TAYLORSVILLE, Utah — A new report by the Utah State Auditor went after the state's alcohol control authority over messy technology handling its financial systems and even what it does with spare bottles of rare liquors.
The audit, released Friday, focused largely on the Utah Department of Alcoholic Beverage Services' accounting systems. Utah State Auditor John Dougall's office said DABS is unable to accurately record financial data from its enterprise resource planning system into the state's accounting general ledger system.
"Because DABS is a part of the State, its financial activities should be accurately recorded in FINET [the state's financial ledger system] to enable proper financial reporting and oversight. DABS’s operations are significant to the State and DABS is considered a major fund for the State’s Annual Comprehensive Financial Report (ACFR). The State cannot issue its ACFR if DABS data is not accurately recorded," the audit said. "If the issue is not resolved before the State fiscal year end closeout, DABS runs the risk of delaying ACFR preparation and issuance, which could impact compliance with bond reporting requirements. The inability to record ERP system data in FINET also hinders oversight of DABS and increases the risk of undetected errors, misstatements, and fraud."
The issue isn't limited to the DABS, but it concerns Dougall, because of how much money the agency brings in. The DABS reported more than $577 million in sales last year, a new record.
The audit was also critical of a lack of coordination and communication in addressing the problems. During Friday's commission meeting, representatives from Utah's Department of Government Operations (which oversees technology services in state government) and DABS Executive Director Tiffany Clason said they were working to fix it.
"There’s no missing money. There’s been no fraud, neglect, abuse regarding the finances," Clason told FOX 13 News. "The financial data exists, it’s there. This is merely an issue of two systems integrating and being aligned."
The audit also found:
- The DABS was not collecting the legally required cost +88% markup from some "Type 5 package agencies." Those are breweries, distilleries and wineries that sell bottles directly to consumers. The audit claimed the agency may have lost as much as $3.9 million in extra income. But at the same time, it was charging some of those same stores an "administrative fee" that no one could figure out where it came from. The legislature may have to address both issues in statute.
- Other package agencies, which are run by people who contract with the state, have agreements in "perpetuity" the audit claims. Auditors recommended time limits.
- The agency was criticized for taking too long to issue notices to businesses who violate Utah liquor laws. The length of time licensees have been notified went from 11 days in 2022 to 27 days this year.
- The DABS' own governance structure could be changed under the auditor's recommendations. One idea proposed is removing the DABS commission from day to day operations and giving that fully to the executive director, who is a member of the governor's cabinet. It leaves the commission to regulate and adjudicate other matters, like liquor licenses and violations.
- How the DABS handles rare liquors like the coveted Pappy Van Winkle bourbon could use some tightening, according to the audit. The agency was heavily criticized for how people found out the rare liquor was available in Utah (usually word of mouth) and so it pivoted to an "opportunity drawing." The DABS actually sets aside some bottles to account for breakage. But the audit took issue with what happened to those spare bottles. "Although the main drawing and distribution process did not appear to be susceptible to favoritism, DABS personnel were allowed to use their discretion to determine which stores received remaining safety stock items," the audit said.
In its response, the DABS accepted the findings of the auditors and said it was working to implement changes. The agency pointed out many of the problems highlighted by the audit date back well before the Cox administration.
Read the audit here:
