The office in charge of North Carolina’s state-run liquor stores has wasted millions of taxpayer dollars through years of mismanagement, according to an audit released Thursday morning.
The audit found that the Alcoholic Beverage Control Commission lost the state nearly a million dollars a year — specifically, $11.3 million over the course of 13 years — due to poor handling of contracts. ABC officials also wasted $2.1 million by renting warehouse space that they then kept empty for seven years, the audit found.
State Auditor Beth Wood said in an interview Thursday that the waste this audit uncovered was some of the most egregious she has seen in her nine years in office.
“There was just no overview, no oversight,” she said. “There was no monitoring of that contract. You just had a contractor come up and say ‘I want more money,’ ... and whatever the contractor asked for, it was what they got.”
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The state ABC commission has its day-to-day operations run by a chief administrator, whose work is overseen by three commissioners. Wood said at least half a dozen people have been in those various roles while this waste was going on — and that it appears no one ever thought to look into whether the extra payments were appropriate, or whether the state was even getting what it paid for.
Wood also said her office looked for evidence of possible criminal behavior but has not referred anything to prosecutors.
“We looked to see where there was some back-scratching,” she said, but couldn’t find solid proof.
Her office says the contractor owes the state about $300,000, and also owes some private distillery companies $12,000. But her main complaint is with the political appointees at the ABC Commission in the last decade-plus who allowed the waste to grow unchecked.
“The commission didn’t monitor them,” she said. “It’s not their fault for not being monitored.”
Her staff also said in the audit that the ABC Commission did not appear very eager to assist in the investigation, giving only “limited assistance” until Wood’s office threatened to subpoena documents.
Although the report from Wood’s office has just now become public, the ABC Commission learned of findings earlier this summer.
A response included in the audit from the chairman of the commission is dated July 26. That’s the same day that the chief administrator of the commission, Bob Hamilton, stopped working there, according to a report from the NC Insider last week. Officials refused to tell the Insider whether Hamilton quit or was fired. He had been appointed to the top spot in 2014 by former Gov. Pat McCrory.
The ABC Commission did not dispute any of the findings that Wood’s office reported.
“I take this audit seriously and plan to implement changes accordingly,” said the chairman of the commission, Zander Guy, in his letter to Wood’s office. Guy took charge of the commission in 2017 as an appointee of Gov. Roy Cooper. Guy, the former Surf City mayor, was the subject of controversy when Cooper appointed him since he is a convicted — and later pardoned — felon, The News & Observer reported.
In his July letter responding to the audit, Guy wrote to Wood that “the majority, if not all” of what Wood’s office found happened before he joined the board.
“While I am not responsible for the actions that occurred before my tenure, I will take responsibility for the future oversight and management of this organization,” Guy wrote.
Prior to Guy’s tenure under Cooper, the chairman of the commission under McCrory was Jim Gardner, a Republican politician who was the state’s lieutenant governor from 1989 to 1993. But the issues extend beyond Gardner’s time leading the commission, too, and stretch all the way back to 2004.
Every year since 2004, the audit found, the ABC Commission authorized more state spending than it was allowed to. The overruns started out relatively small but exceeded $1 million a year almost every year from 2009 on.
Wood’s office couldn’t get any clear answers as to why.
“The Commission did not explain why it repeatedly approved price increases that exceeded the maximum allowed amounts,” the audit said. “But the Commission offered that it had little to no resources dedicated to monitoring the contract.”
The ABC Commission has four in-house lawyers, as well as a 12-person internal auditing team and multiple levels of management.
Guy said he has given the legal and auditing staffs new tasks in light of this audit.
The audit found that at least five times the state paid for services that it didn’t have to pay for. And in both 2008 and 2016, the contractor received more money, citing increasing fuel costs, even though its fuel costs were actually down in those years. The contract was also extended multiple times in violation of state rules, the audit found.
Guy promised a follow-up internal review “within the next 12 to 18 months” and said the commission would begin bidding for contracts once again, in accordance with state rules.
North Carolina is one of 17 states in which privately run liquor stores are illegal, and the state has total control over the market.