[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 [www.gpo.gov]
[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, 
[email protected], 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 www.regulations.gov 
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 https://www.gsa.gov/travel, 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