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The Utah Department of Alcoholic Beverage Control should hire an outside consultant to review its data-entry and decision-making processes, and managers need more training in "industry best practices," urges a state audit released Tuesday.
The state liquor department also needs to improve accounting controls and monitoring of certain types of package agencies along with some of its warehouse procedures.
For the 24-page report, auditors looked at DABC practices in five areas: management; accounting; package agencies; the warehouse; and restaurant, bar and other licensee satisfaction. The data were collected between July 2013 and February 2015.
"We understand that the DABC is a unique beast, part regulatory, part licensing, part retail," state Auditor John Dougall said when presenting the audit to members of the state liquor commission. Because of that, Dougall said the audit presented Tuesday focused only on the retail side of the operation.
In the area of management, auditors found that top-level management has adequate levels of formal education and applicable experience, but most have "limited business experience outside the DABC." Because of that, the agency does not foster "the use of best industry practices within the organization."
Auditors suggested that the DABC hire an outside consultant to help in these areas and consider providing managers more training.
"The department needs to look around the retail industry," Dougall said, "and see where it can strengthen the experience of managers."
DABC Executive Director Sal Petilos agreed, saying that he sends staff to outside conferences and trainings when the agendas seem pertinent and when it is financially possible. "We are lean and we can only send a minimal amount of people," he said. "But we'll see if we can strengthen those things."
Currently, the DABC is trying to find ways to make up for a $500,000 budget cut for the 2015-2016 fiscal year.
Former employees as well as state Sen. Karen Mayne, D-West Valley City, have complained in recent months about DABC business practices, including a new computerized ordering system and allowing one manager to oversee two stores. Mayne already has asked business experts to help look at all sorts of issues, from proper ratios for full- and part-time employees to worker training, turnover and adequate pay.
Auditors also expressed concern with the way the DABC collects data. Auditors noticed several "instances where DABC could improve data entry, streamline processes, and better retain data electronically." One example was the Detailed Point of Sales data, which is kept for only 90 days, making year-to-year comparisons difficult.
Dougall said because of poor data collection, a portion of the audit was not included in Tuesday's initial report so that his office could collect more data to make valid recommendations. He said the second portion of the audit should be released in June and could address some of the recent complaints about store staffing and ordering software.
Many of the problems cited in the report also related to package agencies. These small, privately run outlets are operated in towns and resorts where there is no state-owned liquor store. Most Utah breweries, distilleries and wineries also run package agencies. Some of the package agency problems include:
• DABC does not monitor the accuracy and timeliness of the monthly sales reports submitted by package agencies located in breweries, distilleries and wineries, possibly causing lost state revenue.
• DABC does not bill or receive alcohol tax payments in a timely manner from package agencies located in breweries, distilleries and wineries.
• DABC does not use a consistent calculation to determine the amount of compensation paid to some package agencies.
• Some 38 percent of the compensation paid to some package agencies in the past fiscal year has been incorrectly calculated.
Among the other problems mentioned in the audit:
• The DABC accounting office has inadequate separation of duties, so the same person approving purchases also is paying for them, creating a potential for errors and theft.
• DABC uses inconsistent and unreliable procedures to determine what liquor products are unsellable. Because of this, recovering funds from the manufacturer is difficult.
• DABC lacks proper warehouse picking procedures, which leads to shipment inaccuracies.
• A survey of restaurant and bar owners shows that while many licensees are generally satisfied with the DABC, many are not aware of the agency's free training on state alcohol laws.
To see the full report, visit the state auditor's website at: http://financialreports.utah.gov/saoreports/2015/15-01DABC-SpecialFinancialAuditAlcoholicBeverageControl,Departmentof.pdf