State auditors tell committee of nine audit findings; DABS says it is implementing fixes

The Office of the State Auditor presented an audit update on Oct. 14, 2025, that identified nine findings at the Department of Alcoholic Beverage Services and consolidated them into three principal areas: missing liquor store deposits, accounting and oversight of type‑5 package agent revenue and earmarks, and unresolved accounting system issues affecting inventory and transmittal between the agency’s ERP and the state system.

Auditor overview and principal findings

Auditor representatives described the first grouping of findings as related to missing cash deposits at liquor stores. Auditor Jordan told the committee the audit identified roughly $118,000 in missing liquor store cash deposits covering fiscal years 2021–2024. The auditors said the missing funds persisted in part because bank reconciliations were not being performed for a period of time; once reconciliations resumed the discrepancy was discovered and referred to the Attorney General’s Office for potential criminal investigation.

The second finding group concerned the accounting and oversight of type‑5 package agencies (manufacturers that operate retail package sales). Auditors reported DABS had recorded revenue and expenses associated with these outside sales in agency accounts beyond the statutory earmarks and administrative fees the agency should collect and remit. The audit also noted DABS was not validating self‑reported sales data from type‑5 agencies, which increases the risk of under‑reported sales and under‑remitted earmarks.

The third and most consequential group of findings involved the agency’s accounting system controls and data transmission to the state financial system. Auditors identified three concerns in this area:

- Lack of approval controls for journal entries and a lack of formal fiscal‑period closeout procedures, which increases the risk of erroneous or unauthorized entries;
- Delayed or manually transcribed transmissions between DABS’s Microsoft Dynamics 365 (D365) system and the state’s Vantage system; auditors said a 2024 error in that manual process produced a $19 million adjustment that was removed from the liquor profit transfer after the fact; and
- A technical issue in how the system calculates inventory and cost of goods sold that, based on the auditors’ preliminary review, suggested the agency may have understated expense by as much as $13 million, which would reduce the amount available for liquor profit transfers if adjustments are required. Auditors said that technical issue remains under audit and that a conclusive resolution had not yet been reached.

Nut graf — why this matters

The audit relates directly to the state’s liquor profit transfer and to public stewardship of revenue from a large retail operation the state runs. The auditor’s office recommended stronger controls, staffing to retain qualified accounting personnel, proper system configuration that involves accountants when new systems are built, monthly bank reconciliations and closure procedures, and verification of type‑5 reporting.

DABS response and remedial steps

Erica Evans, executive director of DABS, and Todd Darrington, deputy director for finance and administration, told the committee that the agency has implemented or begun implementing a number of the auditor’s recommendations. Darrington said bank reconciliations are now performed monthly in accordance with Division of Finance requirements and that the agency has moved from a monthly manual transmittal process to daily automated transmittals between D365 and Vantage. He told the committee DABS is working with an external CPA firm to validate accounting accuracy and with an external information systems firm to reconfigure the ERP settings. Evans said suspected theft was referred to the Attorney General shortly after the discrepancies were first noticed.

Committee reaction, context and closing

Committee members and the auditor emphasized the importance of basic accounting practices such as bank reconciliations and of keeping qualified accounting staff. Senator Jerry W. Stevenson (committee member) told the committee the operation is large and complex but said he believes recent leadership and staffing changes position DABS to address the issues. The auditor’s office said it will continue to monitor remediation progress and that recurring findings deserve careful policymaker attention when making appropriations.

No formal committee action was taken at the hearing; presenters said work would continue and that the auditor’s office would follow up in subsequent audits.