Pennsylvania report critical of Agriculture Department

Pennsylvania’s Auditor General released a report on Wednesday claiming that the state’s Agriculture Department nearly bankrupted a fund it oversees that provides for the regulation of horseracing. The report says the Agriculture Department overbilled the fund and charged it for millions of dollars in services it could not document over a four-year period ending in 2013.

The report, by auditor general Eugene DePasquale, said the Agriculture Department overbilled the State Racing Fund, which provides money to the state’s harness racing and Thoroughbred racing commissions and to the state’s testing laboratory, by just over $700,000 during the four-year period, while charging the fund for $5.2 million in “additional personnel costs that it could not document were directly related to services provided to the two racing commissions.”

The report said that the State Racing Fund would have gone bankrupt this spring if the legislature had not agreed to transfer $4.2 million from slot-machine subsidies that normally flow to owners and breeders to the fund to make up for the shortfalls caused by the Agriculture Department.

Pennsylvania’s legislature has annually targeted the slot-machine subsidies for the state’s general fund, and some Pennsylvania racing officials were afraid the audit would call the subsidy program into question.

Instead, the audit defended the subsidy program, saying that the annual $250 million outlay to owners and breeders was an important element of the Pennsylvania economy. DePasquale also said that the attempts by the legislature to target the funds was destabilizing the industry.

“To protect the jobs and reap economic benefits from the industry, we need to ensure the state and the Department of Agriculture are appropriately administering the funds,” DePasquale said in a statement. “The horse racing industry — like every industry — needs certainty and stability in regulation and oversight from the state.”

The audit recommended that the Agriculture Department change its billing formulas and procedures and is prohibited from using the State Racing Fund money for its own budget shortfalls.

Pete Peterson, a spokesperson for a racing lobbying group called the Pennsylvania Equine Coalition, said racehorse owners and breeders were pleased with the report’s conclusions.

“This report confirms what the Pennsylvania racing industry has been saying for a number of years: that money intended for the operation of the state’s racing commissions and for breeders incentives was improperly diverted for other purposes,” Peterson said.