RALEIGH, NC (WBTV) - Poor oversight and administration of a contract between the North Carolina Alcoholic Beverage Commission and its main logistics contractor has cost taxpayers more than $13 million, according to North Carolina State Auditor Beth Wood.
Wood's office released a report on Thursday morning detailing the findings of a year-long performance review of the ABC Commission's operations.
The commission contracts with LB&B, a company based in Maryland, to transport and store liquor sold at ABC stores across the state.
According to the report released by Wood's office, the commission's poor contract administration cost the state at least 11.3 million over the past 13 years, the time period from when LB&B was hired through when the audit took place.
The report found the commission approved cost increases in its contract with the company for things like an increase in fuel costs on at least two occasions, despite the fact that the company's actual costs had decreased.
The report found the state's contract with LB&B also exceeded the allowable contract price for 13 straight years and was improperly renewed without being put out for bid four times without proper approval and in violation of the state's purchase and contract policies.
The report also found unused warehouse space that LB&B leased for the ABC Commission with the state's approval potentially cost taxpayers more than $2 million over the past seven years.
Pictures included in the audit report show a mostly empty warehouse space. According to the report, the space was leased in 2011 to address the need for additional warehouse space.
Document: Read the auditor's report
"However, the warehouse space is largely unused," the audit found after visiting the space three times, including during the commission's busiest time of the year.
The report found the unused warehouse space amounted to roughly $300,000 in unnecessary annual costs since 2011.
Finally, the auditor found the ABC Commission's failure to monitor the company's compliance with the warehouse contract resulted in underpayments to the state of $297,537.
"When asked about monitoring and oversight of the Contract, the Commission's Chief Administrator stated that the Commission did not need to monitor LB&B's activities because any errors made by LB&B would be noticed, addressed, and corrected by a local ABC board or distiller's interaction with LB&B," the report said.
The audit said state policy and accounting best practices require the commission to monitor contract performance.
In response to the audit's findings, the chairman of the commission, Zander Guy, wrote a letter to Wood accepting all three main findings.
"The majority, if not all of your review period, was before my tenure as chair. However, I take this audit seriously and plan to implement changes accordingly," Guy said.
"Throughout the year-long performance audit process I have worked with the Commission's previous administrator and staff to implement areas of improvements the auditors identified," Guy said. "It is important that we implement changes when they are identified."