01/09/2007 12:00AM

Auditor critical of Kentucky authority

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LEXINGTON, Ky. - The Kentucky Horse Racing Authority should hire a supervisor of parimutuel wagering and consider the purchase of monitoring software to insure that bettors and the state are receiving the proper returns from wagering, according to a report prepared by the state's auditor, Crit Luallen.

The report, which was released on Monday, states that the racing authority "needs additional expertise and resources to meet its mandates," which include the supervision of betting pools. But, the audit concluded, the authority does not have adequate funds to hire additional staff, because of a lack of commitment from the state legislature and assessments from racetracks that fail to cover the authority's costs.

The audit also criticized the authority for failing to file adequate reports to the state and for "continuing financial management problems." The audit was required by a law passed by the General Assembly in 2006, two years after Gov. Ernie Fletcher abolished the authority's predecessor, the Kentucky Racing Commission, citing the commission's poor record of financial reporting and governance.

Lisa Underwood, the authority's executive director, said the problems highlighted by the audit cannot be resolved without increased funding to the agency. The authority is funded by the state's general fund - an amount that has declined 62 percent from 2000 - and assessments charged to racetracks.

"It's one of those things where it's great to say, 'You shall do this,' or 'You shall do that,' but if you don't have the staffing or the funding, it's hard to do anything about it," Underwood said.

Authority members are having discussions with legislators about how to address the lack of funding, Underwood said, but she would not identify the solutions that are being considered.

The audit said the authority's current staff level of 32 employees has left it "severely understaffed." The 32 employees are 36 fewer than the average of the staff level of 10 state racing commissions that auditors surveyed.

Underwood said the authority has been considering hiring a supervisor of parimutuel wagering, as required by law, for nine months, but that a reduction in funding from the legislature last year stripped away available money for the position.

The audit recommended hiring the supervisor in order to give the authority the power to directly access betting data. Currently, racetracks are responsible for "self-reporting" handle, and the audit said that "Kentucky was the only state of those tested that did not have a method to access the racetracks' tote systems to conduct audits of parimutuel wagering."

In addition, the audit faulted the authority for a failure to properly monitor the funding of the Kentucky Thoroughbred Development Fund, an owners' award program. The authority has acknowledged that problem, and late in 2006 reached a settlement with racetracks to make up for previous shortfalls.