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SALT LAKE CITY — The Utah Department of Alcoholic Beverage Control needs an internal audit division that reports directly to its director and the DABC Commission, according to a legislative audit report released Thursday.
The latest audit took an expanded look at the department after a May 2011 audit found a $300,000 loss at a contract, retail outlet in Eden, Weber County.
"We found that the problems associated with the Eden Packaging Agency were not isolated, but DABC has strengthened controls over package agencies since the Eden audit," the report from the Legislative Auditor General concluded.
The report also recommends that the department update its policies to include its newly implemented oversight procedures. It also recommends that the DABC take oversight of the package agencies' illegal sales of liquor to minors, just as it does for state-owned liquor stores.
State auditors looked at the 31 privately owned, retail liquor outlets or "package agencies" that sell state-owned liquor inventory on a commission basis.
We found that the problems associated with the Eden Packaging Agency were not isolated, but DABC has strengthened controls over package agencies since the Eden audit.
–From the audit
The consignment value of the 31 outlets is just under $1 million, according to the audit report: "This represents a substantial liability to the state if the package agencies are not managed correctly."
Because of that risk, auditors recommended the DABC establish an internal audit division.
In a Jan. 9 letter responding to the audit, DABC Executive Director Francine Giani said, "I am honestly optimistic about the DABC's future, and I believe this and other legislative audits are helping build that future."
In recent months, the DABC has came under fire after legislative audits, including the initial Eden packaging agency audit, found it had been "incompetently managed" and accused the former executive director of committing a felony by doing business with a company owned by his son. The allegation is under investigation by the Utah Attorney General's Office.
Since the controversies, legislators have been looking at proposals to restructure the DABC, and some have questioned the need for the state's system of complete control over alcohol sales and suggested more package agency arrangements.
But in December, House Speaker Becky Lockhart said, "I don't see the Legislature giving (the sale of alcohol) completely up. But I do think there is a lot of momentum and a lot of activity around this idea of contractual agreements in order to do the selling."
The state operates 42 full-service retail stores open to the public, and two club stores that only service licensees. There are also 67 independently owned and operated package agencies — small retail liquor outlets operated privately under contract with the department.
Email:lbrubaker@ksl.com
