Alcoholic Beverage Commission auditView
Years of damning audits leave lawmakers with a looming decision on whether to keep or blow up Tennessee's Alcoholic Beverage Commission.
A November performance audit found a continued litany of failures by the commission in several key areas, some of which date back more than a decade and were never corrected.
New management throughout the ABC is left scrambling to pick up the mess from previous administrators. The agency has — among other changes — a new executive director, assistant director, chief law enforcement officer, administrative services director and new commissioners appointed by Gov. Bill Haslam, Director Clay Byrd said.
"When we became aware of [the findings], we immediately put action into place," Assistant Director Zach Blair said. "We're all new leadership. We take it very seriously, and we can't speak to what previous management accomplished or didn't accomplish."
Byrd and Blair were both outside hires who began with ABC over the summer.
The performance audit was conducted by the state comptroller to help the General Assembly's Joint Government Operations Committee decide whether ABC should be continued, restructured or terminated.
Right now, the commission is scheduled to be terminated June 30, 2017, and lawmakers must decide how to handle the findings while new management works to correct failures noted in the current performance audit.
The audit covered seven areas, and auditors noted failures in four.
"We take [the findings] very seriously," Byrd said. "Coming into the agency as new leadership, we really look at the audit as a roadmap for areas we could immediately improve."
ABC put new policies in place that are noted throughout the audit. The commission also has implemented policies since the personnel overhaul that are not noted in the audit, Byrd and Blair both said.
"Essentially, the agency needed additional internal controls to strengthen and prevent problems with everything from confiscated funds to evidence issues," Byrd said. "The agency needed to update its policies to reflect both current practice and to include internal controls to prevent the findings in the future."
The commission is no stranger to failing reports. A 2009 performance audit conducted to determine if the commission had fixed previous failures — including a lack of internal control — found the Nashville office failed to effectively safeguard against fraud and did not properly respond after three cases of cash theft by employees in 2007 totaling nearly $13,000.
In one case, the culprit admitted to stealing money but was given a second chance after a five-day unpaid suspension, according to the 2007 audit. The 2009 audit also found a handful of other failures by the commission.
Failures in the 2009 audit were resolved in a 2012 follow-up review. The latest audit found prior management for more than a decade did not fix failures and or adequately perform key functions.
The audit found ABC did not have proper policies in place for overseeing licenses, one of its most basic responsibilities. It did not document approved licenses or close expired licenses in a timely manner.
The commission failed to properly maintain and document confiscated evidence and did not improve its control over the evidence since the 2007 failure. It did not keep a log of who accessed confiscated evidence and did not ensure confiscated cash was ever transferred to the central office.
In the Nashville office, 7 percent of tested case files for evidence could not be found. In the Cookeville office, that percentage rose to 17.
The audit found the commission bought software in 2012 to help with previous failures but did not effectively use it, leading to the same failures as before.
Proper conflict-of-interest policies were not in place, a failure also noted in the 2007 audit. Even the policies that were in place did not have proper paperwork, according to the audit.
New management did give the updated policy and affidavit to all employees and commission members to be signed and notarized in September, management personnel wrote back to auditors. ABC will require employees to read and sign the policies each year, Byrd said.
The commission's failure to perform proper background checks on any of the 1,210 distiller's representative permits issued between Jan. 1, 2012, and Feb. 28, 2014, increased the risk that those who should not have a license would get one.
Management agreed with the audit's findings and told auditors it has or will take steps to ensure compliance.
Management personnel outlined steps and policy changes to auditors in a response added to the final performance audit report and confirmed those updates with the Times Free Press.
Auditors wrote they will conduct a follow-up review to help the JGOC determine what to do with the commission.