State Auditor Dave Vaudt’s staff has released a review which questions past operations in the Alcoholic Beverages Division.  

The audit determined former Alcoholic Beverages Division chief Lynn Walding did not seek competitive bids for “extensive remodeling” that started in April of 2007. The audit shows original contracts were often altered, with the original quote from one contractor increasing by 279 percent by the end of the project.  In addition, the agency’s former administrator apparently authorized paying a million dollars to one contractor two days after the deal was struck, but “prior to completion of the work.”

The audit seems to suggest the agency’s managers lied about getting a waiver to buy furniture from private companies rather than get the furniture made by inmates at the state prison. 

The audit questions the purchase of several specific items, like an $1100 industrial-strength dishwasher that employees use primarily to wash their own lunch dishes.  The former agency administrator approved the purchase of more than $23,000 worth of artwork from a friend of his wife.  A camper was purchased for nearly $8000.

According to the audit, Governor Culver asked the Department of Management to review Walding’s activities in late 2008 and new “controls” were put in place then.

A statement from the governor says Culver wanted to fire Walding, but was told by the state attorney general he could not. Walding was appointed to the Alcoholic Beverages Division post by former Governor Tom Vilsack and Walding’s four-year term ended in April.  Culver replaced Walding with Stephen Larson. The audit says Larson has implemented “internal controls” that “ensure strict adherence” to state rules for buying goods and services.

The audit also listed “citizen concerns” about the “rapid promotion” of the woman who currently serves as operations manager for the Alcoholic Beverages Division.  The woman started at the agency in 2000, as an intern, and from 2004 to 2006, her annual salary increased 81.6 percent.  The agency’s new administartor says he can’t explain the woman’s rapid rise through the ranks — only Walding knows.

The audit also mentioned the National Alcohol Beverage Control Association gave the Iowa agency money to buy three high-definition televisions for a training room.  Two were installed; the third TV is still sitting in its original packaging and isn’t being used.

Here, again, is the link to the audit.  Below is the governor’s written statement.

When, in August of 2008, the Governor’s office first learned of concerns about the Alcoholic Beverages Division (ABD), the Governor immediately instructed the Department of Management (IDOM) to conduct an internal review of ABD.  Based on the results of that review, IDOM took immediate and ongoing corrective actions and strict cost and personnel controls were placed on the agency.  In addition, IDOM’s findings were turned over to the Attorney General for further review.  The Governor’s office was advised by the Attorney General that there was not a sufficient legal basis for Walding’s termination.  However, these findings did result in the Governor’s decision not to re-appoint Walding to another term as ABD Administrator.

The Auditor’s draft audit report for FY 2009…makes it clear that the controls placed on ABD by IDOM were effective; the concerns raised by the Auditor in the FY 2008 audit were ended by the end of calendar year 2008.  However, it is troubling that during the 12-month period during which the FY 2008 audit was being conducted, the Auditor failed to notify the Governor’s office, the ABD Commission or IDOM that the Auditor was having any difficulties obtaining information from the former ABD Administrator, Lynn Walding. It wasn’t until May of 2010, after Walding was gone, that IDOM was informed by the Auditor of any such difficulty.  It is unclear why the release and publication of the Auditor’s report for FY 2008 has been delayed until now.  The public would have been better protected if the audit had been completed and published in a more timely manner.

Finally, the draft FY 2009 audit reflects that, after IDOM’s imposition of controls, the kinds of accounting, contracting and personnel policies that were questioned in the FY 2008 audit report were addressed.  Further, under the leadership of the Governor’s recently-appointed ABD Administrator, Steve Larson, staff changes have been made and operations have been streamlined and improved at this Division—internal controls have been implemented to ensure strict adherence to all procurement policies.