Changes under way at state agency to curb past abuses

MORAVIA – The current administrator of the Iowa Alcoholic Beverages Division said Monday he is in the process of implementing new controls and structural changes designed to prevent future questionable expenditures or lavish purchases like ones identified in a recent state audit.

“It's been a lot of work,” said Steve Larson, a former state deputy treasurer who found out shortly after taking his new assignment that his division was being fingered by state auditors for allegedly spending thousands of state dollars on artwork, bicycles and other products as well as bypassing bidding procedures in upgrading and remodeling facilities at its Ankeny headquarters.

“In 90 days, we've moved pretty quickly,” Larson said in describing new safeguards, increased accountability and transparency measures, and a staff overhaul that's taken place since Gov. Chet Culver named him to succeed Lynn Walding as ABD administrator effective May 1. “We have a lot more to do in the next 60 days and after that, we'll be there.”

Larson said he wants to hire a compliance officer, get the division's commission better information and more involved in oversight, and “find a new home” for more than $23,000 in artwork and several multi-speed bikes that are among the vestiges of the previous administration.

Tonya Dusold, the division's communications' director, also said the agency wants to implement a whistleblower procedure so staff members have someplace to go other than the administrator if they detect a potential problem, institute a records management policy and provide procurement training to make sure personnel at the division -- which regulates the distribution and sale of alcohol in Iowa -- is following the law and meeting accountability and transparency standards.

The audit findings by State Auditor David Vaudt's Office were not discussed during Monday's commission meeting, but Larson said the proposed changes would be discussed as part of the two-day strategic planning process scheduled to conclude Tuesday at the Honey Creek Resort.

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

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. A separate examination by the state Department of Management determined the division improperly accumulated $7.5 million in an agency fund and requested the money be transferred to the state's general fund, which the division did.

In addition, the audit questioned the rapid promotion and pay increases of employee Nicole Watson-Gehl, an administrative intern with an annual salary of $27,248 in 2000 who, by 2008, was an operations manager within the division making $89,710 per year. Larson said Monday he could not discuss personnel matters but noted that he reorganized the staff since May and that Watson-Gehl is no longer with the division.

Culver aides have indicated the governor requested the Department of Management's internal review when his office learned of concerns about the division in August 2008. The department's findings were turned over to the Iowa Attorney General's Office, which found there was not a sufficient legal basis for Walding's termination, according to the governor's office.

The governor did not reappoint Walding earlier this year when his term expired, replacing him with Larson instead.

Larson said the first he became aware of the issues pertaining to the Alcoholic Beverages Division was when he received the draft audit report on May 10.

Commission chairwoman Mary Hunter of Clive said she was “oblivious” to the concerns raised in the state audit until details came to light after Culver decided to change administrators. Commissioners said the division was operating under a special charter status, but agency officials said that still required the administrator to follow procurement and bidding procedures, provide the reasoning for major purchases and remodeling projects, and back that up with documentation.

Commissioner Jim Clayton of rural Iowa City said the commission's role to date has been one of policy making, not overseers of the agency budget or day-to-day operations. He did note that the state's warehouse “was a rat trap” in 1998 when he began his commission work, but now it is a “state-of-the-art” operation with energy efficient facilities that represent a vast improvement.

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