REPORT DIGEST

FINANCIAL AND COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 1998

Summary of Findings:

SYNOPSIS

• The Commission did not have adequate controls over authorization and accounting for computer equipment totaling approximately $100,660 used outside the Commission's Office.
• The Commission's Administrative Review Process Manual lacked documentation of approvals and effective dates of policy changes.

{Expenditures and Activity Measures are summarized on the reverse page.}

FY 1998

FY 1997

FY 1996

• Total Expenditures (Dram Shop Fund)

OPERATIONS TOTAL
% of Total Expenditures

General Office:
Personal Services
% of Operations Expenditures
Average No. of Employees

Other Payroll Costs (FICA, Retirement)
% of Operations Expenditures

Contractual Services
% of Operations Expenditures

All Other Items
% of Operations Expenditures

Automation - Investigative Staff
% of Operations Expenditures

Retailer Education Program
% of Operations Expenditures

Tobacco Study
% of Operations Expenditures

• Property and Equipment (at cost)

$3,556,434

$3,556,434
100%

$1,758,367
49.45%
53

$540,603
15.20%

$300,910
8.46%

$241,902
6.80%

$87,870
2.47%

$191,743
5.39%

$435,039
12.23%

$629,111

$3,396,990

$3,396,990
100%

$1,769,116
52.08%
53

$504,991
14.86%

$306,841
9.03%

$331,165
9.75%

$0
0%

$195,192
5.75%

$289,685
8.53%

$580,045

$3,229,169

$3,229,169
100%

$1,660,235
51.41%
54

$472,777
14.64%

$309,341
9.58%

$279,966
8.67%

$0
0%

$218,496
6.77%

$288,354
8.93%

$538,997

FY 1998

FY 1997

FY 1996

• Number of Licenses Issued
• Investigations/Inspections Performed
• Citations

26,402
20,344
6,366

25,071
21,858
6,932

25,823
26,707
5,650

Documentation of approvals and effective dates of policy changes was lacking

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROL OVER FIXED ASSETS

The Commission's internal controls over fixed assets were inadequate because there was no written policy on the authorization and accounting procedures for equipment assigned to employees for use outside of the Commission's office.

Laptop and desktop computers and printers with costs totaling approximately $100,660 were assigned to personnel who routinely worked outside of the Commission's office. There was no equipment release form which would indicate justification or approval for on-location use of equipment, the terms and conditions of such use, and acknowledgment of receipt by the employee to which the equipment was assigned. Return of the equipment to the Commission was also not documented. This increased the risk of improper use or loss of state property. (Finding 98-1, pages 11-12)

We recommended the Commission develop formal written policies and procedures for the release of equipment used externally including provisions to ensure accountability.

Commission management agreed with our recommendation and stated they will implement procedures accordingly.

INCOMPLETE DOCUMENTATION OF POLICY APPROVAL

The Commission has developed an Administrative Review Process (ARP) Manual to provide written policies and procedures in the disposition of violations and assessment of fines. However, there was not formal documentation on file evidencing approval by the Commissioners when the provisions of the ARP Manual were implemented. The ARP Manual also did not specify the effective date of the provisions. Any changes and updates made on the manual did not undergo a formal approval process.

The ARP Manual provides for a consistent application of procedures and encompasses the whole adjudication process. Without a formal approval process, the implementation of the provisions could be challenged and regarded as unauthorized. Changes and updates on the manual could not be traced because the effective dates of the provisions were not specified. (Finding 98-2, pages 13 - 14)

We recommended the ARP Manual should be formally approved for implementation and effective dates should be indicated. Any changes or updates on any provision should undergo the same approval process. The Commission agreed to institute a sign off process for policy approval and to file the approvals with the master copy.

OTHER FINDING

The remaining finding is of lesser significance and is being given appropriate attention by the Commission. We will review progress toward implementation of our recommendations in our next audit.

AUDITORS' OPINION

Our auditors stated the Commission's financial statements for the Dram Shop Fund as of June 30, 1997 and June 30, 1998 were fairly presented.

___________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITOR

Our special assistant auditors were the Bronner Group, Inc.