The Office of the Utah State Auditor released a management letter on July 28, 2026, detailing five findings from its annual audit of the Department of Alcoholic Beverage Services (DABS). The audit, which began in February 2026, included reviews of financial, regulatory, and operational processes.
According to the report, the DABS bailment inventory program lacks a formal policy and does not publicly report the volume or value of the inventory. This inventory, which is stored at the DABS warehouse but owned by vendors, accounts for approximately $61 million, representing 59 percent of the warehouse inventory.
Auditors also found that the department does not ensure Type 5 Package Agencies (PAs) accurately report liquor sales. The report noted that DABS audits of these agencies lack unpredictability in timing and scope. Additionally, a sample of 15 sales reports revealed one report where sales were understated by $1,428 due to a mathematical error, leading to an under-collection of earmark funds.
The audit identified several internal control issues, including a lack of separation of duties within the bank reconciliation process. Currently, a single staff member performs bank reconciliations and records adjusting entries, which increases the risk of undetected errors or fraudulent activity.
Furthermore, the report found that change order deposits were not always completed within the timeframe required by DABS policy and statute. Of 158 change orders reviewed, 46 exceeded the five-business-day requirement.
Additionally, DABS recorded accounting activity and allocated $675,311 in overhead costs to an inactive liquor store that had been closed for several years because its accounting codes were not deactivated.
The Department of Alcoholic Beverage Services has agreed with the audit recommendations. DABS stated it is developing a formal bailment policy and will include inventory volume and value in its annual financial report. The department also plans to adjust its Type 5 PA audit schedule and procedures and has begun reassigning bank reconciliation duties to separate individuals.
