The performance of the local Alcoholic Beverage Control operations and their governing board raises some major questions. Although this board is appointed by City Council, for many years it’s been allowed to operate with very little oversight. The current board consists of Deborah Holmes-Young, Barbara Field and Thomas Bell.
ABC operations must follow strict state guidelines, including allocating a portion of the net profits from alcohol sales to the governments of the city and county in which they operate. Last year, local ABC operations had combined sales of $14 million. Yet only $581,912 of that money was paid to the city’s general fund (the county received $193,971).
Why so little one, might ask? A look at the most recent ABC audit makes it clear that excessive spending, poor record keeping and a faulty management model are to blame.
Last year, for example, this three-person board decided to grant $61,000 in additional funding to alcohol and drug education — an amount that greatly exceeded state requirements. Although this might seem to be a worthwhile project, it should be the responsibility of an elected body — not an appointed board — to allocate taxpayer money.
Another line item shows $168,000 dollars spent on law enforcement — 19 percent more than what state law requires. If you do the math, you can already see excessive spending of $229,000. Unfortunately, things only get worse.
A closer look at the audit reveals that the Charlotte Street ABC Store sold $915,830 worth of alcohol last year while showing a net profit of only $12,431. The year before, $904,635 in sales generated a net profit of only $3,829. How can any business operate this way?
But there’s still more bad news. The ABC operations wrote off a $244,411 line item due to employee embezzlement in 2002. Much more money was unaccounted for, but this was enough to get a conviction. The lost money may never be totally recovered.
Recently, Chairwoman Deborah Holmes-Young attended an ABC convention at the Grove Park Inn. And instead of staying at her own home, she elected to spend the night at Grove Park Inn at a cost of $1,000 in taxpayer funds!
The audit by Crawley, Lee & Co. contains still more troubling information. It states that a board member had been signing checks without thorough documentation; credit-card payments were made from statements with no supporting invoices; employee salaries were not reported to the Internal Revenue Service; and excessive distributions were made to nonprofits without sufficient approval. The list goes on and on.
As of June 30, 2002, the audit shows a balance of $1,781,961. It also shows more than $100,000 in bank charges. Perhaps some of these issues can be explained, but a pattern of poor management and oversight still remains.
A year ago, I reported my deep concerns to City Council, which agreed to expand the board from three members to five. Legislative approval has been received for this change; Council also asked the ABC board to have a management study performed. Deloitte Consulting has finished its study, which highlights many of the problems cited here. In addition, the study noted that administrative and warehouse personnel lack training on accounting systems — and, worse yet, that product ordering is based on estimates, rather than real numbers. The consultant’s recommendations support a total reconfiguration of the ABC system and the way it’s operated.
These problems don’t arise from the rank-and-file ABC employees, and they should not be the scapegoats. The problem lies squarely with the past supervisor and the current board. Overseeing a $14 million operation means ensuring that it’s managed in a businesslike fashion. And the goal of the ABC operations is to provide as much revenue for the city and county taxpayers as possible.
Board member Barbara Field has gone on record stating “that the board should set funding levels to the city at the minimum amount possible to ensure a healthy operating cash balance.” That seems like a sound business principle, but why not adopt the attitude that the board must work harder to produce greater profits — and thus, create more revenue for the city and county?
In any case, my own business experience and common sense tell me there are huge problems with the current ABC board. If it had been following a good management model, many of these things would never have happened. Although there’s been no criminal activity by any board member, I believe this board is guilty of not taking a more proactive role in watching out for the taxpayers.
Overseeing a business this size requires experience and dedication — not just rubber-stamping what the supervisor says. City Council should not have had to request a management study; the ABC board should have done this long ago!
The facts speak for themselves. The ABC operation needs new management — and a completely new board to ensure that these things never happen again.
[Joe Dunn serves on the Asheville City Council.]