Audit of Utah’s liquor control authority finds millions in accounting errors

Posted at 9:28 AM, May 30, 2017

SALT LAKE CITY -- A new audit of Utah's Department of Alcoholic Beverage Control Commission has found millions in accounting errors because of a new computer system.

The report from Utah State Auditor John Dougall, obtained by FOX 13 ahead of the DABC commission's monthly meeting, said from July to December 2016, the DABC did not record $216 million in revenue or $118 million in goods sold into the state's ledger system, FINET.

It also found anywhere from $26 million to $308 million in discrepancies through the state liquor control authority's various financial reporting systems for December 2016 and January of this year alone.

DABC Executive Director Sal Petilos told reporters that no money was missing. In a letter and remarks to the DABC commission on Tuesday, he pushed back at the audit.

"What we had was a delay in reporting and we generate a lot of money monthly," he said. "We weren't able to report because of system issues."

The audit criticized the DABC for "going live" with a new computer system that was still untested, while simultaneously discontinuing the old system.

"The errors described above persisted for an unacceptably long time
because DABC’s Finance Division did not perform a monthly close of the system and did not reconcile it to FINET on a monthly basis," the audit said. "If DABC performed a monthly close and reconciliation of the system to FINET the possibility of future significant errors would be greatly reduced. Furthermore, it is an industry standard to close ones books at the end of each month."

The audit slammed the DABC for high turnover in its finance department, as well as lack of experience for those working there. It also criticized the DABC for not analyzing individual stores' financial performance.

The audit was presented to the DABC commission at its monthly meeting on Tuesday. Some commissioners were stunned.

"I am totally mortified and it sounds like we are being grossly mismanaged," said Commissioner Olivia Vela Agraz.

But some commissioners also put some of the blame on the Utah State Legislature, which controls the DABC's purse strings.

"If the state of Utah expects this to be run like a business, they should treat it like a business," said Commissioner Neil Berube. "There are many constraints put on here that there wouldn't be in a normal business situation."

Commissioner Jeff Wright said the DABC has asked lawmakers for more money to improve retail sales, but "we don't get everything we want from the legislature."

The DABC, which controls the supply and sale of alcohol in Utah, makes hundreds of millions of dollars for the state each year. The money goes toward school lunches, public safety and Utah's general fund. The agency has seen a lot of turnover in recent years with employees and has been battling low morale issues.

Previous leadership at the DABC resigned in the face of audits and investigations into the agency back in 2012 involving no-bid contracts, sloppy bookkeeping and other management problems. Some of the problems led to a criminal investigation by the Utah Attorney General's Office that resulted in no charges.

Read the audit here: