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Audit: DABC mismanagement caused millions of dollars in financial reporting errors

FILE - Salvador Petilos, DABC executive director, speaks during a press conference outside the State Liquor Store in Park City on Tuesday, Jan. 14, 2014. The Utah Department of Alcoholic Beverage Control mismanaged changing over to a new computer accounti
FILE - Salvador Petilos, DABC executive director, speaks during a press conference outside the State Liquor Store in Park City on Tuesday, Jan. 14, 2014. The Utah Department of Alcoholic Beverage Control mismanaged changing over to a new computer accounting system that left the impression that tens of millions of dollars went missing, a state audit shows. "There's no money missing. What we had was a delay in reporting," said Petilos.
Matt Gade, Deseret News

SALT LAKE CITY — The Utah Department of Alcoholic Beverage Control mismanaged changing over to a new computer accounting system that left the impression that tens of millions of dollars went missing, a state audit shows.

Agency administrators say no funds were lost but that there were problems putting the new system in place.

"There's no money missing. What we had was a delay in reporting," said Sal Petilos, DABC executive director.

The audit shows the department didn't report $216 million in revenue to the state from July 2016 to December 2016.

Also, monthly financial reports had inconsistencies ranging from $26 million to $308 million in various line items, according to the state auditor's office. Furthermore, DABC didn't do monthly reconciliations to find and reduce errors.

In addition, the audit concluded that DABC's finance division lacks knowledge of retail and government accounting. Auditor director Hollie Andrus noted the department has had three finance directors for the four audits she has overseen.

Auditors presented their findings to the state alcohol commission Tuesday. The state audits DABC annually.

Commissioner Olivia Agraz said the problems appear to be more than a computer glitch.

"I'm totally mortified. It sounds like we're being grossly mismanaged," she said.

Petilos said he "strongly disagreed" with the audit's conclusion that DABC mishandled implementation of the new accounting system. He said it was faced with running the old system without technical support or switching over. Auditors said the department should have run them simultaneously.

"I think what we had was a system that wasn't working correctly. We wanted to make sure it was correct," he said. "We did not sit idly by when financial issues were discovered."

Commissioner Neal Berube also took exception to auditors saying DABC is mismanaged.

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

Meantime, DABC continues to sell more liquor each year. With one month left in the current fiscal year, it has sold 921,177 more bottles than last year, a 2.4 percent increase. Retail sales are up 5 percent, totaling nearly $17 million more than last year.

State Auditor John Dougall said the agency has grown rapidly the past 20 years and he doesn't see it leveling off. He said one of the purposes of the audit was to flag areas of concern as DABC grows.