Virginia Racing Commission Audit Reveals Oversight Issues

The Virginia Racing Commission (VRC), the state agency responsible for overseeing horse racing and certain gambling operations, faced scrutiny following an audit by SC&H Group. Released on February 12 by the Office of the State Inspector General (OSIG), the audit raised concerns about cash handling, inspections, licensing, and regulatory procedures within the agency.

The audit examined the Virginia Racing Commission’s licensing practices, financial records from the past two years, and oversight of racetracks and off-track betting locations, including Colonial Downs Racetrack and Rosie’s gaming parlors.

The audit report concluded that the Virginia Racing Commission’s ability to implement changes is limited by its current organizational structure and available resources.

Virginia Racing Commission, overseen at the time of the audit by five commissioners appointed by the governor and a staff of six full-time employees, is responsible for licensing various industry professionals, overseeing Colonial Downs Racetrack operations, and conducting routine inspections. The agency regulates 12 pari-mutuel wagering facilities and racetracks where tax revenue exceeded $21 million in fiscal year 2023.

Since the introduction of HHR gambling in 2019, the commission’s responsibilities have increased significantly. The agency inspects HHR facilities twice a month and Colonial Downs Racetrack for each race day. As of the audit, two new HHR locations had opened, increasing the number of yearly inspections to 192 across eight sites.

The expansion of gambling continued in October 2024 with the opening of The Rose Gaming Resort in Dumfries. Owned by Churchill Downs Inc., which also operates Colonial Downs Racetrack and Rosie’s locations, the new facility added 1,650 HHR machines, bringing the total number of machines under Virginia Racing Commission’s jurisdiction to 4,440.

Despite this growing workload, the audit found that only one Virginia Racing Commission employee was responsible for all investigatory functions. This individual was tasked with ensuring race operations complied with regulations and inspecting HHR machines. The report criticized the lack of proper documentation for recording compliance issues at these facilities.

In fact, during the audit process, a new executive secretary, Waqas Ahmed, was appointed to fill the vacancy. In response to the audit, Ahmed claimed that it had led to the establishment of improved oversight and internal controls.

Following the audit, the Virginia Racing Commission adopted several reforms, including conflict-of-interest policies, updated accounting protocols, and review procedures for HHR machines. Additionally, the commission centralized its licensing, betting, and financial operations to track better and manage its processes.

Ahmed did not answer whether he believes the Virginia Racing Commission is adequately equipped to oversee HHR machines. However, the commission has stated it intends to increase staffing levels and seek approval for additional resources.

The audit’s findings follow legislative discussions on creating a single statewide gaming authority. A bill to establish the Virginia Racing Commission, which would have absorbed oversight of HHR machines and other gambling activities, failed in the General Assembly. Lawmakers ultimately removed funding for the proposal in a budget compromise reached in late February.

A previous 2022 Joint Legislative Audit and Review Commission (JLARC) report had already identified staffing shortages and regulatory gaps in the Virginia Racing Commission’s oversight of HHR machines. The report recommended establishing licensing and operational standards similar to those imposed on commercial casinos.

OSIG’s latest audit reinforced these concerns, noting that the Virginia Racing Commission lacked formalized rules to guide its operations and ensure regulatory compliance. Among the troubling findings were missing or unsigned financial documents, including deposit slips from licensed Colonial Downs Racetrack and betting locations totaling more than $2 million.

With Gov. Glenn Youngkin expected to propose changes to the state budget later this month, the fate of gaming oversight reforms remains uncertain. A final vote on any budget amendments is scheduled for April.

Virginia Racing Commission promised an effort to correct its faults; however, the audit creates alarming questions concerning whether the commission has the structure, resources, and regulatory authority to come up to pace with the growing gambling industry of Virginia. While the talks around state gaming regulations continue, it is up to the policymakers as to whether certain further reforms must be instituted to strengthen oversight and accountability.