Racing Industry: Grants Management

Tabled: 28 November 2013

1 Background

1.1 Racing industry

Victoria's racing industry encompasses greyhound, harness and thoroughbred racing, with a controlling body governing each. For greyhound racing and harness racing, the controlling bodies are Greyhound Racing Victoria (GRV) and Harness Racing Victoria (HRV) respectively. These are statutory authorities established under the Racing Act 1958.

Thoroughbred racing is governed differently. Its controlling body—Racing Victoria Limited (RVL)—is a private company formed under the Commonwealth Corporations Act 2001 and certified by the Minister for Racing under the Racing Act 1958.

The controlling bodies perform a range of functions. These include:

  • setting the rules of racing
  • setting dates and times for races
  • providing integrity services, including employing stewards and establishing appropriate levels of drug testing
  • registering participants, racecourses and clubs
  • licensing and monitoring bookmakers registered under the Gambling Regulation Act 2003
  • consulting with stakeholders.

Racing clubs are independent entities that work collaboratively with the controlling bodies. They act as event managers—organising the racing venue and providing catering, staff and promotions. Under the Racing Act 1958, the Minister for Racing licenses racing clubs.

In addition to the controlling bodies and racing clubs, the Office of Racing in the Department of Justice (DOJ) advises the Minister for Racing on racing legislation and regulation, racing licensing, and racing industry issues. The Office of Racing is also responsible for implementing the government's racing program, including its racing grants programs.

1.1.1 Racing industry activity

Together, the three racing codes conduct around 2 000 race meetings each year, at over 100 racing locations across metropolitan and regional Victoria.

The racing industry estimated in 2006 that breeding, training, racing and wagering activities contributed approximately
$2 billion to Victoria's economy each year. A study in 2013 estimated that this has increased to around $2.8 billion. Figure 1A shows the number of race meetings by code for 2011–12.

Figure 1A
Racing code meetings and race locations in 2011–12

Racing locations

Racing code

Race meetings

Melbourne

Country

Greyhound

944

2

11

Harness

498

1

25

Thoroughbred

559

4

63

Total

2 001

7

99

Source: Victorian Auditor-General's Office from racing industry data.

1.1.2 Racing industry income

The racing industry gets most of its income from its joint venture with Tabcorp, the Victorian wagering licensee.

In 2011–12, Tabcorp payments to GRV totalled $43.6 million—79 per cent of GRV's income—while payments to HRV totalled $47 million—64 per cent of HRV's income. The highest Tabcorp payments were to RVL, totalling $179.8 million. This represented 72 per cent of RVL's income and 67 per cent of all Tabcorp payments to racing's controlling bodies. Other income sources for the controlling bodies include race field fees, racing regulation and service fees, and sponsorships.

Tabcorp's payments to the racing industry comprise fees for racing product and a share of wagering profits. Racing's controlling bodies also charge fees for non-Victorian wagering organisations' use of race field information. Racing industry income is spent on prize money, infrastructure development and maintenance, club support and the costs of operating the controlling bodies.

New racing industry income arrangements

New arrangements for racing industry income started with the new wagering licence in August 2012. The new arrangements included the controlling bodies losing gaming machine income and increasing their share of wagering profits from 25 per cent to 50 per cent. The government also reduced the tax charged on wagering to offset the industry's loss of gaming revenue.

1.2 Racing industry funding

Racing's controlling bodies received compensation payments between 2001 and 2008 directly from the Victorian Government, in addition to the bulk of their income from the joint venture with Tabcorp.

Figure 1B shows the source and amount of funding that the government gave, and intends to give, between 2001 and 2015, and accountability measures for each funding program.

Figure 1B
Racing industry direct funding and accountability measures

Direct funding ($mil)

Year

Fund

Accountability measures

Annual amount

Total for period

2001–02 to 2003–04

Payment on behalf of the state

None

4.0

12.0

2004–05 to 2005–06

Racing Community Development Fund

  • Annual plan approval
  • Annual concluding report

4.0

8.0

Payment on behalf of the state

None

3.5

2006–07 to 2007–08

Racing Industry Development Program

  • Project funding application

9.3

18.6

Payment on behalf of the state

None

2.0

2008–09 to 2011–12

Regional Racing Infrastructure Fund

  • Project funding application
  • Recipients' contributions

11.25

45.0

2011–12 to 2014–15

Victorian Racing Industry Fund

  • Project funding application
  • Recipients' contributions

19.88

79.5

Source: Victorian Auditor-General's Office based on DOJ data.

Between 2001 and 2004 the Victorian Government made direct payments to controlling bodies totalling $12 million. The purpose of the direct funding was to compensate the racing industry for income lost as a result of a levy on gaming machine profits. The racing industry received a share of gaming machine profits from its joint venture with Tabcorp.

From 2004–05 to 2005–06 compensation payments totalling $11.5 million were paid to controlling bodies through the Racing Community Development Fund. To increase the industry's accountability, and to acknowledge the government's support, controlling bodies were required to gain approval for project funding and to report on its use. The Racing Community Development Fund supported areas such as breeding, ownership, jockey welfare, education and training, safety, and promotion of racing.

The Racing Industry Development Program, which operated in 2006–07 and 2007–08, gave $18.6 million to the racing controlling bodies to support capital developments at racing and training venues. DOJ controlled allocations from the Racing Industry Development Program, in contrast to previous funds, which were paid directly to controlling bodies. The Victorian Government made an additional payment of $2 million to the controlling bodies in 2006–07 to compensate for an increase in the levy on gaming machine profits in November 2005.

The Regional Racing Infrastructure Fund (RRIF) was announced in November 2008 and operated until September 2012. It also aimed to support controlling bodies' capital development projects. Controlling bodies were required to contribute to each project and made an initial commitment to RRIF of $41 million, almost matching the government's commitment of $45 million.

The Victorian Racing Industry Fund (VRIF) started in July 2011 and will operate until June 2015. It gives grants for approved projects to controlling bodies, clubs and other racing industry bodies such as picnic racing clubs, generally with an equal contribution required of the applicant. It is expected that funds available through VRIF will total $79.5 million over four years.

1.2.1 Regional Racing Infrastructure Fund

RRIF was intended to ensure that Racing Infrastructure had the capacity to support the future needs of the racing industry. It was also intended to support renewal of the wagering licence and the racing industry's joint venture with the new wagering licensee through the development of Racing Infrastructure.

The purpose of RRIF was to financially support controlling bodies' projects at racing and training venues outside Melbourne, and to stimulate industry growth and development. RRIF was intended to support drought-proofing and water-saving measures, occupational health and safety improvements, infrastructure developments, and initiatives to stimulate industry growth and development.

Only racing controlling bodies were eligible to apply for RRIF grants, and DOJ accepted applications at any time. Grants were paid as contributions to individual projects with cash or in-kind contributions from racing controlling bodies, clubs and other sources. RRIF was not a competitive grants program, and the government's contribution was divided according to the racing codes' respective market share of wagering. GRV's initial allocation was $7.7 million, HRV's $6.9 million, and RVL's $30.4 million.

1.2.2 Victorian Racing Industry Fund

VRIF is part of the Victorian Government's Plan for Racing, which includes the return of unclaimed wagering dividends and on-course wagering taxes from totalisator bets to the Victorian racing industry. The level of funding available from these sources depends on the value of funds wagered and the level of unclaimed wagering dividends.

VRIF program guidelines state that the program 'provides funding support to the Victorian racing industry for improvements at racing and training venues and for selected programs designed to further stimulate industry growth and development'.

There are two components of VRIF that directly support controlling bodies, racing clubs, jumps racing, picnic and graduation clubs:

  • Racing Infrastructure—which supports development of racing and training infrastructure and facilities. Funding is up to $30 million over four years from unclaimed wagering dividends.
  • Raceday Attraction Program—which supports initiatives to attract attendance at race meetings. Funding was $5.8 million in the first year and $2.3 million each year thereafter, as a result of the reduction in the wagering tax rate.

VRIF Racing Infrastructure and Raceday Attraction programs benefit controlling bodies and licensed racing clubs. Funds for Racing Infrastructure are broadly divided between the codes according to their wagering market share, with the result that GRV is allocated 15.5 per cent, HRV 15.5 per cent, and RVL 69 per cent. DOJ accepts applications at any time because VRIF, like RRIF, is not a competitive grants program.

Other components of VRIF include:

  • supporting breeding and sales of racehorses and greyhounds—$10 million
  • welfare of retired greyhounds and racehorses—$2 million
  • promotion, increased participation and safety measures for jumps racing—$2million
  • picnic racing—$0.2 million
  • research into drug detection—$4 million.

1.3 Audit objective and scope

The audit objective was to assess whether DOJ and controlling bodies GRV, HRV and RVL are managing racing industry grants effectively and efficiently.

The audit examined whether effective processes guide assessment and funding of grant applications, and whether grant programs are achieving their intended outcomes. The audit examined RRIF, which operated from 2008 to 2012, and the VRIF Racing Infrastructure and Raceday Attraction programs, which run from 2011 until 2015.

1.4 Audit method and cost

The audit involved:

  • desktop research
  • reviews of RRIF and VRIF program management documentation from 2008 to 2013, including funding applications, assessments and briefings
  • grant recipients' project records and governance processes
  • interviews with agencies and stakeholders
  • quantitative and qualitative analysis.

The audit was conducted under section 15 of the Audit Act 1994 and in accordance with the Australian Auditing and Assurance Standards.

Pursuant to section 20(3) of the Audit Act 1994, unless otherwise indicated, any persons named in this report are not the subject of adverse comment or opinion.

The total cost of the audit was $299 000.

1.5 Report structure

Part 2 examines the effectiveness of processes guiding assessment and funding of grant applications.

Part 3 examines how well grant programs are achieving intended outcomes.

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