When Utah increased its liquor prices last year, some restaurants paid too much for booze — while customers got bargains, audit says

(Scott Sommerdorf | Tribune file photo) Looking through one of the sets of shelves at the state liquor store at 1615 Foothill Blvd. in Salt Lake City.

There were bound to be mistakes, last June, when employees entered 25,000 new price codes for all the wine, beer and spirits sold in Utah’s state-owned liquor stores.

The codes were switched in a single night, from June 30 to July 1, the start of the fiscal year. Yet the errors were minimal and involved less than $2,000 in agency funding, a financial audit of the Utah Department of Alcoholic Beverage Control (DABC) shows.

According to the audit, released Tuesday, there were under- and overpriced items after the price code switch. That means a few Utah restaurants that placed special orders paid too much for their alcohol, said DABC Executive Director Sal Petilos.

“The amount of the overcharge is being returned to those affected,” he said.

Errors went the other way, too, and a few liquor store customers scored bargains and paid less than they should have.

The audit, which was discussed during the monthly meeting of the DABC liquor commission, also included a review of the agency’s information technology controls for July 1 through Dec. 30, 2017.

The audit discovered several compatibility problems between the DABC’s AX financial reporting system and the state financial system, called FINET. But no money was lost and problems are being fixed, Petilos said.

Overall, the report was mostly good news for the DABC.

“I didn’t find anything overly alarming,” said commissioner Neal Berube. “Working in private industry, we have many of the same issues.”

The DABC price change — approved by the 2017 Legislature as part of a massive alcohol-reform package — increased the state markup on wine and spirits from 86 percent to 88 percent, and the markup on heavy beer sold in liquor stores from 64.5 percent to 66.5 percent.

Even before the higher tax, Utah consumers paid the highest markup on wine and the sixth highest on spirits among the country’s 17 liquor-control states and one county.

The additional money brought into state coffers will pay for new drinking prevention and training programs in public schools and for owners and managers of bars and restaurants.

For the DABC’s annual financial review, officials in the state auditor’s office analyzed prices “on approximately 25,000 liquor inventory items to identify potential noncompliance issues.”

Auditors specifically checked 75 inventory items, nine of which were the wrong price. Seven of those were due to data entry errors. Those seven errors affected 37 transactions, the audit states.

Nine of the transactions resulted in a price less than the statutory markup, “thereby resulting in a loss to DABC of $185.94,” the audit said.

The remaining 28 transactions were priced more than the statutory markup, “resulting in overcharges to customers totaling $1,161.96,” the report notes.

The errors ”may have been prevented if DABC had effective internal controls in place to review and verify that the markup being added to alcohol inventory was accurate,” auditors wrote.

Petilos said the DABC staff already has put a system into place to avoid similar problems.

The DABC also was scolded for selling “delisted” items for “less than the purchase price — thus being sold at a loss.”

DABC did not follow its formula for selling inventory that ultimately will be discontinued, the audit.

Petilos defended the agency action, saying that “it is common business practice to sell below cost to recover at least a percentage of original investment and to move such items off shelves and out of stores.”