Audit to Look into Shortfall in Kentucky Thoroughbred Development Fund

The Kentucky Horse Racing Authority has requested the state auditor conduct an audit of the Kentucky Thoroughbred Development Fund after it discovered two shortfalls as a result of overpayments during meets conducted at Ellis Park.

The request for the audit was made in a letter from racing authority executive director Jim Gallagher to Crit Luallen.

During Monday's monthly meeting of the regulatory body, Gallagher explained that a preliminary review of the KTDF shows an overpayment of approximately $408,000 was made to Ellis Park in the mid-1990s. Additionally, the KTDF was overpaid by $150,000 during the 2004 Ellis Park meet, Gallagher said.

The 2004 overpayment was a direct result of Ellis conducting a six-day a week meet. The track has reimbursed the fund with two payments of $50,000 each. There is an outstanding balance of $50,000 from the overpayment.

Gallagher said the previous overpayment at Ellis came to light as a result of a routine review undertaken by racing authority staff. He said the fund distributes $7- to $8-million annually.

Under the KTDF, purses at the state's Thoroughbred tracks are supplemented for horses bred in Kentucky and registered with the Kentucky Thoroughbred Owners and Breeders Association. Money from the fund is allocated in an amount equal to the amount each racing association contributed to the fund, Gallagher's letter states. He added that all Kentucky tracks participate in the fund and have requested the audit, which will be paid for by the KTDF. The audit will be only for the shortfall from the 1990s, Gallagher said.

In other action Monday, the authority revised the payment schedule to register prospective foals under the Kentucky Thoroughbred Breeding Incentive Fund, which was implemented this year. Under the revision passed Monday, a fee of $60 would be required by Aug. 1 of the year in which a mare was bred. The previous fee schedule called for a $30 fee within 45 days after a mare was bred. Because it was implemented as part of an emergency regulation and has been paid by some breeders, the $30 45-day registration will remain in effect this year, along with the new fee schedule. There is an additional graduated hardship fee that begins at $1,000 and is capped at $5,000 for registrations after the Aug. 1 deadline.

The authority met in executive session for more than an hour to consider personnel matters or pending litigation but made no decision on the undisclosed matter, according to Gallagher.