Audit finds spending irregularities in state alcohol regulation agency

DES MOINES -- A report released to the public Friday by the state auditor's office finds a number of questionable purchases within the state's alcoholic beverages division and a failure to follow the state bidding process under the agency's previous administrator.

The Iowa Alcoholic Beverages Division regulates the distribution and sale of alcohol in the state.

Some of the questionable purchases by the agency identified in the report include a camper, industrial strength dishwasher for the employee break room, bicycles, high-definition televisions and more than $23,000 of artwork. The audit report covers fiscal year 2008 and other times when former administrator Lynn Walding oversaw the agency.

Walding could not be reached for comment Friday.

The audit also found the agency could not document it used a competitive bidding process for some of its vendors, mostly on electronics, remodeling projects or other work on the agency's building. Agencies are required to use a competitive bidding process when the estimate annual value of a service contract is $50,000 or more.

In addition, the audit questioned the rapid promotion and pay increases of employee Nicole Watson-Gehl.

Watson-Gehl was an administrative intern in 2000, with an annual salary of $27,248. By 2008, she was an operations manager within the division making $89,710 per year.

The audit report noted that while Watson-Gehl had her own office, the other operations manger in the division had a cubicle for a work space.

The audit found Walding gave the promotion and salary increases. A policy put in place now requires the administrator's approval and signature for promotions and raises. Any salary increase of more than 5 percent will require written justification placed in the employee's personnel file.

Gov. Chet Culver's office released a statement Friday saying when the office first learned of concerns about the division in August 2008, Culver instructed the Iowa Department of Management to conduct an internal review.

The department of management took “immediate and ongoing corrective actions and strict cost and personnel controls” on the agency, the statement said. The department's findings were turned over to the Iowa

Attorney General, which found there was not a sufficient legal basis for Walding's termination, according to the governor's office.

“However, these findings did result in the governor's decision not to re-appoint Walding to another term as ABD administrator,” the statement from Culver's office said.

The attorney general's office confirmed they found at that time that the information they had did not appear to support the removal of Walding.

Culver appointed Steve Larson to the post, a job he began in May.

Culver's office distributed a draft audit report from fiscal year 2009 they say makes it clear that controls placed on the alcoholic beverages division were effective. Culver's office questions why their administration didn't receive notice until May 2010 that the auditor was having difficulty obtaining information from Walding and why the state auditor's office waited until now to release the report.

“The public would have been better protected if the audit had been completed and published in a more timely manner,” the statement from Culver's office said.

State Auditor David Vaudt said his office had to wait until they had the information they needed to complete the investigation.

In a letter to Culver, Vaudt accused the governor's office of releasing the report inappropriately to the media before the auditor's office released the official report Friday. Vaudt said the Culver administration would no longer receive a courtesy copy of reports before their public release.

Culver spokesman James Flansburg denied the governor's office leaked the report before the auditor's office released it.