LANSING, Mich. — An audit report conducted by the Michigan Office of the Auditor General, or OAG, found that the Michigan Liquor Control Commission’s, or MLCC, did not have sufficient oversight of the sale and distribution of spirit products in the state in 2022.
The report found that the MLCC lacked:
- Control over the spirit inventory purchase, sale, and distribution process.
- Spirit inventory management controls.
- Physical inventory controls.
The MLCC is the sole wholesaler of all spirit products in the state and is responsible for licensing the manufacture, distribution, and sale of all beer, wine, distilled spirits, and mixed spirit drinks, according to officials.
The Ethics and Oversight Committee hosted a meeting with the Department of Licensing and Regulatory Affairs, or LARA, along with lawmakers Thursday to talk about the findings.
“According to MLCC’s records, state-owned inventory recorded for the three ADAs (authorized distribution agents) totaled approximately 521,000 bottles with a value of $4.9 million,” OAG Audit Supervisor Natalie Heckman said. “However, upon the ADAs recount, approximately 62,300 bottles were missing totaling approximately $1 million. In addition, we sampled 65 spirit products and performed a physical inventory at the ADA warehouses. Our inventory account identified seven of the 65 spirit products were either missing or had insufficient inventories during our site visits in August 2022.”
Kevin Kubacki, who is an internal control officer for LARA, suggested that the discrepancies could be attributed to outdated software used for reporting the process of buying and selling of spirits in the state.
“The software the process utilizes is aged and beyond its useful life,” Kubacki said. “The current system, the software we use today, Mainframe, we believe is over 50 years old and was built using a COBOL language. COBOL is a programming language that is no longer widely used. Resources to maintain computer applications that use COBOL are limited and difficult to obtain. As a result, the OAG identified deficiencies on inventory are largely a result of this outdated software.”
Rep. Kelly Breen (D-Novi) suggested that COVID may have had something to do with it.
“What impact, if any, did COVID have on this because if I am accurate in my recollection, during COVID, liquor sales skyrocketed and alcohol sales skyrocketed,” Breen said. “I am wondering if that has anything to do with any possible discrepancies or MLCC’s inability to keep up with what was happening.”
MLCC complied with all of the report’s recommendations.
To read the full report, go here.
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