Racing Industry: Grants Management

Tabled: 28 November 2013

Audit Summary

Victoria's racing industry is estimated to have contributed around $2.8 billion to the Victorian economy in 2011–12. The racing industry encompasses greyhound, harness and thoroughbred racing—each governed by a controlling body. 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.

The Victorian racing industry conducted some 2 000 greyhound, harness and thoroughbred horse race meetings in 2011–12.

The racing industry has received funding from government since 2001. Since 2009 the racing industry has received funding through the Regional Racing Infrastructure Fund (RRIF) and the Victorian Racing Industry Fund (VRIF). The Department of Justice (DOJ) manages these funds.

RRIF operated between 2009 and 2012 and provided $39.4 million for 117 infrastructure projects, with controlling bodies contributing $31.5 million. Only the racing controlling bodies were eligible to apply for RRIF funding.

VRIF will operate between July 2011 and June 2015. By June 2013, VRIF had provided $14.3 million in grants for racing infrastructure, with racing industry contributions of $16.6 million. Racing controlling bodies, racing clubs and other racing industry bodies, such as picnic racing clubs, are eligible to apply for VRIF funding.

The audit examined whether DOJ and controlling bodies are managing grants to the racing industry effectively. This included examining processes for assessing applications, making funding recommendations, managing funding agreements and delivering the outputs and outcomes intended of the grants programs.

Conclusions

DOJ's management of racing industry grants over the past five years has been administratively weak. Particularly for the now completed RRIF, a lack of assessment guidance and records meant it was unclear whether applications had met the funding criteria or had been assessed consistently. There were also weaknesses with how some controlling bodies managed publicly funded projects, and how DOJ oversaw these projects and gained assurance that they would achieve intended outcomes.

Since VRIF started in 2011, there has been steady improvement both in how DOJ manages applications and in how controlling bodies manage funded projects. But greater effort is needed to improve the transparency and accountability of grants assessments. DOJ also needs to demonstrate that grants have achieved the desired outcomes and brought the expected benefits—something it is currently unable to do.

Findings

Grant assessments

DOJ conducts all grant assessments. During the audit we found that it had set up clear application and assessment procedures, roles and responsibilities for RRIF and VRIF grants programs, and improved funding criteria and requirements of applicants for VRIF. However, there are still significant weaknesses with how DOJ assesses applications and how it records assessments.

RRIF funding criteria reflected the program's purposes and focused on need, net benefit and the adequacy of project management and consultation. DOJ has further strengthened the funding criteria for VRIF.

DOJ also set up effective application procedures for RRIF and VRIF, including clear roles and responsibilities for applicants, the Office of Racing and the Minister for Racing. DOJ was responsible for assessing RRIF and VRIF applications.

However, DOJ has not established guidelines to robustly and consistently assess proposals against the funding criteria. In addition, it only started recording its grant application assessments in August 2012—three years after the RRIF program began. These assessments do not show whether applications met each funding criterion or the extent to which they met them.

Grant approvals

The Minister for Racing decides which projects RRIF and VRIF will fund based, in part, on DOJ's advice and funding recommendations. While DOJ routinely gives advice, its recommendations are not based on clear assessments against all funding criteria. Consequently it is not clear whether all funded projects met all the funding criteria. The amount of information that DOJ gives to the minister has increased under VRIF, but further improvement is needed.

Managing funding agreements

DOJ established funding agreements for all grants made under RRIF and VRIF, with funds distributed according to the Minister for Racing's funding decisions.

However, DOJ incurred unnecessary risks in managing the RRIF program as it did not assure itself of the suitability of the funding agreement prior to its use. The execution of agreements was not always timely, with agreed activities often occurring without a funding agreement in place.

DOJ has processes in place to manage risks associated with payments under the funding agreements, such as not making payments without evidence of expenditure. However, it has not exercised all its rights under the funding agreements to monitor projects and assure itself of recipients' management of RRIF and VRIF funds. During the RRIF program, DOJ did not identify weaknesses in some recipients' procurement and contracting practices that could have reduced the benefits arising from public funding.

Under RRIF, recipients did not accurately plan the project completion dates listed in funding agreements, and DOJ did not enforce the agreements to improve recipients' planning and compliance. Under VRIF, the timeliness of project completion has since improved.

Controlling bodies' grant-funding governance

The three controlling bodies received $39.4 million in RRIF grants between June 2009 and September 2012, and $13.5 million in VRIF grants between July 2011 and June 2013. Overall, the racing controlling bodies are improving their capital procurement and contract management practices. However, there has been considerable variation in standards of practice.

RVL is the largest recipient of RRIF and VRIF Racing Infrastructure grants, receiving 134 grants amounting to $35.7 million, or approximately 64 per cent of funding granted for infrastructure. Thoroughbred racing clubs received 30 VRIF grants amounting to $3.2 million.

RVL's project management is sound. It has developed procurement methods to reduce reliance on specialist providers and increase competition for its capital spending. RVL's procurement processes showed attention to probity, and it has sound controls over project accounting and record keeping.

GRV received $9.5 million for 18 projects, comprising approximately 17 per cent of RRIF and VRIF Racing Infrastructure funding.

GRV is addressing the deficiencies in its procurement and project management that were identified by the Ombudsman in 2012. These improvements will ensure GRV manages procurement fairly and gets the best possible value for money. GRV plans to improve its project accounting, and is in the process of developing requirements for managing capital project records.

HRV received $7.7 million for 22 projects, comprising approximately 14 per cent of RRIF and VRIF funding for infrastructure.

HRV has identified, and is addressing, weaknesses in its procurement and contract management. HRV purchases from specialised suppliers of capital equipment and project services without obtaining multiple quotes or tenders, and does not use contracts for all consultants. Strengthening its contracting practices and procurement from specialised suppliers will allow HRV to show that it gets value for money. HRV also needs to implement standards for managing capital project records.

Outcomes and net benefit

DOJ does not know whether RRIF and VRIF have met their objectives or achieved their intended outcomes. It has not developed measures to assess the performance of these programs and has no plans to assess whether the programs are achieving their intended outcomes or producing sufficient benefit for the racing industry and wider community.

A lack of comprehensive public information on funded projects' outcomes diminishes transparency and accountability.

Recommendations

That the Department of Justice:

  1. implement guidelines to assess applications against Victorian Racing Industry Fund funding criteria
  2. require Victorian Racing Industry Fund Racing Infrastructure applicants seeking funding for large or complex projects to support their application with a business case
  3. improve the rigour of Victorian Racing Industry Fund Racing Infrastructure funding recommendations by advising the Minister for Racing of applications' merits against each funding criterion
  4. establish and report the outcomes of the Regional Racing Infrastructure Fund, and the Racing Infrastructure and Raceday Attraction programs of the Victorian Racing Industry Fund
  5. maintain on the Department of Justice website a list of all projects, funding sources and grants from the Regional Racing Infrastructure Fund and Victorian Racing Industry Fund
  6. establish processes to ensure that all Victorian Racing Industry Fund Raceday Attraction Program funding agreements are executed before the funded event.

That Greyhound Racing Victoria:

  1. implement requirements for managing project records that are consistent with its procurement and contract management policies.

That Harness Racing Victoria:

  1. include in its procurement policy minimum requirements for market testing to confirm pricing and competition in areas of specialised supply for capital projects
  2. implement contracts for all capital project consulting services in accordance with its new contract management policy
  3. establish grounds and standards of justification for exemptions from Development Fund Operating Guidelines and procurement policy and procedures
  4. implement requirements for managing project records that are consistent with its procurement and contract management policies.

Submissions and comments received

In addition to progressive engagement during the course of the audit, in accordance with section 16(3) of the Audit Act 1994 a copy of this report was provided to the Department of Justice, Greyhound Racing Victoria, Harness Racing Victoria and Racing Victoria Limited, with a request for submissions or comments.

Agency views have been considered in reaching our audit conclusions and are represented to the extent relevant and warranted in preparing this report. Their full section 16(3) submissions and comments are included in Appendix A.

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