by Brian de Lore
Published 30 August 2018
The NZRB is due for a Performance and Efficiency Report of the Board which under the terms of the Racing Act of 2003 is required to take place every five years by a person approved by the Minister.
Strangely, the wording in the Act for the appointment of an auditor to do this report does not specify it has to be an independent person but only that it must, ‘not be a member, former member, or employee of the Board.’
Two previous reports have been completed since the Racing Act came into play at the five and ten-year intervals, and now at 15 years a third is due, but the NZRB has neither referenced it nor scheduled its commencement in any press release.
On the NZRB website, only three press releases have been posted since 2015 – that’s an average of one per year. They have a substantial Communications Department at NZRB, so the output is far from prolific. It also can’t be found referenced in the late July release of the Statement of Intent (SOI), or as I prefer to call it, Statement of Discontent (SOD).
The last P&E Report was a calendar year late, coming out in 2014, and was completed by KPMG. That report suggested that the then CEO Chris Bayliss and his team of star-studded executives that were brought over from the BNZ would take the racing world by storm and take profit by 2018 up to $180 million – oops, they must have hit a few speed bumps, that never happened.
Bayliss, who was appointed by current NZTR Chair Alan Jackson, and his cohorts have disappeared long ago with their severance packages, but they must have departed in haste as a strewn mess was left where they once pretended to work. On one occasion during this Bayliss era, an off-site NZRB managers meeting was held at The Chateau at Mt Ruapehu where the weekend bill was reputed to be $100,000.
On another occasion, Bayliss installed – between two sets of swipe card doors on different levels at the Petone TAB headquarters – a couple of extra security measures in the form of two turnstiles through which employees had to pass to gain entry. They cost more than $100,000 to install but had disappeared just a year later – more unreported wastage.
Even the more serious allegations of goings-on and further monetary wastage in a Wellington Hotel suite that was permanently booked by the NZRB but used only on a couple of days a week, but I digress. This story is supposed to be more about the P&E audit of the board and how they will audit the plethora of misadventures that have occurred during the past five years.
But don’t these audits tend to be a bit friendly towards the organisation paying for them, anyway? When, and if it comes out, it is unlikely to make mention of The Chateau at Ruapehu, the Petone turnstiles or the Wellington Hotel because categories in the accounts have been invented to hide or gloss-over these expenses. These are just three of numerous misuses of industry funds.
What’s highlighted here is stuff that’s been swept under the carpet. In Australia, they expose all the misdemeanors publicly, hand out the penalties and move on. But here things are hidden away from view, and the sores stay festering. Well, these festering sores are about to pop.
Have a breeze through the last NZRB Annual Report released for the year 2016-17 – the one that was conveniently released after the AGM. You will not find any mention in that report of the Private Box at Wellington’s Westpac Stadium which costs $80,000 a year and is used possibly twice a year for the Elite Customers and the mates of TAB executives. Not to be found anywhere.
Let’s discern the facts from the fiction, and there’s plenty of the latter to be found in documents like the latest SOI which states: “We’re delivering on our financial targets, making good progress in the delivery of our strategic initiatives and delivering on our commitments to the racing industry.”
Delivering, delivering, delivering – the only delivery to be seen are the trucks arriving to stock up the gravy train – a hypocritic NZRB also continually claim they are controlling costs when clearly, they are not. As an industry, we are over these false statements.
So, what would be the point of the racing industry paying around $200,000 plus for a new P&E Report when the estimated 58,000 racing participants will simply have the wool pulled over their eyes, anyway. In addition, what would be the future use of such a report on the very eve of the release of the Messara Report which is certain to be the catalyst to propel all the remaining current NZRB board members into outer space. No point at all.
Sorry, but we are over the rhetoric, the lies, the false promises, and the incompetence. Here is ‘the end of the section’ – employees of the NZRB who suspect they contribute less to the racing industry than they take home in salary should be updating their CVs for immediate, future use.
The Messara Report is about to hit the streets and one suspects, if adopted, will result in casualties – blood in the streets for the greater good and the long-term sustainability of New Zealand racing. Will Winston adopt it? Yes, he will. Why? Because it’s a very well-compiled professional report and no alternative exists, and the consequences of not adopting it would bring on racing’s Armageddon.
The Messara Report makes the P&E Report irrelevant because, by its own definition, the latter will be a review of people no longer involved. Perhaps a better report would be a full inquiry into the running of the TAB conducted by a more probing organisation than KPMG. Far more serious allegations than those stated above have yet to surface.
But the most serious issue confronting this industry at present is the progress of the Fixed-Odds-Betting (FOB) platform and its costs which appear to be well out of control. Some NZRB employees have lost faith in the project and are ready to talk.
The costs are already over $40 million, and one insider is saying no possibility exists that the platform will be ready for use before Christmas. Management hasn’t moved from the position of the FOB being ready by Melbourne Cup time, but information received on this desk denies that’s possible.
That informer is saying the odds for the FOB platform being ready this year are 30 to one and drifting. And by mid-December, the festive season has arrived, and you wipe out the next couple of months.
A simple calculation based on the 125 IT people involved in working on this project suggests it would be accumulating over-run costs of $3 million to $4 million per month and that’s not taking into account the loss of the budgeted profit from a system not up and running.
Two months ago, NZRB CEO John Allen at a Riccarton ‘racing conversation’ meeting, admitted that costs were already up to $39 million with the FOB being ready for launch by Melbourne Cup time. But conducting the testing of it, according to our IT information, is a six-month process in total and therefore it will not be ready before Christmas.
Remember that 15 years ago we had assets of $106 million which included $70 million in cash – that has been spent, and NZRB debt in a recent statement of financial position was projected to be $24 million in August of this year.
Forecasted debt figures of $24 million after the 2018/19 season are predicated on the NZRB achieving a very questionable $14 million profit from its strategic initiatives. If this didn’t occur which seems very likely, then the debt will balloon out to around $40 million which is the reason we are in a crisis.
The industry doesn’t have the money so is borrowing it. The net profit distributions generated from wagering to all three codes is presently about $100 million. If the industry got to a debt level of $40 million with a net income of only $100 million, it would be in a potential disaster situation.
What would then happen if the economy faltered and the banks wanted their money back? The racing industry couldn’t manage with a distribution level of just $60 million – it might be ‘all over red rover.’
The doors of racing would have to close, or the government would otherwise need to bail the industry out – that would seem unlikely going on recent history. If you didn’t previously think this industry was in the state of crises then think again?
The voice of John Messara is still resonating quite loudly when he told this writer upon completion of his report, “I knew when I began reviewing the New Zealand racing industry it was in pretty bad shape; what I didn’t know until later was, just how bad it really was.”
