HISA Proposed 2025 Budget, 70183-70189 [2024-19468]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 89, Number 168 (Thursday, August 29, 2024)]
[Notices]
[Pages 70183-70189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19468]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. P222100]


HISA Proposed 2025 Budget

AGENCY: Federal Trade Commission.

ACTION: Notice of publication of Horseracing Integrity and Safety 
Authority 2025 proposed budget; request for public comment.

-----------------------------------------------------------------------

SUMMARY: The Federal Trade Commission publishes the 2025 proposed 
budget of the Horseracing Integrity and Safety Authority and seeks 
public comment on whether the Commission should approve, disapprove, or 
modify the proposed budget.

DATES: Comments must be filed on or before September 12, 2024.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Comment Submissions part of the 
SUPPLEMENTARY INFORMATION section. Write ``HISA 2025 Budget, Matter No. 
P222100'' on your comment and file it online at https://www.regulations.gov by following the instructions on the web-based 
form. If you prefer to file your comment on paper, mail your comment to 
the following address: Federal Trade Commission, Office of the 
Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex H), 
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Sarah Botha (202-326-2036), Attorney 
Advisor and Acting HISA Program Manager, Office of the Executive 
Director, Federal Trade Commission, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: The Horseracing Integrity and Safety Act,\1\ 
enacted on December 27, 2020,\2\ and amended on December 29, 2022,\3\ 
directs the Federal Trade Commission to oversee the activities of a 
private, self-regulatory organization called the Horseracing Integrity 
and Safety Authority (``HISA'' or the ``Authority''). In March 2023, 
the Commission issued rules setting forth the procedure whereby the 
Commission approves, disapproves, or modifies the Authority's proposed 
annual budget.\4\ Under these rules, the Authority must first publish a 
proposed budget on its own website and invite public comments. See 16 
CFR 1.150(b). Thereafter, the Authority must forward the budget to the 
Commission, along with all public comments received and an assessment 
of those comments, and must identify any changes made to the proposed 
budget in response to the comments received. 16 CFR 1.150(c). The 
Authority's submission must also include (a) a statement of the vote by 
the Authority's Board of Directors approving the proposed budget; (b) 
information about revenues, including how fees are calculated and 
apportioned; (c) information about expenditures, broken down by program 
area, e.g., the racetrack safety program, the anti-doping and 
medication control program, etc.; (d) sufficient information about 
individual line items for the Authority's Board of Directors to 
exercise their fiduciary duty of care; and (e) information comparing 
actual revenues and expenses against the approved budget and explaining 
variances of greater than 10 percent. Id.
    After the Authority submits its proposed budget and supporting 
materials to the Commission, and if the Secretary determines the 
submission comports with the requirements of the 16 CFR 1.150(c), the 
Secretary publishes the Authority's proposed budget in the Federal 
Register and invites public comment for a period of 14 days. 16 CFR 
1.150(d). After taking into consideration the comments submitted, the 
Commission either approves or disapproves the budget. 16 CFR 1.151(a). 
The Commission will approve the proposed budget if ``the Commission 
determines that, on balance, the proposed budget is consistent with and 
serves the goals of the Horseracing Integrity and Safety Act in a 
prudent and cost-effective manner and that its anticipated revenues are 
sufficient to meet its anticipated expenditures.'' 16 CFR 1.151(c). The 
Commission may also modify the amount of any line item. 16 CFR 
1.151(d).

Request for Comments

    On July 31, 2024, the Authority forwarded to the Commission a 
Notice of Filing of HISA Budget, together with appendices furnishing 
detailed information pertinent to its 2025 budget proposal (as required 
by 16 CFR 1.150(c)). The Notice of Filing of HISA

[[Page 70184]]

Budget is reproduced below. The appendices to which it refers have been 
collected and reproduced as a supporting document on the docket for 
this publication at https://www.regulations.gov.
    The Secretary concluded that the Authority's proposed 2025 budget 
submission complies with the requirements of 16 CFR 1.150(c), and 
therefore issues this document and invites comments from the public on 
the Authority's 2025 budget. Comments should address the decisional 
criteria set forth in 16 CFR 1.151(c) and whether any line items should 
be modified. See 16 CFR 1.150(d).

Comment Submissions

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before September 12, 
2024. Write ``HISA 2025 Budget, Matter No. P222100'' on your comment. 
Your comment--including your name and your state--will be placed on the 
public record of this proceeding, including the https://www.regulations.gov website.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we strongly encourage you 
to submit your comments online. To make sure the Commission considers 
your online comment, you must file it at https://www.regulations.gov, 
by following the instructions on the web-based form.
    If you file your comment on paper, write ``HISA 2025 Budget, Matter 
No. P222100'' on your comment and on the envelope, and mail your 
comment to the following address: Federal Trade Commission, Office of 
the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex H), 
Washington, DC 20580. If possible, please submit your paper comment to 
the Commission by overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's 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. You are also 
solely responsible for making sure your comment does not include any 
sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``any trade secret or any commercial or 
financial information . . . which is privileged or confidential.'' 15 
U.S.C. 46(f); see 16 CFR 4.10(a)(2). In particular, your comment should 
not include competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with 16 CFR 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request and 
must identify the specific portions of the comment to be withheld from 
the public record. See 16 CFR 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted publicly at https://www.regulations.gov, as legally 
required by 16 CFR 4.9(b), we cannot redact or remove your comment, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under 16 CFR 4.9(c), and the General Counsel grants 
that request.
    Visit the https://www.regulations.gov to read this document. The 
FTC Act and other laws that the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. The Commission will consider all timely and responsive 
public comments it receives on or before September 12, 2024. For 
information on the Commission's privacy policy, including routine uses 
permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.
    The text that follows is the Notice of Filing of HISA Budget that 
the Authority submitted to the Commission. The appendices to which it 
refers have been collected and reproduced as a supporting document on 
the docket for this publication at https://www.regulations.gov.

Notice of Filing of HISA Budget

    Pursuant to the Horseracing Integrity and Safety Act of 2020 \5\ 
(the ``Act'') and the Federal Trade Commission's (the ``Commission'') 
Procedures for Oversight of the Horseracing Integrity and Safety 
Authority's Annual Budget,\6\ notice is hereby given that on July 31, 
2024, the Horseracing Integrity and Safety Authority (``HISA'' or the 
``Authority'') filed with the Commission the Authority's proposed 2025 
budget. This Notice of Filing of HISA Budget (the ``Notice'') provides 
the contents of the submission as set forth in 16 CFR part 1 Subpart U.
    I. Information Concerning Rule 1.150(b). The Authority's proposed 
2025 budget was posted on the HISA website (hisaus.org) on July 11, 
2024. The Authority received one comment regarding the budget. Section 
VI contains a further discussion of the comment. The Authority did not 
make any revisions to the proposed budget in light of the comment.
    II. Information Concerning Rule 1.150(c)(1). The Authority's 
proposed 2025 budget was approved by its Board of Directors by a vote 
of 9 to 0 before the proposed budget was posted on the HISA website and 
was approved by the Board of Directors by a vote of 9 to 0 after 
reviewing the comment submitted by Mr. Cohen. Therefore, the 
requirements of 15 U.S.C. 3052(f)(1)(C)(iii) and Rule 1.150(c)(1) have 
been satisfied.
    III. Information Concerning Rule 1.150(c)(2). In accordance with 15 
U.S.C. 3052(f) and using the Assessment Methodology Rule approved by 
the Commission, the Authority calculated the following:
     2025 Assessments by State (attached as Appendix 8).
     2025 Assessments by Track (attached as Appendix 9).
    Appendix 8 and Appendix 9 display the estimated amount required 
from each State Racing Commission as calculated under the Assessment 
Methodology Rule.
    The 2025 HISA Budget includes the following revenue line items:
     Racetrack Safety Fines Income--this consists of fines 
levied for violations of the Racetrack Safety Program.
     ADMC Fines Income--this consists of fines paid for 
violations of the Anti-Doping and Medication Control Program.
     Lab Test Income--this consists of the money paid to HISA 
to cover the cost of B Sample testing, claimed horse testing, and 
clearance testing.
     Interest Income--This consists of interest income from 
HISA's Money Market Savings account.
     Other Revenue--this consists of payments made by certain 
racetracks to reimburse HISA for paying for the cost of Racetrack 
Safety Program compliance (there is an offsetting expense).
    Please note that no loans are contemplated to be procured by HISA 
in 2025.

[[Page 70185]]

    IV. Information Concerning Rule 1.150(c)(3). The Authority's 
proposed 2025 budget includes the following expense line \7\ items:
     Rule 1.150(c)(3)(i): Racetrack Safety Program. These 
expenditures consist primarily of salaries for staff to monitor and 
implement the Racetrack Safety Program, racetrack surface testing, and 
vendors and contract employees that support the Racetrack Safety 
Program.
     Rule 1.150(c)(3)(ii): Anti-Doping and Medication Control. 
Pursuant to 15 U.S.C. 3054(e), the Authority contracted with the 
Horseracing Integrity and Welfare Unit (``HIWU'') to serve as the 
independent anti-doping and medication control enforcement organization 
for covered horses, covered persons, and covered horseraces. HIWU 
implements the Anti-Doping and Medication Control Program on behalf of 
the Authority. Expenditures related to this Program include HIWU costs, 
lab testing, and professional services. Additionally, 15 U.S.C. 3055(e) 
provides that the Authority ``shall convene an advisory committee . . . 
to conduct a study on the use of furosemide on horses during the 48-
hour period before the start of a race, including the effect of 
furosemide on equine health and the integrity of competition and any 
other matter the Authority considers appropriate.'' The costs of this 
study are included in the Anti-Doping and Medication Control portion of 
the proposed 2025 budget.
     Rule 1.150(c)(3)(iii): Other programmatic expenses. These 
expenditures consist primarily of salaries, professional services, and 
technology to support the Authority's veterinary and technological 
needs. Additional programmatic expenditures relate to the business and 
operational components of the Authority and include expenses such as 
salaries, legal (lawsuits and general), and professional services.
     Rule 1.150(c)(3)(iv): Repayment of any loans. This 
expenditure consists of $250,000 in repayment of loans.
     Rule 1.150(c)(3)(v): No funding shortfall is expected.
    V. Information Concerning Rule 1.150(c)(4). The Act recognizes that 
the establishment of a national set of uniform standards for racetrack 
safety and anti-doping and medication control will enhance the safety 
and integrity of horseracing. The 2025 budget allows the Authority to 
continue implementation of the horseracing Anti-Doping and Medication 
Control Program and the Racetrack Safety Program for Covered Horses, 
Covered Persons, and Covered Horseraces.
    The proposed 2025 HISA Summary budget (Appendix 1) is a compilation 
of the following departmental budgets: Racetrack Safety (Appendix 2); 
Veterinary Services (Appendix 3); Anti-Doping and Medication Control 
(Appendix 4); HIWU (Appendix 5); Technology (Appendix 6); and 
Administration (Appendix 7). A summary of these departmental budgets is 
set forth below:
    1. The 2025 Racetrack Safety budget funds the implementation of the 
Racetrack Safety Program as set forth in Rule Series 2000 and as 
originally approved by order of the Commission dated March 3, 2022.\8\ 
The budget consists of the following items:
    a. Salaries/Payroll Taxes/Employee Benefits. The salaries provide 
for staffing to support and monitor the Racetrack Safety program, 
including those persons necessary to oversee the following components 
of the program:

    i. Administration
    ii. Track Accreditation Services
    iii. Stewards' & State Racing Commission Liaison
    iv. Jockey Health & Welfare

    Salary levels for each position are based on market rates, while 
Employee Benefits consist primarily of a HISA contribution to cover a 
portion of employee health insurance and a 401(k) match that is 
consistent with market practice. The salaries budget provides for six 
racetrack safety employees. As of July 31, 2024, the Racetrack Safety 
Program has six employees. For all employees of the Authority, the 
Director of Operations and Compliance, an individual who does not have 
a conflict of interest with regard to the hiring of other open 
positions, reviews and documents compensation based on industry norms 
for similar positions prior to setting and to offering other open 
positions. Where needed, the Director of Operations and Compliance 
relies upon an outside search agency to help determine compensation for 
other open positions.
    b. Meetings. This includes the travel, meals, and materials to 
support the following annual meetings:

i. Track Superintendents
ii. Racetrack Safety Committee

    These meetings are necessary to promote the health and safety of 
both Covered Horses and Riders.
    c. Travel. This category covers the travel and meal expenses for 
all of the employees previously listed in Salaries (section a) of this 
department (excluding the travel and meal expenses for the Meetings 
described in section b. and the Track Accreditation Services travel set 
forth in section f.). Travel to Covered Racetracks by Authority 
employees is often necessary to ensure that Covered Horseraces are run 
in accordance with the standards established in HISA's Racetrack Safety 
Program.
    d. Supplies. This primarily consists of materials to be used in 
educational and Continuing Education programs provided and overseen by 
the Racetrack Safety Department. These programs ensure that trainers, 
jockeys, veterinarians, and stewards are educated in methods and 
procedures that promote the health and safety of Covered Horses and 
Riders.
    e. Professional Services. Several independent contractors and 
external service provider companies will partner with HISA on a part-
time basis to provide and/or augment services in the following areas:

i. Data Analysis
ii. Research/Testing
iii. Statistical Analysis
iv. Jockey Concussion Tracking
v. National Medical Director
vi. Study on the causes of Exercise-Associated Sudden Death (EASD) in 
racehorses

    Pay rates are based on market rates for similar positions. All of 
these independent contractor relationships will increase the knowledge 
base and/or education level of participants in Covered Horseraces.
    f. Track Accreditation Services. Pursuant to 15 U.S.C. 3056 and the 
Racetrack Safety rules, the Authority is responsible for implementing 
an evaluation and accreditation program that ensures that Covered 
Racetracks meet certain safety and performance standards. Both the Act 
and the Racetrack Safety rules require that tracks be accredited, and 
the rules mandate site visits to determine the extent of compliance 
with the rules. The accreditation visits afford HISA staff the ability 
to conduct an in-depth and in-person review of a racetrack's operations 
to determine its level of compliance with the Racetrack Safety Program 
and to provide training on how best to meet ongoing reporting 
requirements. This category includes the costs of compensating teams of 
employees and independent contractors to perform these site visits, and 
the costs of covering the travel and meal expenses for this team.\9\ 
The accreditation site visits are conducted by teams of three to four 
individuals. The costs included in this category are based on the 
actual cost of accreditation site visits in 2023 and 2024.
    g. Racetrack Surface Testing. This category includes the cost of 
pre-meet track surface testing of tracks that run

[[Page 70186]]

Covered Horseraces. Testing is performed to ensure that track surfaces 
comply with the Racetrack Safety Program. This testing is performed by 
the Racing Surfaces Testing Laboratory.
    2. The 2025 Veterinary Services budget ensures that the veterinary 
care component of the Racetrack Safety Program is effectively 
implemented and administered nationally.
    a. Salaries/Payroll Taxes/Employee Benefits. This category 
contemplates four HISA full-time employees that cover the 
administration of veterinary rules, compliance with those rules, and 
veterinary medical records. Salary levels for each position are based 
on market rates, while Employee Benefits consist primarily of a HISA 
contribution to cover a portion of employee health insurance and a 
401(k) match that is consistent with market practice. As of July 31, 
2024, the Veterinary Services department has four employees.
    b. Meetings. This includes the travel, meals, and materials to 
support the Equine Safety Directors Meeting. This meeting is necessary 
to promote the health and safety of both Covered Horses and Riders.
    c. Travel. This includes the costs of travel by veterinary 
employees to racetracks to meet with regulatory veterinarians, 
attending veterinarians, and other practicing equine veterinarians and 
their staff. This also includes travel to training seminars and 
veterinary conferences. Participation by veterinary employees in these 
meetings and seminars will result in a more effective and efficient 
program that better meets the needs of HISA's constituents.
    d. Supplies. This primarily consists of materials to be used in 
educational and Continuing Education programs provided and overseen by 
the Veterinary Services department. These programs ensure that 
trainers, jockeys, veterinarians, and stewards are educated in methods 
and procedures that promote the health and safety of Covered Horses and 
Riders.
    e. Professional Services. Several independent contractors will 
partner with HISA on a part-time basis to provide and/or augment 
services in areas including veterinary consulting and data entry.
    Pay rates are based on market rates for similar positions. All of 
these independent contractor relationships will increase the knowledge 
base and/or education level of veterinarians and other participants in 
Covered Horseraces.
    3. The 2025 Anti-Doping and Medication Control budget supports the 
implementation of the ADMC Protocol. The budget consists of the 
following items:
    a. Travel. This line item covers the travel and meal expenses that 
are expected to be incurred by HISA personnel to support and achieve 
the goals of the ADMC Program.
    b. Supplies. This line item sets forth the cost of materials 
utilized by the Authority to support and achieve the goals of the ADMC 
Program.
    c. Professional Services. Independent contractors have partnered 
with HISA on a part-time basis to provide and/or augment services in 
the following areas:
    i. Arbitration--this covers the fees to be paid to arbitrators who 
preside over cases involving positive tests for banned substances.
    ii. Independent Adjudication Panel (IAP)--this covers the fees paid 
to members of the IAP, who hear cases involving positive tests for 
controlled medications.
    iii. Furosemide Study--this covers the fees to be paid in 2025 for 
the furosemide study that is required by the Act.
    d. HIWU. As set forth above, the Act requires that HISA contract 
with an independent enforcement agency to oversee the components of the 
ADMC Program. HIWU, a division of Drug Free Sport (``DFS''), was 
retained by the Authority as the independent enforcement agency. The 
HIWU line items in the ADMC budget consist of the following:
    i. Salaries/Payroll Taxes/Employee Benefits. All HIWU employees are 
employed by DFS. The salaries account for a staff (expected to total 43 
full-time individuals) that will carry out all of the responsibilities 
of the enforcement agency, including those persons necessary to oversee 
and complete the following components of the program:

1. Testing Operations
2. Testing Strategy
3. Compliance & Policy
4. Collection Personnel Recruitment, Training, & Certification
5. Support Line Management
6. Science
7. Laboratory Accreditation
8. Equine Medical Resources
9. Intelligence & Strategy
10. Investigative Operations
11. Education
12. Communications & Outreach
13. Legal
14. Litigation
15. Results Management
16. Information Technology
17. Human Resources
18. Finance

    HIWU shares 7 staff with DFS in the areas of Information 
Technology, Finance, and Human Resources. This arrangement produces 
cost savings, obviating the need for HIWU to retain full-time employees 
to provide these services.
    ii. Rent. HIWU has procured 3,000 sq. ft. of office space for its 
employees. HIWU is paying $32/sq. ft., which is consistent with market 
rates in the Kansas City area. The cost of basic office equipment is 
also included in this category.
    iii. Office Expense. This consists of common office expenses such 
as utilities and maintenance costs and is based on historical costs for 
similar businesses.
    iv. Telecommunications. This consists of the cost of office phones, 
mobile phone service at $65/month/employee (a commercially reasonable 
rate), and portable hot-spot wi-fi services to be used in test barns.
    v. Travel. This is the travel expense necessary for full-time 
employees to perform functions such as meetings with State Racing 
Commissions and track associations, training and continuing education 
sessions with sample collection personnel, conducting investigations, 
arbitration hearings, laboratory visits, meetings with HISA personnel, 
and participation in industry meetings and conventions. Travel expenses 
include airfare, hotel rooms, rental cars, fuel costs, mileage for 
personal vehicles used for business purposes, parking, and meals. The 
amounts for each expense component were based on estimated market 
average costs.
    vi. Supplies. This consists of drug testing supplies needed for 
sample collections and sample collection personnel training.
    vii. Professional Services. This consists largely of consulting 
fees paid to experts in the areas of:

1. Results Management
2. Investigations and State Racing Commission Relations
3. Laboratory Accreditation

    The guidance provided by these subject matter experts will result 
in a safer sport run on a more level playing field.
    viii. Technology. This consists of the cost of all software, 
hardware, licenses and continued technological development needed to 
perform HIWU's work.
    ix. Insurance. The expense consists of the cost of all of HIWU's 
insurance policies, including liability insurance with an Umbrella 
policy, cyber-risk insurance, property insurance, and workers' 
compensation insurance.
    x. Resources and Education. This includes Training and Continuing

[[Page 70187]]

Education, registration fees for industry conferences, accounting fees 
for state tax filings, and dues and subscriptions to industry 
publications. All of these are necessary for HIWU to properly conduct 
its business.
    xi. Taxes--Other. Estimated taxes based on historical experience. 
These taxes are minimal in amount and are commercially reasonable.
    xii. ADMC Collection Costs. This includes wages paid to sample 
collection personnel in all states that conduct Covered Horseraces. The 
wage amounts were initially based on rates paid to sample collection 
personnel in each state prior to HIWU assuming these sample collection 
functions and have been adjusted where necessary to reflect rates 
currently being paid. Additionally, to cover travel expenses 
specifically related to sample collection, this includes airfare, hotel 
rooms, rental cars, fuel costs, mileage for personal vehicles used for 
business purposes, parking, and meals. The amounts for each expense 
component were based on estimated market average costs.
    xiii. Management Fees. This is the profit amount to HIWU for 
administering the program. It is a negotiated amount of 8% of the total 
expenses incurred for services that HIWU provides directly and 4% for 
everything else.
    e. Lab Testing. Once the samples to be tested have been collected 
by HIWU personnel, they are shipped to one of five accredited 
laboratories located in the United States. All of the laboratories have 
many years of experience in the testing of blood, urine, and hair 
samples taken from thoroughbred racehorses. HIWU has conducted 
extensive negotiations with each of these laboratories in order to 
ensure that competent testing is performed at the lowest price 
possible. One way HIWU has successfully reduced costs is by utilizing 
only five laboratories to perform testing, instead of the nine 
laboratories previously used by various State Racing Commissions across 
the country. This allows the five laboratories to spread their fixed 
costs (salaried employees, testing equipment, etc.) over a larger 
number of samples, resulting in a lower charge per test.
    It is important to note that the ADMC Collection Costs and Lab 
Testing line items represent 47.96% of the total budget of the 
Authority.
    4. The 2025 Technology budget supports the building and development 
of all IT systems needed to properly and efficiently manage the 
Racetrack Safety and ADMC programs. The budget consists of the 
following items:
    a. Salaries/Payroll Taxes/Employee Benefits. This contemplates nine 
HISA full-time employees in areas including programming, field support, 
internal support, external support, project administration, and third-
party developer coordination. Salary levels for each position are based 
on market rates, while Employee Benefits consist primarily of a HISA 
contribution to cover a portion of employee health insurance and a 
401(k) match that is consistent with market practice. As of July 31, 
2024, the Technology department has seven employees.
    b. Travel. This includes the costs of travel by IT employees to 
racetracks to meet with customers/users, to Lexington, Kentucky and 
Montclair, New Jersey for HISA meetings, and to training seminars and 
technology summit meetings. Participation by IT employees in these 
meetings and seminars will result in a more efficient program that 
better meets the needs of the constituents and will ensure alignment 
between the functionality of the system and the published regulations.
    c. Supplies. This includes the purchase of laptops for all HISA 
employees, the provision of workstations for those employees located in 
the Lexington office, and the hardware/software/3rd-party services 
needed for image processing. These items are necessary for HISA to 
efficiently perform its duties under the Act.
    d. Technology. This item includes the costs of cloud computing and 
other specialized applications that together form the foundation of 
HISA's technology system. This includes the cost of Palantir, Amazon 
Web Services, and other vendors relating to the HISA website and 
technology systems. In order to be as cost-effective as possible, HISA 
has chosen not to invest in centralized computing assets. This keeps 
total cost of ownership low and infrastructure stability high, and it 
enables solution flexibility as HISA is engaged in meeting its mandate.
    e. Professional Services. This item budgets for outsourced 
technology delivery provided by third-party system integrators and 
software factories. Given the need for cost-effective, round-the-clock 
services, the necessary software and technology systems were procured 
internationally from development resources in the US, Europe, and Asia; 
this allowed for the implementation of a 24-hour code and test 
development cycle. This is the most cost-effective method of building 
and maintaining technology systems/portals to facilitate program 
reporting to and monitoring by HISA.
    5. The 2025 Administration budget consists of the general and 
administrative staff and expenditures that are needed to conduct HISA's 
business. This budget consists of:
    a. Salaries/Payroll Taxes/Employee Benefits. This contemplates 13 
employees including executive-level personnel (the CEO and CFO) and 
employees in Legal, Communications, Operations/Compliance, Public 
Affairs, and Administrative Services. Salary levels for each position 
are based on market rates, while Employee Benefits consist primarily of 
a HISA contribution to cover a portion of employee health insurance and 
a 401(k) match that is consistent with market practice. As of July 31, 
2024, nine employees make up the Administration Department.
    b. Board and Committee Travel. This consists of travel, hotel, and 
meal expenses for the one annual board meeting that is held with in-
person attendance by the board members.
    c. Rent. In the fall of 2024, HISA anticipates moving its office 
location to a 1,798 sq. ft. office space in Lexington, Kentucky. HISA 
expects to pay $18/sq. ft., which is consistent with market rates in 
the Lexington area. The costs of basic office equipment and furniture 
are also included in this category.
    d. Phones. This is the cost of an office phone system in HISA's 
corporate office, necessary for HISA to conduct its business.
    e. Meetings. This is the cost of miscellaneous meetings of HISA's 
corporate staff as are necessary for HISA to conduct its business.
    f. Travel. This includes airfare, car rental, mileage, and meals 
for HISA's corporate staff in the course of traveling to Covered 
Racetracks, industry meetings, HISA meetings (strategic planning 
summits, board meetings, etc.), and meetings with industry 
stakeholders. Travel to these events allows HISA's corporate staff to 
conduct its business more efficiently and to perform its duties under 
the Act.
    g. Membership and Subscriptions. This is the cost of professional 
membership dues and subscription fees. These memberships allow HISA 
staff to meet with industry stakeholders and carry out its duties under 
the Act.
    h. Bank and Credit Card Fees. This includes the cost of bank fees 
and credit card fees. These fees are necessary to efficiently and 
effectively conduct business.
    i. Supplies. This includes the cost of office supplies, including 
printer/copier paper, printer/copier ink and toner,

[[Page 70188]]

postage, shipping, and other miscellaneous office supplies.
    j. Postage. This includes the cost of postage and shipping for 
communications to Covered Persons. While HISA primarily conducts 
business via electronic communications, U.S. Mail is required where the 
recipient does not utilize an electronic means of communication.
    k. Accounting Services. This consists of the cost of a contract 
bookkeeping service that books accounting entries, produces financial 
statements, manages and processes Accounts Receivable, manages and 
processes Accounts Payable, and drafts/files HISA's annual IRS Form 
990. Contracting this work out to a company with expertise in these 
areas is much more cost-effective than if HISA were to hire staff to 
perform these functions in-house. Additionally, this includes the cost 
of an annual independent audit of HISA.
    l. Public Relations Services. This is the cost of a contract public 
relations service to manage HISA's website, issue press releases, 
assist with the production and distribution of information to industry 
stakeholders, and provide continuing education information for industry 
stakeholders. The public relations firm that HISA is working with has 
many years of expertise in P/R for thoroughbred racing enterprises. The 
firm can perform the aforementioned tasks more efficiently and 
effectively than if HISA were to hire staff to perform these tasks in-
house.
    m. Legal--General and Lawsuits. This includes the cost of outside 
legal counsel for the creation, management, and updating of Racetrack 
Safety and ADMC rules as well as the cost of outside counsel that is 
working on the various lawsuits in which HISA is a party. Additionally, 
this includes the cost of outside legal counsel that handles 
enforcement actions brought under the Racetrack Safety Program. Doing 
all of these tasks requires a decentralized group of lawyers with 
varied skill sets. At present, it is much more efficient and effective 
to utilize outside counsel than for HISA to hire a large in-house legal 
team to handle these issues.
    n. Insurance. This includes the following insurance policies for 
HISA:
    i. Directors & Officers insurance.
    ii. Workers' Compensation insurance.
    All of these policies were competitively shopped by a broker to get 
the lowest rate possible.
    o. Payroll Services. This includes all costs of HISA's relationship 
with Resource Management, Inc. (RMI), a Professional Employer 
Organization (PEO). RMI provides Human Resources administration 
(handbook and policy management resources, new employee onboarding, 
labor law assistance, etc.), benefits management, compliance services 
(workers' compensation claims management and annual reporting, 
unemployment claims management, etc.), and payroll administration 
(payroll processing, W2 management, vacation tracking, etc.). The 
relationship with RMI allows these functions to be performed in a more 
cost-effective manner than if HISA hired employees to perform those 
functions.
    p. Printing and Publication. This includes the cost of printing and 
publishing various educational and communication materials.
    q. Professional Services. This account consists of:
    i. Consulting fees to independent contractors assisting HISA with 
consulting projects and board and executive functions.
    ii. $100,000 to fund the preparation of a white paper on the 
benefits provided by security cameras in shedrows.
    iii. $150,000 contingency fund set aside for unexpected expenses.
    These items will ensure that HISA has high-quality employees who 
are well-trained to properly serve its constituents.
    Please note that the 2025 HISA budget contemplates the repayment of 
$250,000 of loans; it does not assume that any funding shortfall will 
be incurred.
    VI. Information Concerning Rule 1.150(c)(5). Attached as Appendix 
10 is a comparison of the approved HISA 2024 Budget to actual revenues 
and expenditures. A variance has been calculated for each line item, 
and a narrative explanation has been provided for all variances >10% 
and at least $100,000.
    VII. Information Concerning Rule 1.150(c)(6). The Authority 
received one public comment after posting the proposed budget on its 
website. The comment was submitted on July 22, 2024 by Andrew Cohen, a 
columnist for the Paulick Report, a horse racing publication. Mr. Cohen 
submitted his article titled, ``Keeping Pace: A Closer Look at HISA's 
Proposed Budget'' as a comment regarding the budget. The column is 
attached as Appendix 11. The comment was posted on the Authority's 
website on the same day that it was submitted by Mr. Cohen. The article 
sets forth the following suggestions and questions regarding the 
budget: (i) requesting a summary explanation of the budgetary changes; 
(ii) question regarding why the lab testing budget went from $21.2 
million to $20.5 million; (iii) question regarding revenue reduction 
from $3.6 million to $2.4 million; and (iv) question regarding credits 
for sample collection and state laboratory services and whether ``HISA 
officials expect to charge states and tracks about $2 million less in 
2025 than in 2024.''
    The Authority's assessment of Mr. Cohen's comment follows: In 
future years, the Authority will consider including the Notice with the 
budget on its website. The lab testing budget and collection costs 
deceased in large part because the 2024 budget included analysis for 
Louisiana, West Virginia, and Texas, while the 2025 budget does not. As 
it relates to the question regarding revenue reduction, this revenue 
line represents revenue from fines. After reviewing the actual fines 
collected to date, the Authority believes that the budget should be 
based on the fines expected to be collected instead of fines levied. 
The larger fines associated with the ADMC program generally accompany a 
longer suspension and, in these cases, the covered person is not 
motivated to pay the fine until the suspension has been served.
    The Authority did not make any revisions to the proposed budget in 
light of the comment.

HISA's Conclusion

    The proposed budget is consistent with and serves the goals of the 
Act in a prudent and cost-effective manner. The proposed budget 
allocates the funding necessary for the successful implementation by 
HISA of the requirements of the Act. The budget has been carefully 
analyzed and is narrowly tailored to the various regulatory activities 
of HISA as contemplated by the Act. As demonstrated herein, the 
anticipated revenues are sufficient to meet its anticipated 
expenditures.

    By direction of the Commission.
April J. Tabor,
Secretary.

Endnotes

    \1\ Codified at 15 U.S.C. 3051 through 3060.
    \2\ Public Law 116-260, 134 Stat. 1182, 3252 (Dec. 27, 2020).
    \3\ Public Law 117-328, 136 Stat. 4459, 5231 (Dec. 29, 2022).
    \4\ 88 FR 18034 (Mar. 27, 2023). These rules were amended in 
February 2024. 89 FR 8530 (Feb. 8, 2024); see 16 CFR 1.150-1.152.
    \5\ 15 U.S.C. 3051 through 3060.
    \6\ 16 CFR Part 1 Subpart U.
    \7\ The Authority notes that it has adopted and implemented a 
Conflicts of Interest and Business Ethics Policy (the ``Policy'') 
which acknowledges that Authority ``[r]epresentatives involved in 
procurement have a special responsibility to adhere to principles of 
fair competition in the purchase of products and services by 
selecting vendors based exclusively on standard commercial

[[Page 70189]]

considerations, such as quality, cost, availability, service and 
reputation, and not on the receipt of special favors.'' The Policy 
requires, among other things, transactions to be supported by 
appropriate documentation; no entry be made in our books and records 
that intentionally hides or disguises the nature of any transaction 
or of any of our liabilities, or misclassifies any transactions as 
to accounts or accounting periods; HISA Representatives comply with 
our system of internal controls; no cash or other assets be 
maintained for any purpose in any unrecorded or ``off-the-books'' 
fund; no HISA Representative may take or authorize any action that 
would cause our financial records or financial disclosures to fail 
to comply with generally accepted accounting principles or other 
applicable laws, rules, and regulations; and all HISA 
Representatives must cooperate fully with our finance staff, as well 
as our independent public accountants and legal counsel, and respond 
to their questions with candor and provide them with complete and 
accurate information to help ensure that our records are accurate 
and complete. Any HISA Representative who becomes aware of any 
departure from these standards has a responsibility to report his or 
her knowledge promptly to the CEO or Chair of the Board. A copy of 
the Policy is available to the public on the Authority's website.
    \8\ A modification of the Racetrack Safety Rule was approved by 
the Commission by Order dated June 7, 2024.
    \9\ In 2023, the HISA Accreditation Team completed accreditation 
visits at 21 racetracks.

[FR Doc. 2024-19468 Filed 8-28-24; 8:45 am]
BILLING CODE 6750-01-P