Rule2024-18245
Horseracing Integrity and Safety Authority Oversight
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 16, 2024
Effective
September 16, 2024
Issuing agencies
Federal Trade Commission
Abstract
The Federal Trade Commission ("FTC" or "Commission") is issuing a final rule ("Final Rule") regarding oversight of the Horseracing Integrity and Safety Authority ("Authority"). The Final Rule includes new oversight provisions to ensure that the Authority remains publicly accountable and operates in a fiscally prudent, safe, and effective manner.
Full Text
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<title>Federal Register, Volume 89 Issue 159 (Friday, August 16, 2024)</title>
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[Federal Register Volume 89, Number 159 (Friday, August 16, 2024)]
[Rules and Regulations]
[Pages 66546-66552]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18245]
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FEDERAL TRADE COMMISSION
16 CFR Part 1
RIN 3084-AB79
Horseracing Integrity and Safety Authority Oversight
AGENCY: Federal Trade Commission.
ACTION: Final rule.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is
issuing a final rule (``Final Rule'') regarding oversight of the
Horseracing Integrity and Safety Authority (``Authority''). The Final
Rule includes new oversight provisions to ensure that the Authority
remains publicly accountable and operates in a fiscally prudent, safe,
and effective manner.
DATES: This rule is effective on September 16, 2024.
FOR FURTHER INFORMATION CONTACT: Sarah Botha, (202) 326-2036,
<a href="/cdn-cgi/l/email-protection#1a6978756e727b5a7c6e79347d756c"><span class="__cf_email__" data-cfemail="7003121f041811301604135e171f06">[email protected]</span></a>, Office of the Executive Director, Federal Trade
Commission.
SUPPLEMENTARY INFORMATION: This document states the basis and purpose
for the Commission's decision to adopt the Final Rule addressing the
Commission's oversight of the Authority. The new oversight provisions
were proposed and published for public comment in the Federal Register
on February 8, 2024, in a notice of proposed rulemaking (``NPRM'').\1\
After careful review and consideration of the entire record on the
issues presented in this rulemaking proceeding, including 10 comments
submitted by interested parties, the Commission has decided to adopt,
with a few modifications, the proposed new oversight rule.
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\1\ FTC, Horseracing Integrity and Safety Authority Oversight,
Proposed Rule, 89 FR 8578 (Feb. 8, 2024).
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[[Page 66547]]
I. Background
The Horseracing Integrity and Safety Act of 2020 (``HISA'' or ``the
Act''), Public Law 116-260, Title XII, 134 Stat. 1182, 3252 (2020)
(codified as amended at 15 U.S.C. 3051-3060), recognizes the Authority
as a self-regulatory nonprofit organization charged with developing and
enforcing rules relating to racetrack safety, anti-doping, and
medication control. See 15 U.S.C. 3052. The Act expressly provides for
Commission oversight of several aspects of the Authority's operations.
For example, the Commission must approve any proposed rule or rule
modification by the Authority relating to the Authority's bylaws,
racetrack safety standards, anti-doping and medication control, and the
formula or methodology for determining assessments. See 15 U.S.C. 3053.
In December 2022, Congress amended HISA to expand the Commission's
oversight role over the Authority. See Consolidated Appropriations Act,
2023, Public Law 117-328, sec. 701, 136 Stat. 4459, 5231 (2022). As
amended, the Act gives the Commission the power to issue rules under
the procedures set forth in the Administrative Procedure Act, 5 U.S.C.
553, ``as the Commission finds necessary or appropriate to ensure the
fair administration of the Authority . . . or otherwise in furtherance
of the purposes of this Act.'' 15 U.S.C. 3053(e).
II. Overview of the Proposed Oversight Rule
In light of the Commission's experience in overseeing the
Authority's operations to date, the Commission proposed several new
rule provisions to ensure effective Commission oversight over the
Authority. The proposed provisions were designed to ensure that the
Authority is promoting transparency and integrity in its operations.
For example, the proposed new rule sections would require the Authority
to submit and publish annual and midyear reports about its performance
and financial position. The proposed new rules would also require the
Authority to develop, maintain, and publish a multiyear strategic plan,
after taking public comments on a draft plan. The proposed rules would
require the Authority to effectively manage risk and take steps to
prevent conflicts of interest, waste, fraud, embezzlement, and abuse.
The proposed rules would also mandate other operational requirements
and identify best practices for the Authority to follow.
Section-by-Section Analysis
Section 1.153 Submission of the Authority's annual reports, midyear
reports, and strategic plans. This proposed new section would impose
certain requirements on the Authority to report on its finances for the
preceding calendar year by May 15. This would include a complete
accounting of the Authority's budget (as audited by a qualified,
independent, registered public accounting firm and in accordance with
Generally Accepted Accounting Principles), a discussion of budgetary
line items, a summary of travel expenses, and a summary of any new or
continuing risks or issues raised by audits or other reviews. The
proposed section also would impose certain requirements on the
Authority to report by March 31 on its performance for the prior
calendar year. The report would include efforts made to carry out the
requirements of the Act, a description of the cooperation with the
States as set forth in 15 U.S.C. 3060(b), a summary of final civil
sanctions, an assessment of the Authority's progress in meeting or not
meeting its performance measures contained in its strategic plan per
Sec. 1.153(d), and a summary of Board of Directors committee
recommendations and activities. It would also include information about
any changes in the composition of the Authority's Board of Directors or
standing committees, information about the relationship between the
Authority and the anti-doping and medication control enforcement
agency, a summary of all litigation to which the Authority is a party
(including actions commenced by the Authority under 15 U.S.C. 3054(j)),
a summary of all subpoenas issued by the Authority under 15 U.S.C.
3054(c), a description of any areas in which the Authority believes
improvements to its operations are warranted, and the Authority's plans
to achieve those improvements. The proposed section would also require
the Authority to submit to the FTC by August 15 a same-year midyear
report covering January to June that describes spending and staffing
levels and budgetary information. This midyear report would provide
operational insight about the Authority's budget execution and risk
management activities. The proposed section would have also required
the Authority to develop and publish for public comment a multiyear
strategic plan by June 30, 2024. The Authority would be required to re-
evaluate its strategic plan no less frequently than every five years.
The strategic plan must align with the Authority's annual budget,
discuss its priority initiatives, and set forth a set of performance
measures. The Authority would be required publish its annual financial
reports, annual performance reports, and strategic plans on its
website.
Section 1.154 Enterprise risk management. This proposed new section
would impose certain requirements on the Authority to ensure that it
effectively manages risk to prevent conflicts of interest, waste,
fraud, embezzlement, or abuse. Paragraph (a) sets forth guiding
principles around separation of duties and corrective action plans, and
noted that risk management activities must ensure compliance, the
avoidance of conflicts of interest or the appearance thereof, and the
appropriate handling of funds received and expended by the Authority.
Given the confidential nature of much of the Authority's work and the
data that it collects, Paragraph (b) would require the Authority to
ensure the privacy and security of its data in its systems, including
those operated by third-party contractors, and require a complete
annual evaluation of the status of its overall information technology
program and practices as audited by a qualified, independent, third-
party auditor. Given that the Authority leverages contractor resources
in its operations, Paragraph (c) would require the Authority to
document its market research for any action estimated at over $10,000
to ensure the lowest cost or best value for goods and services to be
provided, and to develop policies and procedures covering procurement
activities. Given the FTC's need for regular communication and
awareness of the Authority's activities, Paragraph (d) would require
the Authority to provide advance notice to Commission staff of all
significant Authority-planned events (e.g., press conferences, media
events, summits, etc.) via a calendar, list, email, or other reasonable
means, to summarize key aspects of all such events on its website, and
to give Commission staff prompt notice after significant adverse events
in the horseracing industry that might reasonably lead to sanctions or
track closures.
Section 1.155 Other best practices. This proposed new section
included a set of best practices to promote accountability,
transparency of operations, and effective resource stewardship of the
Authority. These proposals included holding regular monitoring meetings
with the FTC; recommendations for how the Authority may maintain its
records and information; recommendations for how the Authority should
treat confidential information; a standing data request from the FTC
for the Authority's Board of Directors minutes; recommendations
[[Page 66548]]
about the Authority's personnel and compensation policies and
practices; recommendations about the Authority's customer service
program (and the development of associated metrics); and
recommendations regarding the Authority's travel policies.
Section 1.156 Severability. This proposed new section noted that
provisions of this subpart are separate and severable from one another.
If any provision is stayed or determined to be invalid, it is the
Commission's intention that the remaining provisions would continue in
effect.
III. Overview of Public Comments Received in Response to the NPRM
The Commission received 10 comments in response to the NPRM,\2\
representing the views of an industry trade group, individuals and
groups concerned with animal welfare issues, attorneys who have
represented clients in Authority enforcement actions, and individuals
with an interest in the horseracing industry. The Authority also
submitted a comment in which it responded to the comments filed in
response to the NPRM and shared its views regarding the proposed rule.
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\2\ All comments submitted can be found at <a href="http://www.regulations.gov">www.regulations.gov</a>
under Docket ID FTC-2024-0012. We cite public comments by name of
the commenting organization or individual and the comment number.
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The majority of the comments focused on the FTC's proposed
oversight rule, but three comments addressed topics related to the
Authority's rules or suggested other areas that the Commission should
consider for rulemaking.\3\ The remaining comments expressed support
for the proposed rule,\4\ but some comments also submitted suggestions
for additional or amended rule provisions.
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\3\ See Anonymous 5 (seeking the expansion of rules and
regulations for animal welfare, cruelty and abuse); Lange 6
(requesting a change in the Authority's rules addressing eligibility
requirements for Covered Horses); WhoPoo App 9 (asking the FTC to
mandate that all horseracing venues include a horse/equine rescue
allotment and fund).
\4\ See, e.g., Bell 2 (expressing support for actions to improve
the integrity of the governing of horseracing, and opining that
Congress authorized the FTC to engage in this rulemaking); Humane
Society of the United States and Humane Society Legislative Fund 12
(noting that ``increased transparency will be integral to ensuring
the safety and welfare of horses and jockeys, and key to monitoring
effective enforcement of the Horseracing Integrity and Safety
Act'').
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One comment, submitted by two attorneys who have represented
Covered Persons in enforcement actions brought under the Authority's
rules, stated that increased scrutiny of the Authority by the FTC is
needed and welcomed, but urged the Commission to include additional
requirements for the Authority, such as public disclosure of all
contracts, travel expenses, and line item costs for hearings.\5\ The
Commission appreciates the commenters' suggestions but believes the
proposed rule strikes the right balance between mandating the
disclosure of information to bring greater transparency and
accountability to the Authority's operations without depleting limited
resources with overly burdensome disclosure requirements. The rule will
require the Authority to publish on its website annual financial and
performance reports providing significant details regarding the
Authority's expenditures and operations, along with a multiyear
strategic plan that is developed with public input. Existing Commission
rules require further information to be submitted annually during the
budget review process, which the Commission publishes in the Federal
Register, and the Commission can seek additional information through
its process of reviewing and approving the Authority's budget.\6\
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\5\ Fisco 7. The commenters also opined on several existing
rules of the Authority, which are beyond the scope of this
rulemaking.
\6\ See 16 CFR 1.151(a).
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Another commenter expressed support for the proposed rule, but
opined that the rule provisions fall short in the area of
enforcement.\7\ The commenter seems to be under the impression that the
Authority has exempted sales companies and breeders from the
application of 15 U.S.C. 3059. That statutory provision says that in
connection with the sale of Covered Horses (or horses anticipated to be
covered), it is a violation of section 5 of the FTC Act, 15 U.S.C. 45,
to fail to make certain disclosures. See 15 U.S.C. 45(a) (prohibiting
``unfair or deceptive acts or practices in or affecting commerce'').
Section 5, however, is enforced only by the FTC, not the Authority.
Another section of HISA does permit the Authority to refer matters to
the Commission and recommend that the Commission pursue an enforcement
action under 15 U.S.C. 3059. See 15 U.S.C. 3054(c)(2). The discretion
to pursue such an action, however, rests solely with the Commission.
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\7\ Roberts 4. The commenter also opined on several existing
rules of the Authority, which are beyond the scope of this
rulemaking.
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Another commenter believed that the proposed rule would be greatly
beneficial to the horseracing industry but opined that the rule was
``lacking in the enforcement of best practices'' and should include
penalties for violations of the rule in order to incentivize
compliance.\8\ The Commission fully expects that the Authority will
comply with the Final Rule, and that the Authority would seek a
modification from the Commission if there were any provisions in the
rule that the Authority anticipated would present compliance
difficulties. In fact, the Authority has filed a comment expressing its
thoughts on the proposed rule and requesting some minor changes to the
rule, as discussed below. To date, the Authority has complied with the
rules the Commission has promulgated addressing submissions to the FTC
under the Act,\9\ review of final civil sanctions,\10\ and review of
the Authority's annual budget.\11\ The Commission fully anticipates
that the Authority will comply with the Final Rule.
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\8\ Newcomer 11. The commenter also criticized the rule for
failing to address the treatment of horses by parties involved in
horseracing. This falls outside the scope of this rulemaking. The
Authority, however, has rules that address the topics raised by the
commenter, including the humane treatment of equine athletes and
bans on performance-enhancing drugs, and all of the commenters are
encouraged to file comments on those rules when proposed
modifications are published by the Authority or by the Commission.
See, e.g., FTC, Horseracing Integrity and Safety Authority Anti-
Doping and Medication Control Rule Modification, proposed rule
modification, 88 FR 65683 (Sept. 25, 2023); FTC, Horseracing
Integrity and Safety Authority Racetrack Safety Rule Modification,
proposed rule modification, 89 FR 24574 (Apr. 8, 2024).
\9\ 16 CFR 1.140 through 1.144.
\10\ 16 CFR 1.145 through 1.149.
\11\ 16 CFR 1.150 through 1.152.
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A comment from the National Horsemen's Benevolent & Protective
Association (``NHBPA'') supported the Commission's goal to bring
transparency to the Authority's operations, but opined that the
proposed rule is not authorized by the Act.\12\ Specifically, the NHBPA
posited that 15 U.S.C. 3053(e) allows the FTC to initiate rules to
``abrogate, add to, [or] modify the rules of the Authority promulgated
in accordance with [HISA],'' but that the proposed rule does not
abrogate, add to, or modify the Authority's rules and is therefore
unauthorized by the Act.\13\ The Commission disagrees that it lacks
statutory authority to promulgate the proposed rule.
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\12\ NHBPA 8.
\13\ Id.
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The proposed rule is in accordance with 15 U.S.C. 3053(e). Congress
provided there that ``[t]he Commission, by rule in accordance with''
the Administrative Procedure Act, ``may . . . add to . . . the rules of
the Authority promulgated in accordance with'' HISA ``as the Commission
finds necessary or appropriate to ensure the
[[Page 66549]]
fair administration of the Authority . . . or otherwise in furtherance
of the purposes of [the Act].'' 15 U.S.C. 3053(e). The proposed rule
``add[s] to'' the rules that the Authority has promulgated in
accordance with the Act and does so ``to ensure the fair administration
of the Authority . . . or otherwise in furtherance of the purposes of
[the Act].'' Id. The plain text of HISA thus authorizes the Commission
to promulgate the proposed rule.\14\
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\14\ The NHBPA opined that the Act prohibits the FTC from
promulgating a proposed rule unless the Authority has ``already
adopted a rule on the topic.'' Id. (emphasis added). That supposed
limitation on the Commission's authority is nowhere in the plain
text of the statute.
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Apart from its belief that Congress would be the appropriate entity
to promulgate the proposed rule, the NHBPA stated that it ``supports
the substance behind'' proposed Sec. Sec. 1.153, 1.154, and 1.155,
including the requirements for an annual financial report with an
independent audit, an annual performance report with summaries of the
Authority's enforcement activities, a multiyear strategic plan, and
enterprise risk management activities.\15\
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\15\ NHBPA 8.
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Finally, the Authority submitted a comment in which it responded to
some of the public comments submitted in response to the NPRM and
suggested some modifications to the rule as proposed.\16\ Specifically,
the Authority requested that the deadline for submitting the first
annual financial report under Sec. 1.153(a) be changed from May 15,
2024, to June 17, 2024. This request is now moot.
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\16\ Horseracing Integrity and Safety Authority 10.
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The Authority also requested that the annual deadline for
submitting a same-year midyear report under Sec. 1.153(c) be changed
from August 15 to August 30, to ``provide adequate time for the CFO to
complete this report after the proposed budget is submitted to the
Commission.'' \17\ Under the FTC's Rules, the Authority's proposed
annual budget for the following year must be submitted to the
Commission by August 1 each year,\18\ and the Commission must approve
or disapprove the proposed budget by November 1, or as soon thereafter
as practicable, after publishing the proposed budget for public
comment.\19\ The Commission believes that the midyear report required
under Sec. 1.153(c) will inform the Commission's consideration of the
Authority's proposed budget for the following year and that delaying
the submission of the midyear report would hinder the Commission's
ability to fully consider the report prior to voting on the proposed
budget. The Commission's need for the midyear report outweighs the
Authority's need for an extension and, for this reason, the Authority's
request is denied and the proposed reporting deadline of August 15 is
retained in the Final Rule.
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\17\ Id.
\18\ See 16 CFR 1.150(a).
\19\ See 16 CFR 1.150(d) and 1.151(a).
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The Authority requested that the submission deadline for the
initial multiyear strategic plan under Sec. 1.153(d) be changed from
June 30, 2024, to August 30, 2024.\20\ In order to permit the Authority
sufficient time to publish its draft strategic plan for public comment
and finalize the plan subsequent to the effective date of the Final
Rule, the Commission has changed the deadline for submission of the
initial multiyear strategic plan to October 15, 2024.
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\20\ Horseracing Integrity and Safety Authority 10.
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The Authority requested that the documented market research
requirement for procurement actions required under Sec. 1.154(c) be
applicable to procurement actions estimated at over $50,000, rather
than (as proposed) procurement actions estimated at over $10,000.\21\
The Commission does not believe that documenting market research for
procurement actions estimated at over $10,000 will be unreasonably
burdensome, so it declines this request.
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\21\ Id.
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The Authority requested that the recommendation of Sec. 1.155(d)
for the Authority to submit Board of Directors minutes to the
Commission's Office of the Secretary be changed from within 15 days
following each Board meeting to within 30 days following each Board
meeting, to provide adequate time for the Board minutes to be prepared
and approved by the Board.\22\ The Commission finds this request to be
reasonable and has changed the recommended submission deadline in the
Final Rule to within 30 days following each Board meeting.
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\22\ Id.
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Finally, regarding the recommendation in Sec. 1.155(g) that the
Authority ``use standard, GSA [General Services Administration]-
established, published per diem rates when determining how much a
person may spend on lodging, meals, and incidental expenses,'' the
Authority commented that it ``does not receive government lodging rates
and therefore, the Authority does not believe that the use of standard
GSA-established, published per diem rates will be practical.'' \23\ The
Commission believes that the travel policy recommendation in the
proposed rule is reasonable, and has retained it in the Final Rule.\24\
The Commission notes that the recommendation also states,
``Nevertheless, actual subsistence expenses may be authorized under
unusual circumstances with justification and prior approval from the
appropriate approving official.'' This recommendation is similar to GSA
regulations that apply to Federal agencies.\25\ The Authority's travel
policy should specify what rate it will use when authorizing travel,
and the Final Rule recommends that rate should be based upon standard,
GSA-established, published per diem rates. The Authority could,
however, establish a policy whereby it authorizes the standard, GSA-
established, published per diem rates for mileage reimbursement and for
meals and incidental expenses, while basing its rate for lodging on the
GSA rate with allowances for deviations from that rate within a certain
range. For example, the Authority could require that lodging be within
the GSA-established rate but, if an employee cannot find a room within
that rate, the Authority could allow lodging to exceed the GSA-
established rate by up to 300 percent, as necessary and with approval
from a designated official.
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\23\ Id.
\24\ Government per diem rates are updated annually at <a href="https://www.gsa.gov/travel">https://www.gsa.gov/travel</a>, and available to Authority staff to refer to.
\25\ See 41 CFR 301-11.30 (``What is my option if the Government
lodging rate exceeds my lodging reimbursement? . . . You may request
reimbursement on an actual expense basis, not to exceed 300 percent
of the maximum per diem allowance.'').
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IV. The Final Rule
In this document, the Commission adopts the proposed new provisions
as final, with the two minor changes discussed above. The Final Rule
also adds references in Sec. 1.153(c) and (d) to following the
procedures in Sec. 1.143 for submissions to the Commission and, in
this way, mirrors Sec. 1.153(a) and (b) and clarifies the applicable
submissions requirements. The Final Rule also clarifies that the
midyear reporting requirement in Sec. 1.153(c) is an annual one.
The Commission is adding the Final Rule as 16 CFR 1.153 through
1.156 in subpart U of part 1 of its Rules of Practice. Subpart U is
therefore renamed ``Oversight of the Horseracing Integrity and Safety
Authority'' to more accurately reflect the content of the amended
subpart.
V. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA''), 44 U.S.C. chapter 35,
requires
[[Page 66550]]
Federal agencies to seek and obtain Office of Management and Budget
approval before undertaking a collection of information directed to ten
or more persons. Under the PRA, a rule creates a ``collection of
information'' when ten or more persons are asked to report, provide,
disclose, or record information in response to ``identical questions.''
\26\ The Commission concludes that the PRA does not apply to the
amendments because they only apply to one ``person,'' the Authority.
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\26\ 44 U.S.C. 3502(3)(A).
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VI. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires an
agency to either provide a Final Regulatory Flexibility Analysis with a
final rule, or certify that the rule will not have a significant impact
on a substantial number of small entities.\27\ The RFA defines a
``small entity'' as a small business, a small governmental
jurisdiction, or a small not-for-profit organization. See 5 U.S.C.
601(6).
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\27\ 5 U.S.C. 603-605.
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The Final Rule applies only to the Authority, and the Authority is
not a small business or a small governmental jurisdiction. While the
Authority is a nonprofit entity, it is not a small not-for-profit
organization, defined in the RFA as ``any not-for-profit enterprise
which is independently owned and operated and is not dominant in its
field.'' Id. 601(5). The Authority is not ``independently owned and
operated,'' and it is dominant in its field. The Commission therefore
certifies under the RFA that the Final Rule will not have a significant
economic impact on a substantial number of small entities, and hereby
provides notice of that certification to the Small Business
Administration.
VII. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as not a ``major rule,'' as defined by 5 U.S.C. 804(2).
List of Subjects in 16 CFR Part 1
Administrative practice and procedure, Animal drugs, Animal
welfare.
For the reasons set forth in the preamble, the Federal Trade
Commission amends title 16, chapter I, subchapter A of the Code of
Federal Regulations as follows:
PART 1--GENERAL PROCEDURES
Subpart U--Oversight of the Horseracing Integrity and Safety
Authority
0
1. The authority citation for part 1, subpart U, continues to read as
follows:
Authority: 15 U.S.C. 3053(e).
0
2. Revise the heading for subpart U to read as set forth above.
0
3. Add Sec. Sec. 1.153 through 1.156 to subpart U to read as follows:
* * * * *
Sec.
1.153 Submission of the Authority's annual reports, midyear reports,
and strategic plans.
1.154 Enterprise risk management.
1.155 Other best practices.
1.156 Severability.
* * * * *
Sec. 1.153 Submission of the Authority's annual reports, midyear
reports, and strategic plans.
(a) Annual financial report. Every year, by May 15, the Authority
must follow the procedures in Sec. 1.143 to submit an annual financial
report to the Commission, detailing the items listed in paragraphs
(a)(1) through (9) of this section for the previous calendar year. The
Authority must also publish this report on its website. The report must
contain:
(1) A complete accounting of the Authority's budget, as audited by
a qualified, independent, registered public accounting firm and in
accordance with Generally Accepted Accounting Principles (including a
statement from the auditor attesting to the auditor's independence and
its opinion regarding the financial statements presented in the annual
financial report);
(2) Line-item comparisons between the approved budget's revenues
and expenditures for the previous year and the actual revenues and
expenditures for the previous year;
(3) An explanation of how the Authority has considered the relative
costs and benefits in formulating the programs, projects, and
activities described in the budget;
(4) A description and accounting of the Authority's insurance
coverage;
(5) A description and accounting of any budgetary reserves;
(6) Summaries of contracts or other liabilities that the Authority
has entered into or may potentially incur;
(7) A summary of travel expenses, including an itemized list of any
first-class travel (defined as the highest and most expensive class of
service);
(8) Any new or continuing material or significant risks or issues
raised by the audit, internal quality or control reviews, other
inspections or peer reviews of the Authority, or any inquiry or
investigation by governmental or professional authorities, along with
any steps taken (e.g., corrective actions) to deal with any such
issues, consistent with Sec. 1.154; and
(9) Any other information requested by Commission staff.
(b) Annual performance report. Every year, by March 31, the
Authority must follow the procedures in Sec. 1.143 to submit an annual
performance report to the Commission, detailing the items listed in
paragraphs (b)(1) through (11) of this section for the previous
calendar year. The Authority must also publish this report on its
website. The report must contain:
(1) Narrative summaries of all the major efforts by the Authority
to carry out the requirements of the Act, including the status or
results of any publicly announced investigations conducted by the
Authority;
(2) Information about the Authority's cooperation with the States
as set forth in 15 U.S.C. 3060(b), including whether each State has
covered horseraces, elects to remit fees, or has entered into an
agreement under 15 U.S.C. 3060(a)(1) to implement a component of the
programs on racetrack safety or anti-doping and medication control;
(3) A summary of all final civil sanctions imposed by the Authority
in the previous year, in a tabular format. At a minimum, the summary
should be broken down by violation category (e.g., racetrack safety
program, anti-doping and controlled medication protocol rules, etc.)
and should include the total number of alleged violations by category,
the number of times the violations were admitted and resolved without
adjudication, the number of times any violations were contested and
adjudicated, the number of times any sanctions were imposed, the number
of times that no sanctions were imposed, the number of civil sanction
notices that needed to be reissued or corrected, the total fines
imposed, the total amount of purses forfeited, and the number of times
the sanctions were appealed to the Commission's Administrative Law
Judge;
(4) An assessment of the Authority's progress in meeting or not
meeting its performance measures contained in its strategic plan per
paragraph (d) of this section;
(5) A statement from each Board of Directors committee summarizing
its work in the previous year and all
[[Page 66551]]
recommendations each such committee has made to the Board;
(6) Information about any changes in the composition of the
Authority's Board of Directors or standing committees;
(7) Information about the relationship between the Authority and
the anti-doping and medication control enforcement agency, including
how the enforcement agency is performing under its contract with the
Authority and how many years remain under the contract;
(8) A summary of all litigation to which the Authority is a party,
including actions commenced by the Authority under 15 U.S.C. 3054(j);
(9) A summary of all subpoenas issued by the Authority under 15
U.S.C. 3054(c);
(10) Descriptions of any areas in which the Authority believes that
improvements to its operations are warranted, together with the
Authority's plans to achieve those improvements. Forward-looking
information should reflect known and anticipated risks, uncertainties,
future events or conditions, and trends that could significantly affect
the Authority's future financial position, condition, or operating
performance, as well as Authority actions that have been planned or
taken to address those challenges; and
(11) Any other information requested by Commission staff.
(c) Midyear reporting. Every year, by August 15, the Authority must
follow the procedures in Sec. 1.143 to furnish to the Commission a
same-year midyear report covering January through June, to include:
(1) Spending and staffing levels for the quarter ending June 30,
compared to the levels in the Commission-approved budget;
(2) A summary of travel expenses, including an itemized list of any
first-class travel (defined as the highest and most expensive class of
service);
(3) The status of outstanding and completed corrective actions; and
(4) Any other information requested by Commission staff.
(d) Strategic plan. The Authority must develop and maintain a
multiyear strategic plan. The Authority must follow the procedures in
Sec. 1.143 to submit its first strategic plan to the Commission on or
before October 15, 2024. The Authority must reevaluate the strategic
plan no less frequently than every five years. The Authority's annual
budget must align with, and link spending to, the strategic goals. The
strategic plan must include items such as a description of its State-
by-State relationships and a discussion of planned rulemaking
activities. The Authority must:
(1) Post its draft strategic plan on its website for a public
comment period of at least 14 days;
(2) Present its final strategic plan to the Commission, along with
a summary of its responses to public comments; and
(3) Publish its final strategic plan on its website.
(e) Further guidance on strategic plan. The Authority's strategic
plan should include forecasts of the Authority's industry environment
and its priority initiatives for the current and subsequent years. The
strategic plan should also consider the impact that program levels and
changes in methods of program delivery, including advances in
technology, could have on program operations and administration. The
strategic plan should identify several strategic goals aligned with the
Authority's mission statement. Each strategic goal should have
accompanying objectives, strategies, and performance measures. As
guiding principles, performance measures should:
(1) Be limited to the vital few and demonstrate results;
(2) Cover multiple priorities;
(3) Provide useful information for decision-making;
(4) Be clear, measurable, objective, and reliable; and
(5) Focus on core program activities and priorities.
Sec. 1.154 Enterprise risk management.
(a) Guiding principles. The Authority must effectively manage risk
to prevent conflicts of interest, waste, fraud, embezzlement, and
abuse. To manage risk, the Authority must align the enterprise risk-
management process to the goals and objectives noted in the Authority's
strategic plan. The Authority must assess risks, select risk responses,
monitor whether responses are successful, and communicate and report on
risks, consistent with Sec. 1.153. The Authority must ensure that all
internal controls have appropriate separation of duties (e.g.,
requester, approver, recorder). In addition, the Authority must develop
corrective action plans no later than 90 days after receiving a notice
of finding from its auditors or other internal assessments. The Board
of Directors (or one of the Authority's standing committees) must
review and evaluate identified risks and proposed corrective action
plans. The Authority must review regularly its corrective actions
identified from all audits and internal assessments and should develop
criteria by which to prioritize its response activities. The Authority
must ensure that its risk management activities encompass:
(1) Compliance with applicable laws, rules, and regulations;
(2) The avoidance of conflicts of interest, or the appearance
thereof, in all aspects of the Authority's operations, including
investigation and enforcement, vendor selection, personnel assignments
and responsibilities, and actions by the Board of Directors or
management; and
(3) Handling funds received and expended by the Authority,
including revenue/expense policies, fundraising practices, contracting
policies, travel policies, and real and personal property agreements
and expenses.
(b) Data security and privacy. The Authority must ensure the
privacy and security of data, including all reasonable measures to
protect the confidentiality of any sensitive health information (SHI),
personally identifiable Information (PII), and sensitive PII (SPII)
stored in its systems, including those operated by the anti-doping and
medication control program, the Horseracing Integrity and Welfare Unit,
and the Authority's third-party contractors. The Authority must ensure
a complete annual evaluation of the status of its overall information
technology security program and practices, as audited by a qualified,
independent, third-party auditor. The Authority must also ensure that
it has policies, programs, and practices in place to protect SHI, PII,
and SPII. The Authority must send a copy of the annual evaluation to
Commission staff.
(c) Vendor selection. Procurement actions estimated at over $10,000
must be accompanied by documented market research (e.g., comparing the
prices and other terms offered by the selected vendor against the
prices and other terms offered by at least two other vendors) to ensure
lowest cost or best value for goods or services to be provided. The
Authority should also develop policies and procedures covering
procurement activities.
(d) Notice. The Authority must provide advance notice to Commission
staff of all significant Authority-planned events (e.g., press
conferences, media events, summits, etc.) via a calendar, a list,
email, or some other reasonable means. The Authority must also
summarize key aspects of all such events on its website within a
reasonable timeframe. The Authority must also give Commission staff
prompt notice after it has been alerted to significant, adverse events
in the horseracing industry (e.g., adverse safety
[[Page 66552]]
or medical events that might reasonably lead to sanctions, track
closures, etc.).
Sec. 1.155 Other best practices.
(a) Regular monitoring meetings. The Commission recommends that the
Authority hold regular meetings with Commission staff to discuss
upcoming or potential risks, challenges, and opportunities for
improvement.
(b) Records and information management. The Commission recommends
that the Authority maintain records and information in sufficient
detail to support the Authority's programs and operations, as well as
any records relating to its information management policies or
procedures. The Commission expects that the Authority will make any of
these records available to Commission staff upon request, to allow the
Commission to carry out its statutorily mandated oversight.
(c) Treatment of confidential information. The Commission
recommends that the Authority's submissions to the Commission not
include any SHI, PII, or SPII, such as a Social Security number; date
of birth; driver's license number or other State identification number,
or foreign country equivalent; passport number; financial account
number; or credit or debit card number. If the Authority submits
documents to the Commission containing confidential commercial or
financial information, it should so designate that material and request
confidential treatment pursuant to Sec. 4.10(g) of this chapter.
(d) Standing data requests. The Commission recommends that the
Authority submit Board of Directors minutes to the Commission's Office
of the Secretary within 30 days following each Board meeting.
(e) Personnel and compensation. The Commission recommends that the
Authority develop compensation policies and practices with the primary
objective of attracting, developing, and retaining high-performing
individuals capable of achieving the Authority's mission. The Authority
should strive to recruit a diverse team of industry leaders whose
unique backgrounds, education, cultures, and perspectives help position
the Authority as an effective and innovative self-regulatory
organization. The Commission also recommends that the Authority conduct
periodic salary benchmarks to ensure that employee compensation is in
line with other like organizations.
(f) Customer service. The Commission recommends that the Authority
maintain publicly accessible points of contact (e.g., email addresses,
phone numbers) and monitor the timeliness with which it responds to
inquiries. In this regard, the Commission urges the Authority to
develop a policy and associated metrics covering its customer service
activities, to be incorporated into its strategic plan and its regular
reporting to the Commission.
(g) Travel. The Commission recommends that the Authority use
standard, General Services Administration (GSA)-established, published
per diem rates when determining how much a person may spend on lodging,
meals, and incidental expenses. Nevertheless, actual subsistence
expenses may be authorized under unusual circumstances with
justification and prior approval from the appropriate approving
official. The Commission urges the Authority to prohibit the use of
first-class travel (defined as the highest and most expensive class of
service) by employees, except when no other option is available or when
a disability or exceptional security conditions require it. The
Commission also recommends that the Authority not reimburse its
contractors for first-class travel unless exceptional circumstances
warrant.
Sec. 1.156 Severability.
The provisions of this subpart are separate and severable from one
another. If any provision is stayed or determined to be invalid, it is
the Commission's intention that the remaining provisions shall continue
in effect.
By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2024-18245 Filed 8-15-24; 8:45 am]
BILLING CODE 6750-01-P
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</html>Indexed from Federal Register on August 16, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.