i s area.
Use of t h i s area by jockeys appears t o circumvent Commission i n t e n t i o n s t o
i s o l a t e jockeys t o prevent improper b e t t i n g a c t i v i t i e s . F u r t h e r , it
appears unnecessary i n t h a t t h e r e is a t e l e v i s i o n i n the jockey room t o
enable them t o watch the races.
Jockeys Are Not Properly Weighed
Before Races a t R i l l i t o Downs
The weight a horse c a r r i e s is a c r i t i c a l f a c t o r i n f l u e n c i n g the outcome of
a h o r s e r a c e . In a mile thoroughbred race a d i f f e r e n c e of one pound can
a f f e c t a h o r s e ' s performance by a s much as one length. Thus, proper and
accurate weighing procedures a r e e s s e n t i a l t o p r o t e c t t h e i n t e r e s t s of t h e
b e t t i n g p u b l i c , owners and t r a i n e r s . However, we found a t R i l l i t o Downs
t h a t 1 ) jockeys a r e not being weighed before each race as r e q u i r e d ,
2) some jockeys a r e improperly allowed t o weigh without c l o t h e s o r g e a r ,
and 3 ) t h e stewards have knowingly allowed these p r a c t i c e s t o occur.
Jockeys are required t o be weighed before each r a c e they r i d e because
t h e i r weights can vary depending upon what they e a t and drink between
races. According t o the Commission's Executive S e c r e t a r y , jockeys can add
s e v e r a l pounds a f t e r the i n i t i a l weigh- in j u s t by t h e amount of l i q u i d s
they consume. Such d i f f e r e n c e s can be s i g n i f i c a n t enough t h a t Turf
Paradise provides f a c i l i t i e s where jockeys can " f l i p , " o r vomit, a f t e r
e a t i n g s o t h a t they w i l l not exceed t h e i r declared weights.
The c l e r k o f s c a l e s at R i l l i t o Downs does not always weigh jockeys before
- each race. In 28 o u t o f 45 i n s t a n c e s ( 62 percent) observed by a u d i t
s t a f f , jockeys who had ridden e a r l i e r i n the day were not required t o be
reweighed before l a t e r races. F u r t h e r , i n another four i n s t a n c e s jockeys
were allowed t o weigh i n one r a c e p r i o r t o the race i n which they rode.
Also, some jockeys at R i l l i t o Downs a r e weighed without g e a r . According
t o t h e Commissionls Executive Secretary a l l jockeys should be weighed with
c l o t h e s and gear* t o r e f l e c t t h e i r a c t u a l weights when r i d i n g . Weighing
withou't c l o t h i n g o r gear can r e s u l t i n a " hidden1' i n c r e a s e of up t o f i v e
pounds once t h e clothing and gear is donned. During our observations two
jockeys were allowed t o weigh without gear.
The stewards a r e aware t h a t required weighing procedures a r e not followed
a t R i l l i t o Downs, but they have not taken c o r r e c t i v e a c t i o n . While
discussing the f a c t t h a t jockeys were not weighed before each r a c e , t h e
stewards advised us t h a t they were aware of the s i t u a t i o n but t h a t such a
procedure had i n t h e past delayed the races.
Commission r u l e s r e q u i r e the stewards t o enforce t h e r u l e s and r e g u l a t i o n s
and s t a t u t e s o f t h e S t a t e of Arizona. Failure t o do so is grounds f o r
d i s c i p l i n a r y a c t i o n .
* Clothing and gear includes boots, pants, t - s h i r t , c o l o r s , saddle,
o v e r g i r t h , undergirth and pad.
Jockeys Are Not Properly
Weighed After Races
Administrative r u l e s require the c l e r k o f s c a l e s t o weigh each jockey
a f t e r the race. I f a jockey does n o t p r e s e n t himself t o be weighed, o r i f
he is more than one pound s h o r t of h i s assigned weight, h i s horse may be
d i s q u a l i f i e d and the jockey fined o r suspended. According t o the
Commission Chairman, postrace weigh- outs a r e necessary t o ensure t h a t a
horse c a r r i e d h i s assigned weight and d i d n o t have an u n f a i r advantage
over other e n t r a n t s . Jockeys weigh i n with t h e i r saddles. Equipment,
including any necessary weights i n the saddle, is made up based on t h i s
weigh- in. The weigh- out ensures t h a t no one removes weights p r i o r t o o r
during the race.
Actual p r a c t i c e does not serve its intended purpose, rendering t h e
postrace weigh- out e s s e n t i a l l y meaningless. Jockeys a t both t r a c k s simply
walk a c r o s s t h e s c a l e , stepping o f f before t h e needle r e g i s t e r s a weight.
The c l e r k checks o f f the weight on a weight s h e e t without v e r i f y i n g it.
According t o the c l e r k o f s c a l e s at R i l l i t o Downs, the weigh- out is a
t r a d i t i o n a l p r a c t i c e and performed only f o r t h e b e n e f i t of the public.
It should be noted t h a t inadequate weigh- in procedures used a t R i l l i t o
Downs compound the problem. Eecause jockeys a r e not weighed i n p r i o r t o
each race it would be impossible t o determine i f a jockey had l o s t weight
even i f weigh- out procedures were properly performed.
Weight Variances Are
Not Properly Announced
Because weight can d i r e c t l y a f f e c t the outcome of a race, jockeys' weights
a r e l i s t e d i n the o f f i c i a l r a c e programs. I f a jockey's weight v a r i e s
from the program weight, Commission r u l e s r e q u i r e t h a t
- The public be informed e i t h e r by public announcement o r posting;
- If t h e jockey is more than two pounds overweight, consent t o r i d e
must be obtained from the owner o r t r a i n e r of the horse; and
- I f t h e jockey is more than seven pounds overweight, consent must
be obtained from the stewards.
These requirements e x i s t so t h a t t h e 1 ) public is aware when wagering of
any weight handicaps, 2) owners o r t r a i n e r s can choose whether they want
t h e i r horses t o carry a handicap, and 3) stewards can determine whether
the jockey should be allowed t o r i d e .
Our review revealed t h a t procedures a t Turf Paradise and R i l l i t o Downs do
not adequately p r o t e c t t h e b e t t i n g public or horse owners and t r a i n e r s .
Weight variances a r e not always announced and when announced a r e not
always c o r r e c t at Turf Paradise. Of t h e ten weight variances observed by
a u d i t s t a f f which were required t o be posted o r announced, one was not
announced and two were i n c o r r e c t l y announced.
A t r a i n e r a t R i l l i t o Downs is " n o t i f i e d " by announcing the variance over
the public- address system r a t h e r than contacting the t r a i n e r . I f the
t r a i n e r does not n o t i f y t h e c l e r k t h a t he does not wish h i s horse t o carry
an overweight jockey, it is assumed t h a t he approves. This procedure does
not ensure t h a t the t r a i n e r l e a r n s o f t h e overweight, s i n c e he may not be
present when weights a r e announced.
Scales Are Not C e r t i f i a b l e
A t our r e q u e s t , Department of Administration - Weights and Measures
Division ( WAM) i n s p e c t o r s t e s t e d t h e s c a l e s at Turf Paradise and R i l l i t o
Downs and found two of them t o be inadequate f o r t h e i r intended uses.
The s c a l e i n t h e jockey room at Turf Paradise, used t o weigh jockeys p r i o r
t o r a c e s , could not be c e r t i f i e d . The s c a l e had been c e r t i f i e d i n October
1981 but r e g i s t e r e d a q u a r t e r pound behind t h e z e r o reading a t r e t e s t i n g
i n February 1982. According t o t h e WAM i n s p e c t o r , it is possible t h a t
someone tampered with the s c a l e s i n c e screws holding on the back of the
s c a l e were loose, and s e v e r a l pieces were found behind the d i a l which did
not belong t h e r e .
The c l e r k o f s c a l e s n o t i f i e d t h e S t a t e steward of the problem. The s c a l e
has been repaired by a r e g i s t e r e d s e r v i c e agency approved by WAM.
The dismount s c a l e at R i l l i t o Downs, used t o weigh jockeys a f t e r t h e r a c e ,
could not be c e r t i f i e d because it exceeded WAM t o l e r a n c e s i n t h e weight
ranges required t o be a c c u r a t e f o r use i n weighing jockeys.
TRACK OPERATIONS - COUNTY FAIR RACE MEETS
During the time of our a u d i t one county f a i r race meet was conducted.
Reviewing t h e o p e r a t i o n s o f t h i s meet we noted t h e following problems:
- Joclteys were not properly weighed before races;
- The p u b l i c , owners and t r a i n e r s and stewards were n o t p r o p e r l y
informed of jockeys who weighed as much a s 13 pounds i n excess of
t h e i r posted weights;
- Procedures were not followed t o prevent improper c o n t a c t s between
jockeys and o t h e r persons;
- One s c a l e used t o weigh jockeys was d e f e c t i v e , and the other was
i n a p p r o p r i a t e f o r use i n weighing jockeys; and
- Security i n the receiving- barn a r e a needed t o be improved.
However, Commission a c t i o n has s i n c e been taken t o c o r r e c t many of these
problems.
Jockeys Are Not Properly Weighed
A s d i s c u s s e d p r e v i o u s l y i n t h i s Finding, jockeys a r e required t o be
weighed before - each race t o ensure t h a t t h e i r weights do not change
between races. Jockeys a r e a l s o required t o be weighed with t h e i r
c l o t h i n g and gear t o r e f l e c t t h e i r a c t u a l r i d i n g weights. ( see page 8)
We found t h a t 1) t h r e e jockeys were never o f f i c i a l l y weighed on one race
day, 2 ) jockeys were weighed only a t t h e beginning of the race day and
not before each race as r e q u i r e d , and 3) almost half of t h e jockeys were
weighed without c l o t h e s o r gear.
Jockey Overweights Not Announced
A s d i s c u s s e d p r e v i o u s l y on page 9, jockeys' weights a r e l i s t e d i n the
o f f i c i a l r a c e programs. I f a jockey's weight v a r i e s from the program
weight, Commission r u l e s require t h a t
- The p u b l i c be informed e i t h e r by public announcement o r posting;
- I f t h e jockey is more than two pounds overweight, consent t o r i d e
must be obtained from the owner o r t r a i n e r of the horse; and
- I f t h e jockey is more than seven pounds overweight, consent must
be obtained from t h e stewards.
Fourteen i n s t a n c e s occurred i n which jockeys' weights varied from those i n
the o f f i c i a l programs. In four of these i n s t a n c e s the public announcement
was not properly made. In one i n s t a n c e the public was informed t h a t a
jockey who was t h i r t e e n pounds overweight ( without c l o t h e s o r gear) was
two pounds overweight. I f properly weighed with clothing and gear, t h i s
jockey could have been a s much a s 18 pounds overweight. Such a d i f f e r e n c e
c o n s t i t u t e s a s i g n i f i c a n t handicap, but the p u b l i c was not informed of
t h i s handicap.
In a d d i t i o n , consent was n o t o b t a i n e d from the 1 ) owners o r t r a i n e r s i n
s i x i n s t a n c e s i n which jockeys were more than two pounds overweight or
2) stewards i n t h r e e i n s t a n c e s i n which jockeys were more than seven
pounds overweight.
Procedures To Prevent
Improper Contacts Not Followed
Contacts between jockeys and other persons a r e supposed t o be s t r i c t l y
c o n t r o l l e d while r a c e s a r e occurring. Commission Rule R4- 27- 203. B.
r e q u i r e s jockeys t o remain i n t h e jockey room between r a c e s u n t i l they
have f u l f i l l e d t h e i r engagements f o r t h e day. No one but the jockeys,
t h e i r a t t e n d a n t s and racing o f f i c i a l s a r e permitted i n the room.
According t o the Commission Executive S e c r e t a r y , t h i s procedure is
intended t o prevent jockeys from placing b e t s through other persons o r
engaging i n o t h e r a c t i o n s t h a t may be undesirable.
We found jockeys were allowed t o leave t h e jockey room p r i o r t o completing
a l l races. Also i n one i n s t a n c e , a jockey was observed speaking with an
owner beside t h e jockey room p r i o r t o a race.
Inadequate Scales
Used To Weigh Jockeys
A t our r e q u e s t , t h e Department of Administration - Weights and Measures
Division ( WAM) reviewed the scales used t o weigh jockeys. The WAM
i n s p e c t o r found t h e scale used t o weigh the jockeys before t h e races was
d e f e c t i v e due t o a m i s s i n g b e a r i n g . According t o t h e WAM i n s p e c t o r , t h e
absence of t h i s bearing would 1 ) condemn t h e s c a l e f o r any use and
2) make it impossible t o determine t h e degree t o which t h e s c a l e may be
i n a c c u r a t e .
The s c a l e used t o weigh the jockeys a f t e r t h e r a c e s was a l s o found t o be
inadequate. According t o t h e \ JAM i n s p e c t o r , t h e scale, which is an
ordinary bathroom s c a l e , simply cannot provide t h e degree of accuracy
needed t o weigh jockeys. We were informed t h a t t h e Commission had been
aware f o r more than one year t h a t t h e s c a l e s were inadequate.
Receiving- Barn Security
Needs Improvement
Because many p r o h i b i t e d drugs used on race horses must b e a d m i n i s t e r e d
immediately before a r a c e , t h e Commission r e q u i r e s p e r m i t t e e s t o provide
r e c e i v i n g barns. Horses are brought t o t h e s e barns approximately 40
minutes before a race where they a r e under t h e observation o f the
o f f i c i a l s . The Commission a l s o r e q u i r e s t h a t a uniformed, c e r t i f i e d peace
o f f i c e r be present at the r e c e i v i n g b a r n s t o restrict access t o t h e a r e a
t o only authorized persons and provide s e c u r i t y . This is done t o f u r t h e r
reduce t h e l i k e l i h o o d of drugs b e i n g a d m i n i s t e r e d t o horses.
However, t h e peace o f f i c e r s have not received i n s t r u c t i o n s on what they
a r e t o do o r why. Consequently, during t h e period observed by a u d i t s t a f f
an o f f i c e r was n o t p r e s e n t i n t h e r e c e i v i n g barn when horses were present
p r i o r t o one r a c e , and on a t l e a s t four o c c a s i o n s , persons n o t d i s p l a y i n g
Commission l i c e n s e s needed f o r access t o t h e a r e a were allowed t o e n t e r
t h e area.
Corrective Action Has Been Taken
Commission a c t i o n has s i n c e been taken t o c o r r e c t many o f t h e problems
i d e n t i f i e d during the a u d i t . The Commission has discharged* t h e c l e r k of
s c a l e s on t h e county f a i r c i r c u i t whose r e s p o n s i b i l i t y it was t o see t h a t
weighing procedures were conducted properly. Also on January 7, 1982, the
Commission took formal a c t i o n t o arrange f o r new s c a l e s t o be purchased
f o r the county f a i r r a c e meets.
TRACK OPERATIONS - DOG TRACKS
During the course of our a u d i t t h r e e greyhound racing f a c i l i t i e s , Phoenix
Greyhound Park, Tucson Greyhound Park and Yuma Greyhound Park, were i n
operation. Reviewing t h e operations of these t r a c k s we noted the
following d e f i c i e n c i e s :
- Sampling procedures** a r e d e f i c i e n t i n t h a t they do not provide
f o r c o l l e c t i o n of samples from a s u f f i c i e n t number of winning
dogs ;
- Weigh- in weights a r e not posted a t Tucson Greyhound Park; and
- Some s c a l e s a r e not c e r t i f i e d as required.
Saapling Procedures Are Deficient
A s with h o r s e r a c i n g , t h e Commission r e l i e s on drug t e s t i n g procedures t o
d e t e c t and prevent the use of i l l e g a l drugs i n dog racing. Unlike horse
r a c i n g , however, t h e Commission primarily u s e s p r e r a c e r a t h e r than
postrace sampling procedures t o o b t a i n samples f o r t e s t i n g i n dog racing.
We found t h a t
- Prerace sampling alone does not provide samples of a s u f f i c i e n t
number of winning dogs;
* According t o Commission o f f i c i a l s t h e r e were s e v e r a l reasons,
including t h e problems with weighing jockeys a t t h e meet we observed,
t h a t led t o t h e d e c i s i o n not t o r e t a i n the c l e r k o f s c a l e s . ** Administrative Rule R4- 27- 107. Q. provides t h a t " A l l e n t r i e s i n every
r a c e , may be subjected t o a s a l i v a , urine o r blood t e s t f o r the
purpose of determining the presence of any p r o h i b i t e d drug ... ." The
r u l e s f u r t h e r s t a t e t h a t samples of t h e t e s t substance must be taken
by persons appointed by t h e Commission, and submitted f o r chemical
a n a l y s i s by t h e o f f i c i a l racing chemist.
- The limited postrace sampling t h a t is done is not conducted i n a
secured a r e a w i t h w i t n e s s e s and could be s u b j e c t t o challenge; and
- The Commission has a r u l e on its books, which, i f enforced, could
a l l e v i a t e these problems.
We a l s o noted Commission v e t e r i n a r i a n s sometimes f a i l t o submit samples of
winning dogs i n favor of dogs t h a t ran woff- form. ll Further review by the
Commission is needed of t h i s p r a c t i c e .
Prerace sample c o l l e c t i o n does not provide f o r t e s t i n g a s u f f i c i e n t number
of winning dogs. Our review of a sample of 107 races revealed t h a t
samples were submitted f o r a n a l y s i s f o r only 25 percent of a l l winners.
Further, the percentage of winners t e s t e d v a r i e s s i g n i f i c a n t l y by t r a c k ;
one t r a c k o b t a i n s and submits samples on a s few as 5 percent o f t h e
winning dogs.
The number of samples c o l l e c t e d and a v a i l a b l e f o r a n a l y s i s v a r i e s by t r a c k
and is dependent upon such f a c t o r s a s age of t h e dogs and t h e ambient
temperature. A t l e a s t one t r a c k c o l l e c t s samples from almost a l l
winners. Others c o l l e c t as few as 5 percent. The use of postrace t e s t i n g
i n a d d i t i o n t o prerace sampling would provide f o r the c o l l e c t i o n o f more
samples a t f a c i l i t i e s where these f a c t o r s adversely a f f e c t prerace
c o l l e c t i o n .
Yuma Greyhound Park, which uses postrace c o l l e c t i o n , i l l u s t r a t e s t h e
advantage of t h i s procedure. During 14 races observed by a u d i t s t a f f ,
a s s i s t a n t v e t e r i n a r i a n s were only a b l e t o c o l l e c t samples from 18 percent
of the e n t r a n t s , including 14 percent o f t h e dogs " in the moneyn
( f i n i s h i n g i n win, place o r show p o s i t i o n s ) . However, almost one- third of
these samples were postrace samples. Had only prerace sampling been
conducted, samples would have been a v a i l a b l e from 13 percent of t h e
e n t r a n t s and from 7 percent of t h e dogs i n the money. It is evident t h a t
postrace sampling i n c r e a s e s the t o t a l number of samples c o l l e c t e d thereby
i n c r e a s i n g the l i k e l i h o o d of c o l l e c t i n g samples from winning dogs.
Inadequate s e c u r i t y e x i s t s over the postrace sampling t h a t is done.
Whereas prerace sampling is done i n t h e paddock a r e a with t h e v e t e r i n a r i a n
and o t h e r o f f i c i a l s p r e s e n t , postrace sampling is c u r r e n t l y done i n an
unsecured a r e a where dogs are taken a f t e r the race t o c o o l o u t . To t a k e a
postrace sample, the v e t e r i n a r i a n a s s i s t a n t s must go t o t h e far end of the
t r a c k and then carry the unsealed sample back t o t h e paddock area. There
is no witness t o the a c t i o n s o f t h e a s s i s t a n t v e t e r i n a r i a n o t h e r than the
owner o r t r a i n e r who could be expected t o challenge the sampling
procedures i f p o s i t i v e t e s t r e s u l t s were found.
Commission r u l e s a l r e a d y include a r u l e which, if implemented, would
f a c i l i t a t e the use of postrace sampling i n a secured area.
Administrative Rule R4- 27- 309. Y. 6. r e q u i r e s t h a t each greyhound t r a c k
provide a receiving p i t t o which dogs a r e t o be taken a f t e r r a c e s f o r
sample c o l l e c t i o n . Such receiving p i t s would increase t h e number of
postrace samples taken and would allow the samples t o be taken i n a
secured a r e a under Commission c o n t r o l .
F i n a l l y , we noted one Commission v e t e r i n a r i a n submits f o r t e s t i n g from 60
t o 80 percent of the samples he o b t a i n s from winning dogs. He submits
i n s t e a d samples from dogs t h a t ran lloff- formtt-- particularly dogs heavily
favored by the odds t h a t do not f i n i s h i n the money. He does so because
he b e l i e v e s t h a t with the use of lock- out kennels* it would be e a s i e r t o
a f f e c t t h e outcome of a r a c e by causing a dog t o l o s e r a t h e r than win. We
b e l i e v e t h e Commission should review t h i s p r a c t i c e and determine whether
it adequately f u l f i l l s the Commission's i n t e n t i o n s i n conducting drug
t e s t i n g .
* Dogs a r e placed i n " lock- out kennelsrt a t t h e beginning o f t h e day's
r a c e s and a r e not brought out u n t i l it is time f o r them t o race.
These " lock- out kennels1' a r e secured a r e a s and only o f f i c i a l s have
access t o the a r e a s .
Weigh- In Weights Are Not Posted
The weight of a greyhound can c r i t i c a l l y a f f e c t its racing performance.
Because of t h i s f a c t , greyhounds race a t e s t a b l i s h e d r a c i n g weights. Each
greyhound must be weighed i n before being placed i n t h e lock- out kennel,
and i f its weight v a r i e s by more than 1 1/ 2 pounds i n e i t h e r d i r e c t i o n of
its e s t a b l i s h e d weight it is scratched. The dogs a r e a l s o weighed out
upon l e a v i n g t h e kennel.
The weigh- in weights a r e recorded by the c l e r k of s c a l e s o r paddock
judge. Administrative Rule R4- 27- 309 . V. 1. r e q u i r e s t h e c l e r k of s c a l e s t o
post a l l variances from t h e dogsf e s t a b l i s h e d weights. According t o t h e
Commission Executive S e c r e t a r y , t h e s e weights should be posted because
some b e t t o r s may wish t o determine the amount of weight a dog has l o s t i n
the lock- out kennel by comparing the weigh- in weights t o the weigh- out
weights .
This procedure is not followed at Tucson Greyhound Park. A s a r e s u l t , t h e
b e t t i n g public does not have access t o a l l information t h a t it needs o r
wants f o r wagering purposes.
Scales Are Not C e r t i f i e d by WAM
Administrative Rule R4- 27- 309. V. l. r e q u i r e s t h a t the accuracy of t h e
s c a l e s used t o weigh greyhounds be c e r t i f i e d by t h e Department of
Administration - Weights and Measures Division ( WAM). During our review
we found t h a t two of t h e t h r e e s c a l e s used by greyhound permittees a r e not
i n compliance with t h i s requirement.
The s c a l e s used a t t h e Phoenix- and Tucson- area t r a c k s a r e not c e r t i f i e d
by WAM. The s c a l e s a r e , however, reviewed by r e g i s t e r e d s e r v i c e agencies
( RSAS) p r i o r t o each meet and, i f n e c e s s a r y , d u r i n g t h e meet.
Registered s e r v i c e agencies a r e l i c e n s e d by WAM t o r e p a i r and t e s t s c a l e s
r e j e c t e d by WAM i n s p e c t o r s . They follow t h e standards and t o l e r a n c e s
e s t a b l i s h e d by WAM. According t o the WAM Deputy D i r e c t o r , s e r v i c i n g by
these agencies should be adequate t o ensure the accuracy o f t h e s c a l e s .
CONCLUSIONS
1. Corrective a c t i o n is needed i n the operations of t h e two
commercial horse t r a c k s we observed. The Commission r u l e
r e s t r i c t i n g b e t t i n g by jockeys does not adequately c o n t r o l
a g a i n s t improper a c t i o n s . Jockeys a r e n o t p r o p e r l y i s o l a t e d from
contact with the public at R i l l i t o Downs. Also, procedures for
weighing jockeys a r e not f u l l y i n compliance with requirements a t
e i t h e r t r a c k . F i n a l l y , problems were found with s c a l e s used t o
weigh jockeys at both t r a c k s .
2. S i g n i f i c a n t problems e x i s t e d i n t h e t r a c k operations of the
county f a i r race meets with regard t o the procedures used f o r
weighing jockeys. However, the Commission has s i n c e taken
c o r r e c t i v e a c t i o n s on t h i s matter. Security a t the receiving
barn still needs t o be improved t o ensure t h a t a peace o f f i c e r is
always present at the receiving barn and t h a t access t o the area
is r e s t r i c t e d t o authorized persons.
3. Commission a c t i o n is needed at the dog t r a c k s t o see t h a t
adequate numbers of samples from winning dogs a r e obtained and
a r e obtained i n a s e c u r e a r e a . In a d d i t i o n , some v e t e r i n a r i a n s
do not submit f o r a n a l y s i s a l l samples obtained from winning
dogs. Weigh- in weights a r e not posted a t Tucson Greyhound Park
a s required and some s c a l e s a r e serviced by r e g i s t e r e d s e r v i c e
agencies r a t h e r than c e r t i f i e d as required by a d m i n i s t r a t i v e
r u l e s .
1. The Commission amend Rule R4- 27- 203. Q t o p r o h i b i t jockeys from
b e t t i n g on days they r i d e , except through t h e owners of and on
t h e h o r s e s t h e y r i d e .
2. The Commission ensure t h a t improper contact does not occur
between jockeys and the public a t R i l l i t o Downs.
3. The Commission take t h e necessary a c t i o n t o see t h a t
- A 1 1 jockeys a r e weighed before each race they r i d e ;
- A l l jockeys a r e weighed with c l o t h e s and g e a r ;
- A 1 1 jockeys a r e a c t u a l l y weighed a f t e r each race; and
- A 1 1 weight variances a r e properly announced and a l l t r a i n e r s
s p e c i f i c a l l y n o t i f i e d of variances when necessary.
4. The Commission take a p p r o p r i a t e d i s c i p l i n a r y a c t i o n a g a i n s t
o f f i c i a l s , including stewards, who f a i l t o enforce Commission
requirements.
5. The Commission ensure t h a t s c a l e s used t o weigh jockeys a r e
c e r t i f i a b l e by t h e Department of Administration - Weights and
Measures Division. Also, the Commission review whether s e c u r i t y
measures a r e needed t o prevent p o s s i b l e tampering with t h e s c a l e s .
6. The Commission develop formal g u i d e l i n e s f o r t h e county f a i r r a c e
meets explaining t h e d u t i e s and r e s p o n s i b i l i t i e s of t h e peace
o f f i c e r s . The Commission then r e q u i r e t h a t p e r m i t t e e s e n s u r e
t h a t the o f f i c e r s receive t h e i n s t r u c t i o n s p r i o r t o the beginning
of each county f a i r r a c e meet.
>
7. The Commission implement postrace sampling procedures a t the dog
t r a c k s t o supplement prerace sampling. Also, t h e Commission
enforce t h e provisions of Administrative Rule R4- 27- 309 . Y .6. and
require t h a t permittees of t r a c k s where an adequate number of
samples are not c o l l e c t e d provide a receiving- pit area.
8. The Commission review t h e p r a c t i c e o f not submitting a l l samples
obtained from winning dogs and see i f it meets t h e Commission's
i n t e n t .
9. The Commission d i r e c t t h e c l e r k of s c a l e s a t Tucson Greyhound
Park t o post prerace weights.
FINDING I1
COMMISSION CONTROL OVER THE MUTUEL FUNCTION COULD BE INCREASED AND COSTS
REDUCED BY $ 37,000 IF NEEDED CHANGES ARE MADE.
Arizona Revised S t a t u t e s ( A. R. S. ) 55- 106 r e q u i r e s t h a t t h e Commission
appoint a supervisor of mutuels t o ll... supervise the wagering and
pari- mutuel departments at a l l r a c e meetings...."* The s p e c i f i c d u t i e s t o
be perforned a r e not i d e n t i f i e d i n e i t h e r the s t a t u t e s o r t h e
a d m i n i s t r a t i v e r u l e s promulgated by t h e Commission. C u r r e n t l y , t h e
Commission h a s a mutuel supervisor on duty a t each t r a c k during a l l hours
of operation. Such f u l l - t i m e coverage is not e f f e c t i v e a t t h e t r a c k s with
s o p h i s t i c a t e d t o t a l i s a t o r systems*" i n t h a t t h e d u t i e s performed by the
s u p e r v i s o r s do not address c r i t i c a l c o n t r o l s needed i n a computerized
environment. F u r t h e r , the f u l l - t i m e coverage is not necessary and many of
the d u t i e s performed by the s u p e r v i s o r s d u p l i c a t e t h o s e performed by t h e
computers. Controls could be improved and approximately $ 37,000 p e r y e a r
saved by 1 ) obtaining a person with the necessary background t o review
the c o n t r o l s i n and around t h e computerized systems and 2) e l i m i n a t i n g
unneeded p o s i t i o n s .
Controls Over the Computerized Environment
The present a c t i v i t i e s performed by the s u p e r v i s o r s f a i l t o address t h e
need f o r a d d i t i o n a l c o n t r o l s over t h e automated system o r the adequacy of
e x i s t i n g c o n t r o l s . A s a r e s u l t , at least two mutuel systems e x h i b i t
c o n t r o l weaknesses t h a t c r e a t e a p o t e n t i a l f o r abuse.
Results of a general c o n t r o l s review of two t o t a l i s a t o r systems performed
by the Auditor General's E l e c t r o n i c Data Processing ( EDP) Support s t a f f
found t h a t
* Pari- mutuel wagering is a form o f b e t t i n g i n which those holding
winning t i c k e t s d i v i d e the t o t a l amount bet i n proportion t o t h e i r
wagers, l e s s a percentage f o r t a x e s , management, e t c .
** T o t a l i s a t o r equipment records amounts wagered and c a l c u l a t e s b e t t i n g
pools and payoffs.
- S t a t e mutuel s u p e r v i s o r s a r e not aware o f , and do not use,
c o n t r o l s designed i n t o t h e computer systems; and
- General c o n t r o l s over t h e computerized environment a r e weak.
Control weaknesses o r f a i l u r e t o use e x i s t i n g c o n t r o l s c r e a t e s the
p o t e n t i a l f o r misuse of t h e t o t a l i s a t o r system. For example, inadequate
c o n t r o l s i d e n t i f i e d at one t r a c k could allow c o u n t e r f e i t i n g and cashing of
unclaimed winning t i c k e t s . A t another t r a c k , access t o t h e system which
allows adjustments t o t e l l e r balances does not r e q u i r e a password o r code
f o r a u t h o r i z a t i o n . This could allow concealment of overages and shortages
by t e l l e r s .
Duplicate and Unnecessary Functions
The advent of computerized technology has rendered o b s o l e t e the
t r a d i t i o n a l r o l e s and functions of many S t a t e mutuel s u p e r v i s o r s . Whereas
i n the p a s t t h e presence of S t a t e mutuel s u p e r v i s o r s was necessary t o
oversee the i n t e g r i t y o f t h e hand c a l c u l a t i o n s and a c t i o n s of t r a c k mutuel
employees, mutuel functions are now l a r g e l y performed by computer at seven
of t h e t r a c k s . However, the d u t i e s and functions of the s u p e r v i s o r s at
these t r a c k s have not kept pace with t h e technology.*
Mutuel s u p e r v i s o r s at commercial racing f a c i l i t i e s perform the following
d u t i e s :
- Observe s e l l e r s and c a s h i e r s ;
- I n v e s t i g a t e complaints;
- Compute monies due the S t a t e and t r a c k , determine t h e t o t a l
d o l l a r amount wagered and amount wagered i n each pool and v e r i f y
the accuracy of payoffs; and
- Prepare a r e c a p i t u l a t i o n o f f i n a n c i a l information f o r the
Commission accountant.
* Two commercial racing f a c i l i t i e s and most county f a i r race meets use
manual pari- mutuel systems. I n e f f e c t , a l l c a l c u l a t i o n s a r e performed
manually. In a d d i t i o n , county f a i r race meets do not employ t r a c k
mutuel s u p e r v i s o r s ; the S t a t e mutuel supervisor must perform a l l
a d m i n i s t r a t i v e functions. The absence of an automated system r e q u i r e s
t h a t c a l c u l a t i o n o f pools, odds and payoffs be v e r i f i e d . It appears
t h a t a S t a t e mutuel supervisor is necessary a t t h e s e t r a c k s .
The use of automated t o t a l i s a t o r equipment has v i r t u a l l y eliminated t h e
need f o r these a c t i v i t i e s a s they d u p l i c a t e a c t i v i t i e s which a r e o r could
be performed by t h e computer, t h e t r a c k mutuel manager, o r t h e stewards.
Additionally, some functions a r e performed so i n f r e q u e n t l y t h a t a
f u l l - t i m e s u p e r v i s o r is not needed. These conclusions a r e based on t h e
following f a c t s .
- The t r a c k mutuel manager is r e s p o n s i b l e f o r a l l personnel- related
f u n c t i o n s , i n c l u d i n g observing t h e s e l l e r s and c a s h i e r s t o ensure
t h a t they comply with the r u l e s and r e g u l a t i o n s . Additional
observation by Commission employees could be made on a periodic
b a s i s .
- Complaint i n v e s t i g a t i o n and r e s o l u t i o n occurs i n f r e q u e n t l y and
could be handled by the S t a t e steward and t h e t r a c k mutuel
manager.
- The automated t o t a l i s a t o r systems perform a l l c a l c u l a t i o n s
including computing pool amounts, payoffs and monies due the
S t a t e . Mutuel s u p e r v i s o r s then v e r i f y t h e s e c a l c u l a t i o n s
manually. This v e r i f i c a t i o n procedure is e s s e n t i a l l y meaningless
i n t h a t 1 ) a mistake has never been observed, and 2 ) t h e
s u p e r v i s o r s perform t h e i r c a l c u l a t i o n s using d a t a generated by
t h e computers. Such a procedure does not ensure t h a t fraud has
not occurred s i n c e it does n o t i n c l u d e a review o f t h e d a t a i n p u t
and processing. Applications and general c o n t r o l s reviews,
performed by a q u a l i f i e d EDP a u d i t o r , would provide c o n t r o l over
t h e s e f a c t o r s .
- The r e c a p i t u l a t i o n report is prepared by t r a n s f e r r i n g f i g u r e s
from a computer- generated report t o a form prescribed by the
Commission. Since t h e f i g u r e s a r e already prepared by t h e
computer, the computer could be programmed t o produce the r e p o r t
i n a format i d e n t i c a l t o t h a t o f t h e r e c a p i t u l a t i o n s h e e t . This
procedure is, i n f a c t , used a t Turf Paradise.
A number of other agencies t h a t r e g u l a t e pari- mutuel wagering do not
u t i l i z e mutuel s u p e r v i s o r s . Our survey of 34 r e g u l a t o r y bodies i n o t h e r
s t a t e s i n d i c a t e d t h a t 15 do n o t u s e supervisors. A d d i t i o n a l l y , of those
t h a t do employ mutuel s u p e r v i s o r s , one does so on a part- time b a s i s and
another is changing from f u l l t o part time.
$ 37,000 Cost Savings Possible
The e l i m i n a t i o n of full- time mutuel s u p e r v i s o r s a t f u l l y automated t r a c k s
would y i e l d s i g n i f i c a n t c o s t savings. During f i s c a l year 1981- 82, the
Commission w i l l spend approximately $ 77,000 for mutuel supervisors1
s a l a r i e s . Elimination of unnecessary p o s i t i o n s would produce c o s t savings
of approximately $ 37,000. This would occur by 1) obtaining a person with
the necessary background t o review c o n t r o l s i n a computerized environment
and 2) e l i m i n a t i n g unneeded p o s i t i o n s .
A person with the necessary background t o review c o n t r o l s i n a
computerized environment could be hired by the Commission f o r
approximately $ 27,000 per y e a r . T h i s person could work year- round,
monitoring t h e systems at t h e seven t r a c k s with computerized systems. The
person could a l s o review the general c o n t r o l s a t t h e seven t r a c k s without
computerized systems.
Hiring such a person would allow t h e e l i m i n a t i o n of f u l l - t i m e coverage by
mutuel s u p e r v i s o r s a t the seven t r a c k s with computerized systems.
Eliminating t h e s e p o s i t i o n s , which pay a s much a s $ 95 per r a c e day, would
allow f o r a net savings of approximately $ 37,000, even a f t e r funding the
p o s i t i o n described above.
CONCLUSION
Use of f u l l - t i m e mutuel s u p e r v i s o r s a t t r a c k s with f u l l y automated
t o t a l i s a t o r equipment is a m i s a l l o c a t i o n of resources. The d u t i e s
c u r r e n t l y performed by mutuel s u p e r v i s o r s a r e 1 ) e s s e n t i a l l y meaningless
i n t h a t they do not provide adequate monitoring of computer functioning o r
c o n t r o l s and 2) d u p l i c a t i v e of functions which a r e o r could be performed
by the computer o r t r a c k personnel. Appropriate review procedures could
be performed on a periodic b a s i s by a person with a background i n
reviewing computer c o n t r o l s , e l i m i n a t i n g the need f o r such p o s i t i o n s a t
seven t r a c k s with f u l l y automated t o t a l i s a t o r systems. Elimination of
these p o s i t i o n s would r e s u l t i n a $ 37,00C c o s t savings.
RECOMMENDATIONS
1. The Commission e l i m i n a t e t h e p o s i t i o n of mutuel s u p e r v i s o r a t
t r a c k s with f u l l y automated t o t a l i s a t o r systems.
2. The Commission h i r e a person with t h e necessary background t o
review c o n t r o l s i n a computerized environment. This person
should then p e r i o d i c a l l y review t h e c o n t r o l s and f u n c t i o n s of t h e
t o t a l i s a t o r systems a t t h e seven t r a c k s with f u l l y automated
systems.
FINDING I11
THE STATE MAY LOSE APPROXIMATELY $ 150,000 THIS YEAR I N REVENUES BECAUSE
SALES TAX IS NOT ASSESSED ON ANIMALS SOLD I N CLAIMING RACES.
Claiming r a c e s a r e r a c e s i n which licensed owners may purchase any horse
entered i n the race at a p r i c e e s t a b l i s h e d by the Racing Secretary. P r i o r
t o the r a c e , owners submit claim forms i n d i c a t i n g t h a t they wish t o
purchase a s p e c i f i c horse. If t h e form is executed and d e p o s i t e d w i t h the
permittee i n accordance with the Commission's a d m i n i s t r a t i v e r u l e s , t i t l e
is t r a n s f e r r e d t o the claimant.
Arizona does not a s s e s s s a l e s t a x on t h e s e claiming races. Reviewing t h i s
p r a c t i c e we found
- S a l e s through claiming races may f a l l within the s t a t u t o r y
provisions r e l a t i n g t o t r a n s a c t i o n p r i v i l e g e t a x e s ,
- Fourteen of t h e twenty- six other s t a t e s t h a t r e g u l a t e horse
r a c i n g a s s e s s s a l e s t a x on claiming r a c e s , and
- F a i l u r e t o a s s e s s s a l e s t a x on these t r a n s a c t i o n s is c o s t i n g t h e
S t a t e approximately $ 150,000 per year i n l o s t revenues.
Sales Tax Is Not Assessed
On Claim Transactions
Arizona Revised S t a t u t e s ( A. R. S.) 542- 1309 provides f o r the levy of
t r a n s a c t i o n p r i v i l e g e t a x on the proceeds of c e r t a i n business
t r a n s a c t i o n s , including r e t a i l s a l e s of t a n g i b l e personal property. This
tax is not p r e s e n t l y a s s e s s e d on t h e s a l e of animals through claiming
races.
According t o a L e g i s l a t i v e Council memorandum dated February 18, 1982,"
t h e determining f a c t o r i n a s s e s s i n g s a l e s tax is whether t h e s e l l e r is
engaging i n t h e " businessu of s e l l i n g t a n g i b l e p e r s o n a l p r o p e r t y since
casual s a l e s a r e exempt under the provisions of A. R. S. S42- 1301. The
L e g i s l a t i v e Council i n t e r p r e t a t i o n is based p a r t l y upon t h e Department of
Revenue ( DOR) d e f i n i t i o n o f c a s u a l s a l e s a s i s o l a t e d t r a n s a c t i o n s .
According t o a d m i n i s t r a t i v e r u l e R15- 5- 1812, number and frequency
determine whether a sale is casual:
"... Provided t h a t t h e s e l l e r does n o t make a p r a c t i c e
of making s a l e s of such volume o r frequency a s t o
i n d i c a t e he is a d e a l e r , t h e t r a n s a c t i o n is not s u b j e c t
t o t h e tax...."
L e g i s l a t i v e Council noted, " The j u d i c i a l s t a n d a r d s a p p l i e d by t h e c o u r t s
a r e whether such a c t i v i t y is t i s o l a t e d t , ' u n a n t i c i p a t e d 1 , ' i r r e g u l a r ' or
' s i n g u l a r 1 . "
Many s a l e s through claiming r a c e s do n o t appear t o g e n e r a l l y be
" i s o l a t e d , It " unanticipated, " " i r r e g u l a r ," o r f f s i n g u l a r. " They do not
appear t o be " unanticipated" i n t h a t a person e n t e r i n g a horse i n a
claiming race is, i n e f f e c t , o f f e r i n g t h e horse f o r s a l e . They a r e not
n i s o l a t e d , " " i r r e g u l a r " o r " singular" i n t h a t the majority o f t h e races
the horses a r e entered i n a r e c l a i m i n g r a c e s . For example, at Turf
Paradise a s many a s t e n of t h e eleven d a i l y races a r e claiming races.
F u r t h e r , we noted one owner had sold 27 horses through claiming races
during t h e 1980- 81 racing meets held i n Phoenix. This was an average of
one s a l e per week.
The i s s u e of charging s a l e s t a x f o r claiming races was discussed with DOR
o f f i c i a l s . According t o a DOR o f f i c i a l , s a l e s t a x has not been assessed
on claims because DOR was not f a m i l i a r with claiming p r a c t i c e s . After
a u d i t s t a f f discussed the i s s u e with DOR, the Department began reviewing
the a p p l i c a b i l i t y o f the t a x t o claiming races.
* The Appendix contains the memorandum t e x t .
2 8
Fourteen Other S t a t e s Charge
Sales Tax On Claiming Races
Although claiming races do appear t o f a l l within t h e s t a t u t o r y provisions
governing t r a n s a c t i o n p r i v i l e g e t a x e s , even i f they d i d n o t t h e r e would
appear t o be s u f f i c i e n t grounds t o amend t h e s t a t u t e s s o t h a t they were
covered. Fourteen of the twenty- six o t h e r s t a t e s t h a t r e g u l a t e h o r s e
racing charge s a l e s t a x on claiming races. The fourteen s t a t e s , which
include major r a c i n g states, are these:
Arkansas
C a l i f o r n i a
Colorado
Florida
Idaho
Kentucky
Mary land
Massachusetts
Nebraska
Nevada
New J e r s e y
New York
Pennsylvania
West Virginia
$ 150,000 Per Year
i n Lost Revenues
F a i l u r e t o a s s e s s s a l e s t a x on claiming r a c e s w i l l c o s t the S t a t e
approximately $ 150,000 t h i s year i n l o s t revenue. The s i z e of t h i s l o s s
is due t o t h e 1 ) d o l l a r amount involved i n an i n d i v i d u a l s a l e through a
claiming race and 2) number of s a l e s made.
The s a l e of a horse through a claiming r a c e is a major s a l e . Claiming
p r i c e s a t Turf Paradise, where most c l a i m i n g o c c u r s , g e n e r a l l y range from
$ 2,000 t o $ 16,000. The average claiming p r i c e at Turf Paradise t h i s year
is more than $ 5,200.
There a r e a l s o a s u b s t a n t i a l number of s a l e s made through claiming races.
During the f i r s t 75 race days a t Turf Paradise t h i s season, 355 horses
were claimed. This is an average of almost f i v e h o r s e s p e r day and
r e p r e s e n t s more than $ 1,846,000 i n untaxed sales.
During f i s c a l year 1980- 81 t h e r e were a t l e a s t $ 3,059,650 i n s a l e s through
claiming r a c e s . F a i l u r e t o a s s e s s a t a x on these s a l e s r e s u l t e d i n l o s t
revenues of at l e a s t $ 122,000. This year it appears t h e l o s t revenues may
exceed $ 150,000.
CONCLUSION
The S t a t e is f a i l i n g t o a s s e s s s a l e s t a x on claiming races d e s p i t e t h e
f a c t t h a t such s a l e s may fall under the s t a t u t o r y provision f o r such
taxes. F a i l u r e t o assess t h i s t a x may c o s t t h e S t a t e approximately
$ 150,000 i n l o s t revenue t h i s year.
RECOMMENDATIOMS
1. The Department of Revenue continue its e f f o r t s t o determine i f
s a l e s t a x should be assessed on s a l e s made through claiming
races. I f it determines such s a l e s should be taxed, we recornvend
the t a x be immediately levied.
2. The L e g i s l a t u r e consider amending the s t a t u t e s t o s p e c i f i c a l l y
provide f o r c o l l e c t i n g s a l e s t a x on c l a i n i n g r a c e s , a s is done i n
14 other s t a t e s .
FINDING I V
COPIMISSION DISCIPLINARY IiEARINGS ARE NOT CONDUCTED I N A TIMELY MANNER. AS
A RZSULT, UNDESIRABLE PERSONS ARE ALLOWED TO PARTICIPATE I N RACING.
The five- member Racing Commission is u l t i m a t e l y r e s p o n s i b l e f o r
d i s c i p l i n a r y a c t i o n imposed on l i c e n s e e s who v i o l a t e the s t a t u t e s o r r u l e s
governing racing. However, S t a t e s t a t u t e s permit t h e Commission t o
delegate t o the stewards t h e r e s p o n s i b i l i t y o f holding an i n i t i a l
d i s c i p l i n a r y hearing and imposing a f i n e of up t o $ 500. I f a f t e r holding
t h e i r hearings the stewards f e e l t h a t v i o l a t i o n s are of such a n a t u r e as
t o warrant more s e r i o u s d i s c i p l i n a r y measures, such as longer suspensions
o r revocation, t h e cases may be r e f e r r e d t o t h e Commission. Additionally,
v i o l a t i o n s such as some f a l s i f i e d l i c e n s e a p p l i c a t i o n s o r use of
p r o h i b i t e d drugs must by Commission p o l i c y be r e f e r r e d t o the Commission.
Because t h e stewards may suspend l i c e n s e s f o r only 30 days, a speedy
d i s p o s i t i o n o f such r e f e r r a l s is c r i t i c a l .
Commission hearings a r e n o t h e l d i n a t i m e l y manner. Suspensions imposed
by the stewards o f t e n e x p i r e before t h e Commission holds its h e a r i n g s ,
allowing i n d i v i d u a l s who have been found by t h e stewards t o have committed
s e r i o u s v i o l a t i o n s t o resume r a c i n g . F u r t h e r , although t h e Commission has
t h e a u t h o r i t y t o use a hearing o f f i c e r t o expedite hearings, such a
p o s i t i o n is not used.
Commission Hearings Are Untimely
Between July 1, 1980, and November 20, 1981, t h e Cornmission held 54
d i s c i p l i n a r y hearings. Twenty- six of t h e s e , o r 48 percent, were r e f e r r e d
by the stewards f o r such v i o l a t i o n s as p o s i t i v e drug t e s t r e s u l t s ,
possession of n e e d l e s , s y r i n g e s and p r o h i b i t e d drugs and f a l s i f i c a t i o n of
l i c e n s e a p p l i c a t i o n s . Our review revealed t h a t most cases a r e not heard
p r i o r t o the e x p i r a t i o n s of the stewards1 suspensions. F u r t h e r , a s of
February 28, 1982, the Commission had a backlog of 24 c a s e s , some of which
were over 4 months old.
H i s t o r i c a l l y , r e l a t i v e l y few cases have been heard within 30 days of the
issuance of t h e stewards' r u l i n g s . A review of t h e r u l i n g s and hearings
between July 7, 1977, and November 20, 1981, revealed t h a t a f i n a l
d i s p o s i t i o n by t h e Comvission was reached within 30 days of t h e stewardss
hearings i n only 37 percent of t h e cases. An a d d i t i o n a l 34 percent of the
cases were decided within 60 days and i n 18 percent o f t h e cases, the
Commission d i s p o s i t i o n was reached more than 90 days a f t e r the stewardst
hearings.
Delays i n hearing cases r e f e r r e d t o the Commission appear t o be
a t t r i b u t a b l e t o t h e following f a c t o r s :
- Notice requirements and frequency of Commission meetings;
- U n a v a i l a b i l i t y of witnesses and evidence;
- I n c o n s i s t e n t use of scheduling c r i t e r i a ; and
- Continuances of hearings.
Administrative Rule R4- 27- 109. A. 5 r e q u i r e s t h a t t h e Commission give
w r i t t e n n o t i c e a t l e a s t 20 days p r i o r t o t h e d a t e s e t f o r the hearing.
This requirement, coupled with a monthly Commission meeting schedule, can
r e s u l t i n scheduling delays of up t o two months. For example, a l i c e n s e e
who r e c e i v e s a r u l i n g on June 15 could not be afforded adequate n o t i c e t o
be scheduled t o appear a t a June 30 meeting. A s a r e s u l t , a hearing may
not be scheduled u n t i l J u l y 3 0 , over seven weeks a f t e r t h e r u l i n g date.
F u r t h e r , u n a v a i l a b i l i t y of witnesses and evidence hampers timely
d i s p o s i t i o n . In some i n s t a n c e s Commission s t a f f must l o c a t e witnesses who
have moved and then wait u n t i l t h e i n d i v i d u a l is a v a i l a b l e t o t e s t i f y ,
s i n c e the Commission does not have a u t h o r i t y t o subpoena witnesses who a r e
out of s t a t e . I n o t h e r cases evidence such as c e r t i f i e d court documents
must be obtained. According t o the Chief I n v e s t i g a t o r , t h i s can take 30
days o r longer.
I n c o n s i s t e n c i e s i n p r i o r i t i z i n g c a s e s f o r hearings a l s o c a u s e s d e l a y s .
According t o t h e Executive Secretary t h e s e v e r i t y o f t h e v i o l a t i o n , o r t h e
e x t e n t t o which it a f f e c t s the public s a f e t y and welfare, is considered
when hearings a r e scheduled. However, t h i s c r i t e r i a is n o t a p p l i e d
c o n s i s t e n t l y . For example, although some f a l s i f i e d l i c e n s e a p p l i c a t i o n s
are considered t o be s e r i o u s v i o l a t i o n s , a s of February 28, 1982, 17 cases
involving f a l s i f i e d l i c e n s e a p p l i c a t i o n s have not been heard by the
Commission. Two o f t h e s e cases, which have been outstanding f o r 70 t o 90
days, have been scheduled t o be heard a t t h e March Commission meeting.
Other cases involving the same offense which have been outstanding f o r up
t o 140 days have not been scheduled.
Continuances a l s o c o n t r i b u t e t o lengthy d i s p o s i t i o n s . Administrative Rule
R4- 27- 109. C. 2. provides t h a t a l l p a r t i e s appearing before the Commission
have the r i g h t t o be represented by an a t t o r n e y . The Commission has
granted a number of continuances because a t t o r n e y s could not be present at
the hearing. Because the Commission g e n e r a l l y meets monthly, t h e s e
continuances r e p r e s e n t d e l a y s of months r a t h e r than days o r weeks.
Undesirable Licensees Allowed
To P a r t i c i p a t e In Racing
According t o A. R. S. $ 5- 104, subsection E, stewards cannot suspend l i c e n s e s
f o r more than 30 days. If the Commission does not a c t p r i o r t o the
e x p i r a t i o n o f t h e suspension, t h e i n d i v i d u a l is allowed t o continue
p a r t i c i p a t i n g i n r a c i n g . Because the Commission only disposes of 37
percent of its c a s e s within 30 days of the stewards r u l i n g , numerous
persons who have committed s e r i o u s o f f e n s e s a r e allowed t o resume
operating on the t r a c k s . The following cases i l l u s t r a t e t h e need f o r
rapid d i s p o s i t i o n of m a t t e r s r e f e r r e d t o t h e Commission.
Case 1:
In March 1981 stewards suspended a l i c e n s e f o r 30 days and r e f e r r e d
the case t o the Commission f o r possession of needles and i l l e g a l
substances. F i n a l d i s p o s i t i o n was not reached u n t i l July 1981, almost
four months a f t e r the i n i t i a l r u l i n g . The Commission suspended the
l i c e n s e f o r s i x months.
Case 2:
In April 1981 a l i c e n s e was suspended f o r 30 days and a $ 500 f i n e was
imposed by the stewards f o r possession of s y r i n g e s and i l l e g a l drugs.
The case was r e f e r r e d t o t h e Commission. The l i c e n s e e requested and
received numerous continuances. A s of January 28, 1982, t h e case was
not heard by t h e Commission.
House B i l l No. 2028, introduced i n t h e 1982 s e s s i o n of the Arizona S t a t e
L e g i s l a t u r e and supported by the Commission, would allow stewards t o
suspend l i c e n s e s f o r up t o 60 days. Approximately 71 percent of a l l cases
reviewed by Auditor General s t a f f were resolved by t h e Commission within
60 days.
Use Of Hearing O f f i c e r
Would Expedite Hearings
The use of a hearing o f f i c e r would expedite the hearing process. Where
the Commission now meets monthly, a hearing o f f i c e r would be a v a i l a b l e
f u l l time. Problems with t h e 20- day n o t i c e requirement and continuances
would be minimized because scheduling would be more f l e x i b l e . F u r t h e r ,
lengthy hearings, such a s one hearing which l a s t e d more than 8 hours,
would n o t d e l a y o t h e r Commission business.
Administrative Rule R4- 27- 109 permits the Commission t o appoint a hearing
o f f i c e r . According t o the Commission Executive S e c r e t a r y , one has not
been appointed due t o budget c o n s t r a i n t s . The s a l a r y f o r a hearing
o f f i c e r is estimated t o be $ 38,000. I f , a s discussed i n Finding 11,
unneeded mutuel p o s i t i o n s a r e e l i m i n a t e d , $ 37,000 would be a v a i l a b l e f o r
such a p o s i t i o n . ( see page 24)
Use of hearing o f f i c e r s by other agencies is a r e l a t i v e l y common
p r a c t i c e . Eighteen of the o t h e r t h i r t y - f o u r r a c i n g r e g u l a t o r y bodies
surveyed u s e h e a r i n g o f f i c e r s . Additionally, numerous agencies i n
Arizona, including t h e Department of Revenue, Insurance Department and the
S t a t e Personnel Board, use hearing o f f i c e r s .
CONCLUSION
The Commission has f a i l e d t o t a k e timely a c t i o n on c a s e s r e f e r r e d t o it by
the stewards. A s a r e s u l t , i n d i v i d u a l s d i s c i p l i n e d by the stewards f o r
s e r i o u s v i o l a t i o n s a r e allowed t o resume racing before f i n a l d i s p o s i t i o n s
a r e reached.
RECOMMENDATION
The L e g i s l a t u r e 1) amend A. R. S. $ 5- 104, subsection E, t o allow stewards
t o suspend l i c e n s e s f o r up t o 60 days and/ or 2) a p p r o p r i a t e funds t o
allow the Commission t o appoint a hearing o f f i c e r . Such funds could be
l a r g e l y derived by e l i m i n a t i n g unneeded mutuel p o s i t i o n s . ( see page 24)
FINDING V
CONTROLS OVER THE LICENSING PROCESS HAVE BEEN SIGNIFICANTLY IMPROVED.
HOWEVER, SOME ADDITIONAL IMPROVEMENTS ARE STILL NEEDED.
One o f t h e most s e r i o u s findings o f t h e previous performance a u d i t was
t h a t the Commission was not f u l f i l l i n g its s t a t u t o r y r e s p o n s i b i l i t y t o
r e g u l a t e racing p a r t i c i p a n t s through t h e l i c e n s i n g process. Since t h e
time of t h a t r e p o r t c o n t r o l s over t h e l i c e n s i n g process have been
s i g n i f i c a n t l y improved, although some f u r t h e r improvements a r e still
needed. S p e c i f i c a l l y , we found t h a t
- Required i n v e s t i g a t i o n s o f l i c e n s e a p p l i c a n t s , including
f i n g e r p r i n t i n g , a r e now being conducted;
- Procedures recommended t o prevent unlicensed persons from
p a r t i c i p a t i n g i n r a c i n g have been implemented, however,
implementation has not been complete and some unlicensed a c t i v i t y
is still occurring;
- Commission employees a r e doing a b e t t e r job of following
e s t a b l i s h e d l i c e n s i n g procedures but still need t o f u r t h e r
improve t h e i r performance;
- Adequate c o n t r o l s have been placed over t h e c o l l e c t i n g , recording
and handling of l i c e n s e f e e s ; and
- O f f i c e r s and d i r e c t o r s of permittees a r e now required t o be
l i c e n s e d .
I n v e s t i g a t i o n s of License Applicants
A t the time of Report 81- 5 t h e Commission was not v e r i f y i n g l i c e n s e
a p p l i c a t i o n information and had suspended f i n g e r p r i n t i n g of a p p l i c a n t s .
In a d d i t i o n , stewards were not informing t h e i n v e s t i g a t o r s o f information
about a p p l i c a n t s f criminal records and r u l i n g s from o t h e r j u r i s d i c t i o n s .
A s a r e s u l t , a t l e a s t 7 percent of the persons l i c e n s e d by t h e Commission
during f i s c a l year 1979- 80 f a l s i f i e d information on t h e i r l i c e n s e
a p p l i c a t i o n s regarding criminal convictions, r u l i n g s by o t h e r
j u r i s d i c t i o n s o r both.
Required i n v e s t i g a t i o n s a r e now conducted of a p p l i c a n t s f o r l i c e n s e s , and
procedures have been e s t a b l i s h e d t o ensure t h a t i n v e s t i g a t o r s a r e informed
of a p p l i c a n t s ' criminal records and p r i o r r u l i n g s . F i n g e r p r i n t i n g of a l l
a p p l i c a n t s was resumed i n April 1981. Whereas previously f i n g e r p r i n t s
could be found f o r only 19 percent o f t h e Commissionls l i c e n s e e s ,
f i n g e r p r i n t s a r e now on f i l e f o r 100 percent o f t h e l i c e n s e e s reviewed.*
From July 6, 1981, t o December 17, 1981, these measures r e s u l t e d i n the
i d e n t i f i c a t i o n of 131 i n d i v i d u a l s who f a l s i f i e d l i c e n s e a p p l i c a t i o n s .
Preventing Unlicensed Activity
The Commission has e s t a b l i s h e d procedures as recommended i n Report 81- 5 t o
prevent unlicensed a c t i v i t y . After f i n d i n g t h a t 5 percent of t h e persons
and c o r p o r a t i o n s we checked were u n l i c e n s e d , i n c l u d i n g jockeys, stewards,
permittee o f f i c i a l s and owners, we recommended t h a t
- Commission s t a f f i n c r e a s e v i s u a l checks of l i c e n s e s ; and
- The names appearing i n t h e r a c i n g programs be checked a g a i n s t
persons licensed by t h e Commission.
These procedures were e s t a b l i s h e d and r e s u l t e d i n the Commission
i d e n t i f y i n g and taking a c t i o n a g a i n s t 667 percent more unlicensed
i n d i v i d u a l s during July through December 1951 than it did i n the same
period i n 1980. However, the procedures apparently have not been f u l l y
implemented a s a review of a sample of 50 persons l i s t e d on t h e racing
programs found t h a t two unlicensed owners had p a r t i c i p a t e d i n r a c i n g .
* E f f e c t i v e October 1, 1981, t h e Federal Bureau of I n v e s t i g a t i o n placed
a one- year moratorium on t h e processing o f f i n g e r p r i n t s f o r
noncriminal j u s t i c e agencies. The Commission has continued t o take
f i n g e r p r i n t s with the i n t e n t i o n of submitting them a f t e r the
moratorium is l i f t e d . The Comnission has continued t o process names
through the Department of Public S a f e t y ' s f i l e s .
The Commission is a l s o imposing more s t r i n g e n t d i s c i p l i n e a g a i n s t
unlicensed i n d i v i d u a l s . P r e v i o u s l y the most common a c t i o n taken a g a i n s t
unlicensed i n d i v i d u a l s was t o l1make them g e t a license. I1 F u r t h e r , when
formal a c t i o n was taken it r e s u l t e d i n a f i n e i n approximately one- half of
the cases. During July through December 1981 t h e formal a c t i o n s a g a i n s t
unlicensed i n d i v i d u a l s a l l r e s u l t e d i n f i n e s except f o r one case which was
r e f e r r e d t o the Commission f o r f u r t h e r a c t i o n .
Following Licensing Procedures
Commission employees a r e doing a b e t t e r job of following e s t a b l i s h e d
l i c e n s i n g procedures. Few of the l i c e n s e a p p l i c a t i o n s reviewed during
Report 81- 5 were properly completed. The other a p p l i c a t i o n s were o f t e n
1 ) not signed by stewards ( 69 p e r c e n t ) , 2) not signed i n the presence of
a Commission o f f i c i a l ( 53 p e r c e n t ) , o r 3) lacking such i n f o r n a t i o n a s
d a t e s of b i r t h , employers, names of animals, a p p l i c a n t s ' s i g n a t u r e s , o r
d e t a i l s of p r i o r r u l i n g s and criminal h i s t o r i e s . Now, 63 percent of t h e
a p p l i c a t i o n s a r e properly completed. The l a r g e s t a r e a of noncompliance is
the 29 percent of t h e a p p l i c a t i o n s t h a t a r e still not signed i n t h e
presence of a Commission o f f i c i a l o r notary public.
Controls Over License Fees
In Report 81- 5 we noted a number of weaknesses i n t h e accounting c o n t r o l s
over t h e c o l l e c t i n g , recording and handling of l i c e n s e f e e s . These
weaknesses were demonstrated by the f a c t t h a t t h e r e was an unexplainable
d i f f e r e n c e of $ 3,969 between t h e l i c e n s e f e e s t h a t were a c t u a l l y c o l l e c t e d
during f i s c a l year 1979- 80 versus t h e f e e s t h a t should have been c o l l e c t e d
based on the number of l i c e n s e s issued.
A June 1981 f i n a n c i a l a u d i t o f the Racing Commission by t h e Auditor
General has s i n c e found t h a t proper accounting c o n t r o l s a r e now i n place.
F u r t h e r , a r e c o n c i l i a t i o n by performance a u d i t s t a f f found t h a t f e e s
c o l l e c t e d during the f i r s t s i x months of f i s c a l year 1981- 82 versus the
fees t h a t should have been c o l l e c t e d based on t h e number o f l i c e n s e s
issued now agree.
Licensing of O f f i c e r s and
Directors of Permittees
We previously noted t h a t although t h e Commission had s t a t u t o r y a u t h o r i t y ,
it was not l i c e n s i n g i n d i v i d u a l o f f i c e r s and d i r e c t o r s o f racing
p e r m i t t e e s . T h i s l e f t the Commission with no means t o d i s c i p l i n e o f f i c e r s
o r d i r e c t o r s who v i o l a t e d Commisson r u l e s . I n d i v i d u a l o f f i c e r s and
d i r e c t o r s a r e now licensed pursuant t o a May 21, 1981, d i r e c t i v e o f t h e
Commission.
CONCLUSION -
Controls over t h e l i c e n s i n g process have been s i g n i f i c a n t l y improved.
However, the Commission needs t o 1 ) more f u l l y implement t h e procedures
a v a i l a b l e t o prevent unlicensed a c t i v i t y and 2) ensure t h a t all l i c e n s i n g
procedures a r e followed.
RECOMMENDATIONS
1. The l i c e n s i n g supervisor ensure t h a t - a l l names l i s t e d i n t h e
r a c i n g program a r e reviewed a g a i n s t persons l i c e n s e d by the
Commission.
2. The l i c e n s i n g supervisor p e r i o d i c a l l y review l i c e n s e a p p l i c a t i o n s
t o ensure t h a t - a l l procedures, including the requirement t h a t
a p p l i c a t i o n s be signed i n t h e presence of a Commission o f f i c i a l
o r a n o t a r y p u b l i c , a r e followed.
FINDING V I
THE COMMISSION HAS NOT TAKEN TIMELY ACTION TO RECOVER FUNDS I T GRANTED
IMPROPERLY.
Auditor General Report 81- 5 disclosed t h a t the Comaission had improperly
granted approval t o permittees t o withhold c a p i t a l improvement funds,* and
had, i n past years, made i l l e g a l loans t o l i c e n s e e s . Also, the Commission
had never determined whether funds from t h e county f a i r s and r a c i n g
b r e e d e r s t award fund should be used t o pay f o r t h e s a l a r y of a
manager- supervisor. Once n o t i f i e d of these problems, t h e Commission did
n o t t a k e timely a c t i o n t o recover t h e funds o r c o r r e c t t h e s i t u a t i o n s .
C a p i t a l Improvement Funds
I n 1978 t h e Commission improperly approved r e q u e s t s from Turf Paradise and
P r e s c o t t Downs t o use c a p i t a l improvement funds t o purchase r o l l i n g stock
( t r a c t o r s , t r u c k s and equipment). The c o s t of t h e s e items purchased by
Turf Paradise and P r e s c o t t Downs was $ 190,122 and $ 38,922, r e s p e c t i v e l y .
However, t h e P r e s c o t t Downs equipment was p a r t o f a l a r g e r $ 100,943
request. Once the improper r o l l i n g stock c o s t s were s u b t r a c t e d , t h i s
request a l s o f a i l e d t o meet t h e s t a t u t o r y requirements f o r c a p i t a l
improvements.** Thus, the Commission a c t u a l l y improperly approved
$ 291,065 f o r c a p i t a l improvements.
* A. R. S. 55- 111.02 provides f o r the S t a t e t o subsidize c a p i t a l
improvements a t commercial h o r s e t r a c k s . Commercial horse racing
permittees who receive Commission approval f o r c a p i t a l improvements
a r e allowed t o reduce the percent paid t o the S t a t e by 1 percent of
the t o t a l amount wagered. ** A. R. S. $ 5- 111.02, subsection D, r e q u i r e s t h a t a request t o t a l a t l e a s t
$ 100,000 t o q u a l i f y a s a c a p i t a l improvement. After s u b t r a c t i n g t h e
$ 38,921 which was improperly approved f o r v e h i c l e s and equipment, t h e
o r i g i n a l $ 100,943 request f a i l e d t o meet t h e s t a t u t o r y requirement.
Turf Paradise h a s n o t withheld any funds f o r its r o l l i n g stock. A t the
time of our previous r e p o r t , P r e s c o t t Downs had withheld $ 85,974 of t h e
t o t a l $ 100,943 r e q u e s t , including $ 23,953 f o r r o l l i n g s t o c k . C u r r e n t l y ,
the e n t i r e $ 100,943 has been withheld. We recommended i n Report 81- 5 t h a t
the Commission do a s follows:
- Rescind its approval of r o l l i n g stock a s a c a p i t a l improvement;
- D i r e c t Turf Paradise not t o withhold funds f o r the r o l l i n g s t o c k ;
- D i r e c t P r e s c o t t Downs t o repay t h e $ 23,953 withheld f o r r o l l i n g
s t o c k ; and
- Request an Attorney General opinion t o determine i f P r e s c o t t
ilowns should be required t o repay a l l funds withheld a g a i n s t t h e
$ 100,943 r e q u e s t .
The Commission did not t a k e timely a c t i o n on t h e s e recommendations.
Instead of r e s c i n d i n g its improper approval and r e q u e s t i n g repayment of
the funds from P r e s c o t t Downs, t h e Commission waited almost two months and
then requested an Attorney General opinion on t h e e n t i r e m a t t e r . When the
Attorney General opinion was received t h r e e months l a t e r supporting t h e
conclusions of t h e a u d i t r e p o r t , t h e Commission waited a n a d d i t i o n a l t h r e e
months, u n t i l December 3, 1981, before r e q u e s t i n g repayment of t h e funds.
F u r t h e r , Commission correspondence i n d i c a t e s it was not u n t i l a month
a f t e r t h a t a c t i o n i n January 1982 t h a t the Co~ naission n o t i f i e d Turf
Paradise it could not withhold funds f o r r o l l i n g stock.
In d i s c u s s i n g why it took s o long f o r t h e Com! ission t o rescind its
approval of r o l l i n g stock a s a c a p i t a l improvement, p a r t i c u l a r l y a f t e r the
Attorney General opinion was r e c e i v e d , we were t o l d t h a t t h e Commission
was hoping t h a t l e g i s l a t i o n could be passed which would r e t r o a c t i v e l y
include r o l l i n g stock a s a c a p i t a l improvement. When t h e Commission
learned t h a t t h i s would not be p o s s i b l e , a request was then made f o r
repayment.
We were a l s o t o l d t h a t t h e former chairman of t h e Commission had
r e p o r t e d l y n o t i f i e d Turf Paradise p r i o r t o January 1982 t h a t approval f o r
r o l l i n g stock had been rescinded. When no copies of t h e correspondence
could l a t e r be found, t h e c u r r e n t chairman s e n t t h e January 1982
n o t i f i c a t i o n t o Turf Paradise.
A s of February 18, 1982, no funds had been repaid by P r e s c o t t Downs.
However, the Commission and t h e Attorney General a r e studying the
p o s s i b i l i t y o f having the Yavapai County F a i r Association, which owns
P r e s c o t t Downs, use funds from t h e county f a i r s r a c i n g and b r e e d e r s ' award
fund t o purchase t h e items t h a t P r e s c o t t Downs bought with t h e c a p i t a l
improvement funds. P r e s c o t t Downs would then use t h a t money t o reimburse
t n e S t a t e .
I l l e g a l Loans Through Benevolent Funds
P r i o r t o March 1978 t h e Commission i l l e g a l l y loaned $ 51,016 t o l i c e n s e e s
through the Race Track Benevolent Fund and t h e Greyhound Benevolent
Fund.* Although the Funds were found t o be i l l e g a l and were discontinued,
no e f f o r t was made t o determine whether any of t h e $ 50,656 i n
i n t e r e s t - f r e e loans t h a t remained outstanding could be c o l l e c t e d . Our
a u d i t recommended t h a t an e f f o r t be made t o determine whether it would be
f e a s i b l e t o c o l l e c t any, o r a l l , of t h e unpaid loans.
The Commission d i d n o t i n i t i a t e a c t i o n t o recover t h e unpaid loans u n t i l
approximately nine months a f t e r our a u d i t was r e l e a s e d . In January 1982
the Executive Secretary was d i r e c t e d t o attempt t o c o l l e c t the outstanding
loans. A s of February 18, 1982, no monies had been recovered.
Commission o f f i c i a l s t o l d u s a c t i o n was not taken e a r l i e r t o recover the
i l l e g a l loans because the Commission f e l t they had not erred when t h e
loans were made and did n o t t h i n k any monies would be recovered.
Funding County F a i r
Manager- Supervisorls Salary
The Commission annually d i s t r i b u t e s more than $ 200,000 from the county
f a i r s racing and breeders1 award fund t o t h e county f a i r race meets. The
Commission has complete d i s c r e t i o n i n a l l o c a t i n g the monies a s long a s t h e
use of the monies is deemed I1necessary f o r the promotion and betterment of
county f a i r racing meets. l1
* These Funds were c r e a t e d t o provide an emergency source of f i n a n c i a l
a s s i s t a n c e f o r needy i n d i v i d u a l s employed a t t h e race t r a c k s . Fines
l e v i e d a g a i n s t l i c e n s e e s were used t o e s t a b l i s h and s u s t a i n t h e Funds
which were c o n t r o l l e d by the stewards.
Although most expenditures a r e used f o r physical improvements and
equipment, one county d i d u s e t h e funds t o pay t h e s a l a r y of a
manager- supervisor. While the Commission has determined t h a t such items
as expenditures f o r equipment a r e necessary f o r t h e " betterment1I of county
f a i r racing meets, it has never made a similar d e t e r m i n a t i o n r e g a r d i n g the
s a l a r y of a manager- supervisor. We previously recommended t h a t the
Commission make a determination on the matter.
A request f o r a determination on t h e matter was brought t o t h e Commission
by Commission s t a f f i n December 1981. No a c t i o n had been taken as of
January 31, 1982. The Commission chairman t o l d us he personally believed
expenditures f o r a manager- supervisor's s a l a r y would be f o r the promotion
and betterment of county f a i r r a c i n g . He s a i d it was an oversight t h a t
the Commission had not addressed t h e i s s u e e a r l i e r .
CONCLUSION
The Commission did not take timely c o r r e c t i v e a c t i o n with regard t o t h e
use of c a p i t a l improvements f o r r o l l i n g stock. The Commission a l s o had
not taken timely a c t i o n t o attempt t o recover outstanding, i l l e g a l loans
nor t o determine whether manager- supervisors s a l a r i e s should be paid from
the county f a i r s racing and breeders' award fund.
RECOMMENDATIONS
1. The Commission continue its e f f o r t s t o recover the 1 ) c a p i t a l
improvements monies improperly approved and withheld and
2) o u t s t a n d i n g , i l l e g a l loans made to l i c e n s e e s .
2. The Commission determine whether expenditures f o r management
s a l a r i e s a r e f o r the " promotion and betterment" of county f a i r
racing meets.
FINDING V I I
ACTIONS HAVE BEEN TAKEN TO CORRECT DEFICIENCIES I N THE COMMISSION'S
PROGRAMS TO CONTROL ILLEGAL DRUGS.
Previous review found a number of d e f i c i e n c i e s i n t h e Commission's
programs t o c o n t r o l i l l e g a l drug usage i n r a c e animals. The more s e r i o u s
d e f i c i e n c i e s included 1 ) the procedures followed by t h e Commission
v e t e r i n a r i a n s t o o b t a i n some urine samples which destroyed t h e i n t e g r i t y
o f t h e sample t e s t i n g process, 2) the f a i l u r e t o take blood samples and
a d d i t i o n a l samples when a p p r o p r i a t e , and 3) t h e inadequate procedures
used t o s e l e c t and evaluate t h e chemist who performed t h e drug t e s t i n g .
The Commission appears t o have addressed most of t h e s e d e f i c i e n c i e s .
However, due t o inadequate records we could not f u l l y e v a l u a t e t h e i s s u e
of taking a d d i t i o n a l samples.
Procedures Used To Obtain Samples
A t t h e time of our previous r e p o r t we found t h a t Commission v e t e r i n a r i a n s
were administering Lasix ( a d i u r e t i c ) t o horses when samples could not be
obtained within a s p e c i f i e d t i m e . Racing chemists from other
j u r i s d i c t i o n s t o l d u s t h a t Lasix t a k e s e f f e c t within minutes and masks the
presence of v i r t u a l l y a l l i l l e g a l substances known t o be used i n r a c e
amimals. Commission v e t e r i n a r i a n s have s i n c e been i n s t r u c t e d t o
discontinue using Lasix t o c o l l e c t samples. A review of t e s t cards and
v e t e r i n a r i a n s t r e p o r t s i n d i c a t e s the p r a c t i c e has been discontinued.
Blood and/ or Additional Samples
Other d e f i c i e n c i e s noted i n Report 81- 5 included 1) the f a i l u r e t o take
blood samples from a l l horses t h a t died immediately b e f o r e , d u r i n g o r
a f t e r a r a c e and 2) a decrease i n the number of a d d i t i o n a l samples taken.
Blood samples a r e o f t e n the only samples a v a i l a b l e when a horse d i e s
immediately before, during o r a f t e r a race. We previously noted t h a t
blood samples were not taken from any horses t h a t died a t R i l l i t o Downs
and from only h a l f of the horses t h a t died a t Turf Paradise. However,
blood samples a r e now being taken from a l l horses t h a t d i e immediately
b e f o r e , d u r i n g o r a f t e r a race. We i d e n t i f i e d 14 horses t h a t died under
such circumstances between May 1, 1981, and December 31, 1981. Blood
samples were taken from a l l horses.
Additional samples a r e samples taken from other animals i n a race i n
a d d i t i o n t o the sample taken from t h e winner.* Additional samples a r e
used t o i n c r e a s e t h e p o s s i b i l i t y o f d e t e c t i n g i l l e g a l drug usage and may
be taken i n races with p a r t i c u l a r l y l a r g e purses o r when an animal does
not perform as expected. During the t i m e period covered by Report 81- 5,
the Commission had decreased its use of a d d i t i o n a l samples. Due t o
inadequate records we cannot evaluate whether t h e taking of a d d i t i o n a l
samples has s i n c e increased. The inadequacies i n t h e r e c o r d s i n c l u d e :
- I n a b i l i t y t o l o c a t e 8 o f t h e 31 l a b o r a t o r y r e p o r t s needed f o r our
review,
- Incompleteness of 5 of t h e 31 l a b o r a t o r y r e p o r t s as t o n o t a t i o n s
of the types of samples ( i . e . , blood, urine o r s a l i v a ) , and
- F a i l u r e t o show adequate d e t a i l s about samples on 14 of the 31
v e t e r i n a r i a n s ' r e p o r t s .
* These samples a r e generally urine samples, but may a l s o be taken a s
blood o r s a l i v a samples.
Procedures Used To S e l e c t
and Evaluate t h e Chemist
Ultimately, t h e Commission r e l i e s on t h e e x p e r t i s e o f a racing chemist and
t h e accuracy of h i s a n a l y t i c a l t e s t i n g t o c o n t r o l and r e g u l a t e i l l e g a l
drug usage i n racing animals. The previous performance a u d i t found t h a t
1) the Commission had discouraged q u a l i f i e d l a b o r a t o r i e s from bidding on
c o n t r a c t s t o perform the Commission's drug t e s t i n g , 2) the Commission had
n o t a d e q u a t e l y e v a l u a t e d the performance o f t h e chemist it used, 3) the
Commission d i d n o t take timely a c t i o n when it found the chemist was not
performing e f f e c t i v e l y , and 4 ) the one- page c o n t r a c t document used was
inadequate and possibly i n v a l i d . However, e f f e c t i v e September 8, 1981,
the Commission entered i n t o a new c o n t r a c t with a d i f f e r e n t r a c i n g
chemist. The bidding procedures used and the provisions incorporated i n t o
t h e c o n t r a c t appear t o have a l l e v i a t e d the previous problems.
S p e c i f i c a l l y , we noted:
- The Commission a d v e r t i s e d n a t i o n a l l y and a c t i v e l y sought t o
o b t a i n as l a r g e a number of q u a l i f i e d bidders a s p o s s i b l e . Ten
l a b o r a t o r i e s were d i r e c t l y contacted by t h e Commission and
requested t o bid.
- The c o n t r a c t i n c l u d e s p r o v i s i o n s f o r monitoring the performance
of the chemist including the use of " audit samples. 1t*
A d d i t i o n a l l y , the Commission uses s p l i t samples** t o evaluate t h e
chemist. A s of January 31, 1982, 21 samples from 2 major races
had been s p l i t .
- The c o n t r a c t r e q u i r e s t h e chemist t o f i l e a $ 50,000 performance
bond which is due if the chemist f a i l s t o d e t e c t 90 percent of
the a u d i t samples.
- The 22- page c o n t r a c t was prepared by the Commissionts A s s i s t a n t
Attorney General t o ensure its soundness and v a l i d i t y .
* Audit samples a r e samples t h a t a r e s p e c i a l l y prepared o r " loadedn so
t h a t they a r e known t o contain drugs.
** S p l i t samples a r e r e g u l a r samples t h a t a r e s p l i t i n t o two o r more
portions and submitted t o a d d i t i o n a l l a b o r a t o r i e s as a cross- checking
procedure. This is done without p r i o r knowledge a s t o whether drugs
a r e a c t u a l l y p r e s e n t .
CONCLUSION
The Commission has taken a c t i o n t o c o r r e c t d e f i c i e n c i e s i n t h e
1) procedures used t o o b t a i n samples, 2) t a k i n g of blood samples, and
3) procedures used t o s e l e c t and evaluate the c o n t r a c t chemist. Due t o
inadequate records we could not evaluate Commission a c t i o n s taken with
regard t o the taking o f a d d i t i o n a l samples.
RECOMMENDATIONS
1. The Commission improve its records regarding drug t e s t s by
- Retaining and/ or more c a r e f u l l y f i l i n g l a b o r a t o r y r e p o r t s ;
- Ensuring t h a t l a b o r a t o r y r e p o r t s show d e t a i l s a s t o t h e
types of samples t e s t e d ( u r i n e , blood o r s a l i v a ) ; and
- Providing more d e t a i l on t h e v e t e r i n a r i a n s ' r e p o r t s a s t o
the number and types of samples taken p e r r a c e .
2. The Commission continue t o monitor t h e performance of t h e new
racing chemist now under c o n t r a c t t o t h e Commission.
FINDING V I I I
ACTION HAS BEEN TAKEN TO IMPROVE COMPLIANCE WITH THE OPEN MEETING LAW AND
THE WORKMEN'S COMPENSATION LAW. HOWEVER, THE COMMISSION MAY NOW BE
VIOLATING STATUTES PERTAINING TO THE DESTRUCTION OF PUBLIC RECORDS.
Auditor General Report 81- 5 found t h a t 1 ) s t e w a r d s ' h e a r i n g s did not
comply with the public n o t i c e requirements of t h e Open Meeting Law, and
2) the Commission did not enforce a n a d m i n i s t r a t i v e r u l e concerning t h e
Workmen's Compensation Law. Although the Commission has s i n c e taken
a c t i o n t o improve compliance i n both a r e a s , Commission employees may now
be v i o l a t i n g S t a t e law by not r e t a i n i n g minutes of stewards' hearings.
Open Meeting Law
P r i o r , t o Report 81- 5 t h e Comxission did not consider stewards' hearings t o
be s u b j e c t t o the Open Meeting Law. Consequently, required public n o t i c e s
were not posted, minutes were not kept and public attendance was not
allowed.
Commission a c t i o n has been taken t o c o r r e c t these d e f i c i e n c i e s , but t h e
Commission is not complying with s t a t u t o r y r e q u i r e x e n t s t o r e t a i n minutes
of public meetings.
Stewards1 hearing proceedings a r e tape- recorded i n p l a c e o f t a k i n g w r i t t e n
minutes. These tapes a r e erased a f t e r 72 hours u n l e s s 1 ) the case is
r e f e r r e d by t h e stewards t o t h e Commission f o r f u r t h e r a c t i o n o r 2) the
person appeals t h e r u l i n g . The t a p e s are erased a f t e r 72 hours because
persons cannot appeal r u l i n g s l a t e r than 72 hours a f t e r the hearing.
Despite t h i s procedure, we found t h a t t h e tapes a r e public documents and
erasing them may v i o l a t e S t a t e law.
Attorney General Opinion 180- 198 reviewed the question of r e t a i n i n g
tape- recorded minutes of public meetings and concluded t h a t recordings,
l i k e w r i t t e n minutes, must be r e t a i n e d i n d e f i n i t e l y . The only exception
is i f w r i t t e n minutes are l a t e r t r a n s c r i b e d from the t a p e recordings; then
t h e t a p e recordings can be erased. Erasing tape- recorded minutes under
o t h e r circumstances may v i o l a t e A. R . S. $ 38- 4 21 which addresses the
d e s t r u c t i o n o f public records. Violations of t h i s s t a t u t e c o n s t i t u t e a
c l a s s 4 felony.
Workmen's Compensation
Commission r u l e s r e q u i r e l i c e n s e e s t o be insured under the Workmen's
Compensation Law. The previous a u d i t d i s c l o s e d t h a t t h i s r u l e was not
being enforced. Since t h e time of t h a t a u d i t t h e Commission h a s t a k e n t h e
following a c t i o n s t o ensure compliance:
1. The Commission has requested and received t h e a s s i s t a n c e o f t h e
I n d u s t r i a l Commission i n enforcing the provisions of the
Workmen's Compensation Law.
2. Stewards have compiled lists of persons not covered by insurance
which have been submitted t o t h e I n d u s t r i a l Commission f o r
f u r t h e r a c t i o n .
3. Commission l i c e n s e a p p l i c a t i o n s have been changed t o r e q u i r e
d i s c l o s u r e o f insurance coverage.
CONCLUSION
Commission a c t i o n s have been taken t o comply with the Open Meeting Law and
t o ensure t h a t l i c e n s e e s a r e insured under Workmen's Compensation
Insurance. However, Commission employees may be v i o l a t i n g S t a t e s t a t u t e s
by e r a s i n g t h e tape- recorded minutes of stewards1 h e a r i n g s .
RECOMMENDATION
The Commission e i t h e r 1 ) r e t a i n tape- recorded minutes of stewardst
hearings i n d e f i n i t e l y o r 2) t r a n s c r i b e w r i t t e n minutes before the tape
recordings a r e erased.
COMMISSION
Michael J. O'Haco. Cha~ rrnan
Chet E Johns, V~ ceC ha~ rman
ARIZONA RACING COMMISSION
John K. Goodman, Cornrn~ ss~ oner
Ronald A. Lebow~ tz. C ommlss~ oner
R. F. Shaffer, Commissioner
EXECUTIVE SECRETARY
Roy Snedigar
1645 West Jefferson
Room 437
Phoenix, Arizona 85007
( 602) 255- 51 51
BRUCE BABBITT
GOVERNOR
Mr. Douglas R. Norton
Auditor General
111 West Monroe ( Suite 600)
Phoenix, Arizona 85003
Dear P lr . Norton :
Your attention is invited to the attached resFnse to the
Auditor General's Performance Audit Report of March 9, 1982.
Aqain, thank you for the opportunity to comment on the draft
before it was released.
S i n c e ~ ~, l y
Ex& utive- Director
Enclosure
RS / br
I
AUDITOR GENERAL'S PERFORMAJKE AUDIT RESPONSE
The Codssion has reviewed the preliminary draft of the second phase
of the Performance Audit of the Arizona Racing Conmission by the Arizona
State Auditor General.
This Codssion is generally in agreement with the f i r s t draft and
the findings therein, and appreciates the opportunity to respond to it
before the audit becomes a matter of public record.
Finding # I:
Cormnission rules which regulate jockey betting w i l l be reviewed and
amended where necessary to control any improper betting by jockeys.
A feasibility study w i l l be made to determine the best possible mans of
isolating jockeys and Jockey Room employees from the public and the
best possible solution to the problem w i l l be taken.
Positive action has been taken and w i l l continue to be taken to
ensure that jockeys are weiqhed both in and out for every race. Any
ovem~ eights or weight changes w i l l be announced to the public in
accordance with Commission Rules and Regulations.
The Stewards a t the Rillito Race Track have denied that they have
knowingly allowed jockeys to race without being properly weighed.
Positive disciplinary action w i l l be taken i f any rule violations
have occurred.
The new Clerk of Scales a t Rillito Downs has been thoroughly
briefed concerning his responsibilities as Clerk of Scales and Agency
Investigators have been assigned the duty to mnitor and ensure that
the proper scale procedures are followed. The person responsible
for not weiqhing riders in Yuma has been dismissed. Tm sets of scales
and certified weights were purchased for the County Fairs and steps
w i l l be taken to obtain certified weights for use a t the c o m r c i a l
tracks.
Duties have been defined and distributed to test barn Security
Officers. Compliance w i l l be mnitored by the stewards and security
people.
A greater number of winning qreyhound samples w i l l be collected
under the s t r i c t supervision of the State Veterinarian, and closer
attention w i l l be paid to sample control and suE4nission.
The Conmission w i l l consider a rule change which w i l l require the
weigh- in weights to be displayed in the grandstand area and the pre-race
weights posted on the odds board.
A greater number of greyhound smLp3. cs c? n 12 c3btahed when the
lead- out people are directed to take the samples in f u l l view of the
State Veterinarian, instead of taking samples in the receiving pit.
Rule R4- 27- 309. Y. 6. is being reviewed and an amendment w i l l be
drafted which w i l l provide for a more efficient procedure of
sampling.
Finding # I1 :
The Commission recognizes the need for an electronic data processor
to establish controls and monitor track computers used a t the large
horse tracks and a t a l l of the greyhound tracks.
A review w i l l be originated to determine i f the Mutuel Supervisor
activity is required as it is today, or needs some change which muld
incorporate sane EDP function, or is completely obsolete, and the
total function is in fact now an FLIP function. Additional funding
was requested in the Corfunission's FY 82- 83 Budget Request for an
EDP Auditor or EDP Audit Contract funding.
We feel the wagering public needs to be represented a t the mutuel
windows by an agent of the State, rather than an employee of the
permittee. The State Mutuel Supervisor has other duties that are
essential to ensure integrity and compliance of rules. The State
Pari- mutuel people investigate customer complaints, ensure
procedures are in accordance with racing rules and regulations,
testify before the Racing Commission concerning illegal activity
within the mutuel rooms.
Finding # III:
The Arizona Department of Revenue was contacted and it was
determined that the sales tax issue is a mtter under their
cognizance. It is recommended that a final draft copy of this
audit report be s h i t t e d to The Arizona Deparbwnt of Revenue
for whatever action they deem appropriate in this finding.
Finding # IV:
The facts and circumstances delineated within this finding
are a l l basically true, but an additional cause for the case
backlog is:
1. The official State Chanist is finding considerably mre
traces of foreign substances in animal samples than ever before
due to improved chemical analysis procedures. A l l of these findings
are referred by the Track Stewards for hearings by the Comnission.
2. Fingerprinting is now done on 100% of a l l applicants, and
this has turned up consideraldy mre falsifications which are referred
to the Commission for hearing and their dispsition.
3. All applicants who are found to have felony connections within
the past five years, and a l l drug convictions within the past ten
years, and a l l falsified race related rulings pertaining to fraudulent
and corrupt practices are referred to the Commission for disposition.
The C& ssion was originally funded $ 10,000 in their FY 81- 82
Budget, however, recent budget reductions forced the loss of these
funds. Funding was again requested in the FY 82- 83 Budget Request
for a Hearing Officer.
Lqislation was introduced to grant suspension authority of 60
days to the stewards, which would give the ComrrLssio~ additional
time to process a case through the lengthy legal process to a
hearing.
A Typist I11 position was requested in the FY 82- 83 Budqet
Request to help eleviate the severe shortage of clerical support
for the typing of hearing notices, steward rulings and reports,
plus the large rider of investiqation reports now being generated.
Concentrated effort is being placed on the developnent of case
f i l e s and getting the mre serious cases before the Codssion
as soon as possible.
Finding # V:
Agency concentrated efforts have been made in the licensing
function of this Agency to improve efficiency and define licensing
authority throughout the State. The Codssion's FY 82- 83 Budget
Request includes a request for a new Licensing Supervisor position
and one seasonal FTE position to meet the requirements of this
function. In addition, detailed written operating procedures
are " on the drawing bard," and individual job descriptions
and employee evaluations have k e n clearly defined which w i l l be
s t r i c t l y adhered to and properly evaluated on a continuing basis.
In addition, legislation has been introduced which w i l l allow
the agency to spread the licensing function over a f u l l year
instead of the two peak periods each year as it is now.
Improvement is expected to continue within the Licensing Section.
Finding # VI:
When the Cormnission originally authorized the permittees
to withhold capital improvement funds for rolling stock, it was
done in good faith and thought not to be i l l e g a l u n t i l the i n i t i a l
Auditor General's report was received.
The reason it appears that the Racing Comnission did not take
timely action to recover the funds was:
1. Propsed legislation was introduced t o make rolling stock
a part of the capital improvement authority, retroactive to include
the rolling stock a t Prescott Downs and Turf Paradise. Once it
becomes apparent that this legislation would not be granted, prompt
action was initiated to recover the rolling stock funds.
Every recipient of Benevolent Funds, where located, was sent
a collection letter demanding the repayment of the loan. It might
be noted that these Benevolent Fund loans were not considered
illegal when loaned, and were loans to terribly desperate people
who were about die, loans for funeral expenses, and off track
accident victims, etc.
Tremendous hardships w i l l be placed on some of the payees
because their financial situation has not changed since 1959 or
earlier. Same loans w i l l simply remain uncollectible. However,
every effort has been made to recover these individual Benevolent
Fund grants.
Funding HVII :
The Codssion has adopted a l l new redication rules within
the past year, which virtually eliminated the use of foreign
substances in racing animals.
Chemist selection was done s t r i c t l y in accordance with
state purchasing guidelines, and a contract was issued for one
full year. Split sampling has become a routine procedure now
and the Arizona State Health Laboratory has been contracted
to actually v i s i t the laboratory and observe that proper analysis
procedures are being utilized.
The Comnission has notified the contracted chemist to include
in his report the t y p of s q l e tested. The Cammission's
Veterinarian is reviewing the reports concerning sampling and
a auditable record system w i l l be established as soon as possible.
Finding # VIII :
The Commission requested assistance from the Arizona Industrial
Comission to work out a procedure to ensure that proper Industrial
Conpensation laws are complied with. From this contact, a list
was provided to the Industrial Corrrmission of a l l those track people
who should participate in the program. The Industrial Commission
has taken action to enforce compliance with the laws concerning
Industrial Compensation coverage.
Immediate steps have been taken to maintain a record of a l l
steward hearings. Tape recorders were requested in the C o ~ s s i o n ' s
EY 82- 83 Budget Request to provide for public record requirements.
At the present time, hand- written minutes of the hearings w i l l be
taken by the one State Steward present a t each hearing. These
minutes w i l l then became a part of the Agency's permanent records.
ADDITIONAL COMMFSJT
During this past year, with the assistance of the Division of
Finance, Becutive Budget Office and the State Personnel Division,
the Comission has reorganized into five separate divisions, each
with an assigned Division Chief. Each Division Chief is responsible
directly to the Executive Secretary. This reorganization is in
place and working exceptionally well. Every effort has been made to
analyze the total Agency mrkload, and distribute this among a l l
available personnel using individual written job descriptions.
Due to the limited personnel resources, there are sane areas
that were not assigned, and these areas were addressed in the Agency's
FY 82- 83 Budget Request.
APPENDIX
LEGISLATIVE COUNCIL MEMORANDUM 0- 82- 3,
FEBRUARY 18, 1982
February 18, 1952
TO: Douglas R. Norton
Auditor General
FROM: Arizona Legislative Council
RE: ' Request for Research and Statutory Interpretation ( 0- 82- 3)
This is in response to a request submitted on your behalf by Bill Thomson in a
memo dated February 11, 1982. No input was received from the Attorney General
concerning this request.
FACT SITUATION:
Arizona Revised Statutes ( A. R. S.) section 42- 1309, subsection A provides for the
levy of a transaction privilege tax " measured by the amount or volume of business
transacted by persons on account of their business activities. . . ."
A. R. S. section 42- 130 1 defines " business1' and " sale11 as:
2. " Business" includes all activities or acts, personal or corporate,
engaged in or caused to be engaged in with the object of gain, benefit or
advantage, either directly or indirectly, but not casual activities or sales.
19. " Salen means any transfer of title or possession, or both,
exchange, barter, lease or rental, conditicnal or otherwise, in any manner or
by any means whatever, of tangible personal properry, for a
consideration. . . . (~ rnphasisad ded.)
Licensed horse owners may obtain title to horses through claiming races. Prior to
the race, owners may enter claims indicating that they wish to purchase a horse entered
in the race for a price established by the permittee. If the claim form is properly
executed and deposited with the permittee, title is transferred to the claimant. ( See
A. C. R. R. R4- 27- 206 for further background.)
Owners may claim only one horse in a race but are not restricted to the total
number whicfi can be claimed in any time period. Some owners have claimed as many as
30 horses in a year.
QUESTION PRESENTED:
Are sales of horses in daiming races subject to transaction privilege taxes?
DISCUSSION:
The transaction privilege tax is imposed on the gross proceeds of sales or gross
income of certain specifically enumerated transactions. A. R. S. section 42- 1309. One of
those transaction classifications is the retail sale of tangible personal property. A. R. S.
section 42- 1312. The focus is on the seller's activity, not on the buyer's. The key issue
posed by your question is whether the seller of horses in a claiming race is engaging in the
" business" of selling tangible personal property at retail. This issue can only be decided on
a case- by- case basis.
' 4. R. S. section 42- 1301 provides xi exemprion for " casual sales or activities". The
Department of Revenue has further defined the meaning of " casuai" in two of its
regulations, as follows:
2. " Casual1' applies to those transactions which are of an isolated
nature by a person who is not engaged in business and does not represent
himself as being in business ( see R15- 5- 1812) provided, however, that:
a. Retail sales by a person engaging in a taxable business are subject
to tax, even though the tangible personal property sold is not normally held
for sale.
r b. Sales made by trustees, receivers, and assignees in connection
with the liquidation or operation of an established business are not
considered t o be casual.
c. The sale of repossessed merchandise by a lending institution, not
normally engaged in the business of selling, is not considered to be casual.
( A. c. R. R. R- 1 5- 5- 202.)
A casual sale is one that is made by a person not engaged in an
activity taxable under the Sales Tax statutes. Provided t h a t t h e seller does
not make a practice of making sales of such volume or frequency as to
indicate he is a dealer, the transaction is not subject to the tax as a retail
sale. Examples of a s u a l sales include: sale of an automobile by a private
party, garage sales by persons selling articles originally purchased for their
own use. ( A. C. R. R. ~ 1 5 - 51- 8 12.)
The iudicial standards ap. . p lied by the courts are whether such activity is " isolated",
" unanticipated", " irregular" or " singular1'. Arizona Department of Revenue v. Mountain
States Tele~ hone ' and Tele~ raph Co., 113 Ariz. 467, 556 P. 2d 1129 ( 1976). The same
andysis applies whether the sale activity takes place a t swap meets, yard sales, public
auctions or claiming races.
CONCLUSION:
The issue of whether the sale of horses in a dairning race is subject to transaction
privilege taxes can only be decided on a case- by- case basis. You may wish to contact the
Department of Revenue or the Tax Division of the Attorney General's office for further
clarification in this regard.
cc: Bill Thornson, Acting Director
Performance Audit Division