The Tennessee Alcoholic Beverage Commission is preparing to fully automate license, permit and evidence-cataloging processes, as a new state audit finds a paper culture persists within the agency.
The Tennessee Alcoholic Beverage Commission (TABC) will migrate licensing, permitting and evidence-cataloging processes fully online, an agency official said, following a new audit suggesting that a paper-based culture and computer software issues are behind two series of irregularities, one dating to 2007.
The audit by the State of Tennessee Comptroller of the Treasury was released in November and scrutinized programs and activities from July 1, 2011, to March 31, 2016.
It identified longstanding problems at TABC in maintaining internal control of seized evidence, including cash, which increased the risk of evidence misappropriation or misuse. These had been previously identified in a 2007 financial and compliance audit.
The review also uncovered difficulties in the agency's paper-driven process of issuing permits to manufacture, distribute, sell or serve alcoholic beverages. These, it said, increased the risk that ineligible applicants would be permitted.
TABC maintained nearly 2,700 pieces of evidence at nine separate locations as of April 2014, according to an audit listing of confiscated evidence.
But auditors discovered that the commission's evidence custodians at the agency's central office in Nashville, a district office in Chattanooga and a subsidiary post in Winchester did not record all evidence using online Evidence Management System (EMS) software purchased in 2012, and instead kept separate paper listings.
"Because custodians maintained their own records and no master listing existed, the commission had no independent record of what confiscated inventory should be on hand," auditors wrote.
John Dunn, public information officer for the Tennessee comptroller, noted that the issue of independent records was limited to just three offices. "The use of the EMS was not mandatory at the time of the audit," he noted.
In a random sampling of confiscated evidence in Nashville, Memphis and Winchester, auditors found one item at each location that was not listed. Auditors also found $1,200 cash had been held in evidence in Winchester without prior authorization from the chief law enforcement officer, and had remained there for 109 days after being checked in.
Auditors recommended transferring all cash evidence to the central office; using EMS to fully document, control and maintain oversight of confiscated evidence; and using employees independent of TABC to conduct periodic inventories.
TABC Assistant Director Zack Blair said the agency agreed with the recommendations and has revised its policies to include mandatory use of EMS and transfer of cash evidence to Nashville within five days. But he was unable to explain why some agency offices had not used the software system.
"I would characterize that we are way behind when it comes to technology. We’re excited about getting into the 21st century very soon," Blair said, pointing out he was only appointed in July. This was just one month after the appointment of new Executive Director Clayton Byrd, who replaced former Executive Director Keith Bell. Bell resigned in March.
The audit also found that the total number of permits issued for the manufacture, distribution, sale or serving of alcoholic beverages during the period examined could not be verified, due to lack of TABC control.
Auditors found 11,200 permit numbers that could not be accounted for due to gaps in sequence; 260 distiller's representative permits issued to the public that were not properly logged; 15 permit numbers assigned to multiple applicants; and 10 permit numbers that were issued to more than one applicant.
Additionally, 138 permit holders were assigned multiple permit numbers in the commission's server permit software; and 22 permit numbers were incorrectly recorded.
However, it remains unclear whether permit holders actually paid for or received multiple permits.
"We’re not sure if it was the software or the staff, or maybe it was a clerical error," Dunn said.
Divon Crutchfield, who worked on the audit, said auditors didn’t see any fraudulent activity with the system.
"We do get the sense that they’re aware of these issues and their importance, aware of a lot of the risks in these areas," he said. "I think that is really going to result in a lot of changes there."
Blair said permitting and licensing issues should end by mid-2017 with the online migration and automation of the permitting and licensing of alcoholic beverage manufacture, distribution, sale and service.
TABC hired Accela in May 2015 at a cost of nearly $3.4 million to provide an online Regulatory and Licensing Permitting System (RLPS) software system.
Migrating to RLPS will allow applicants to upload supporting documentation, and, following staff review and payment, to print their own licenses and permits. It will also generate regulatory, though not criminal, citations.
The system will only allow a permit to be issued after an application is fully vetted and approved by staff.
When completely automated, the online migration should eliminate roughly 127,000 pieces of paper in the permitting process of alcohol servers alone, Blair said, and reduce wait time for applicants. It will also free up employee hours, allowing staffers to be cross-trained and equalize workloads.
The migration will also make data analytics increasingly possible.
"The great thing about this system is a robust reporting function. We will have access, specifically for management, to dashboards with data points," Blair said. "Things that we cannot get access to right now, so that’s exciting."
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