PERFORMANCE REVIEW ALCOHOL BEVERAGE CONTROL ADMINISTRATION › Joint › PERD › perdrep › ABCA_7_2012.pdf · 2013-05-02 · PERFORMANCE REVIEW ALCOHOL BEVERAGE CONTROL ADMINISTRATION

PERFORMANCE REVIEW

ALCOHOL BEVERAGE CONTROL ADMINISTRATION

July 2012PE 12-05-518

AUDIT OVERVIEW

A Follow-Up Survey of Enforcement Agents Shows That There Has Been Progress in Some Areas Since the 2010 Survey Was Conducted, But Further Improvements Can Be Made

The Legislative Auditor Identified That the ABCA Was Paying Overtime to an Exempt Employee Who Was Not Required to Receive Overtime Compensation Under the Fair Labor Standards Act

The ABCA Has Internal Controls in Place to Ensure the Accurate Reporting of Time Worked in the Field, But Improvements Can Be Made

The ABCA Assessed Penalties for Ten Percent of License Violations Outside the Guidance of the Agency’s Penalty Schedule

WEST VIRGINIA LEGISLATIVE AUDITOR

PERFORMANCE EVALUATION & RESEARCH DIVISION

JOINT COMMITTEE ON GOVERNMENT OPERATIONS

JOINT COMMITTEE ON GOVERNMENT ORGANIZATION

SenateHerbSnyder,ChairRonaldF.Miller,Vice-ChairRichardBrowningDanFosterEvanH.JenkinsArtKirkendollOrphyKlempaBrooksMcCabeMikeGreenJosephM.MinardBobWilliamsJackYostDonnaJ.BoleyDaveSypolt

HouseofDelegatesJimMorgan,ChairDaleStephens,Vice-ChairWilliamRomine,MinorityChairTomAzinger,MinorityVice-ChairBrentBoggsGregButcherPhilDiserioRyanFernsRoyGivensDanielJ.HallWilliamG.HartmanBarbaraHatfieldRonnieD.JonesHelenMartin

RupertPhillips,Jr.MargaretA.StaggersRandySwartzmillerJoeTalbottAnnaBorderEricHouseholderGaryG.HowellLarryD.KumpEricNelsonRickSnufferErikkaStorch

AaronAllredLegislativeAuditor

Building1,RoomW-314StateCapitolComplexCharleston,WestVirginia25305(304)347-4890

JohnSylviaDirector

DennyRhodesResearchManager

TinaL.C.BakerResearchAnalyst



DerekHipplerReferencer

SenateHerbSnyder,ChairDouglasE.FacemireOrphyKlempaBrooksMcCabeClarkS.Barnes

HouseofDelegatesJimMorgan,ChairDaleStephens,Vice-ChairRonFragaleEricNelsonRuthRowanScottG.Varner,Nonvoting

Agency/CitizenMembersJohnA.CanfieldW.JosephMcCoyKennethQueenJamesWillisonVacancy

Performance Evaluation & Research Division | pg. �

Performance Review July 2012

CONTENTS

ExecutiveSummary.......................................................................................................................................................................................... 5

Issue1:AFollow-UpSurveyofEnforcementAgentsShowsThatThereHasBeenProgressinSomeAreasSincethe2010SurveyWasConducted,ButFurtherImprovementsCanBeMade..................................... 7Issue2:TheLegislativeAuditorIdentifiedThattheABCAWasPayingOvertimetoanExemptEmployeeWhoWasNotRequiredtoReceiveOvertimeCompensationUndertheFairLaborStandardsAct..................................................................................................................................................................................19Issue3:TheABCAHasInternalControlsinPlacetoEnsuretheAccurateReportingofTimeWorkedintheField,But

ImprovementsCanBeMade.....................................................................................................................................................25Issue 4: The ABCA Assessed Penalties forTen Percent of LicenseViolations Outside the Guidance of the Agency’s

PenaltySchedule..................................................................................................................................................................................... 33

ListofTablesTable1:OvertimeCompensationPaidtotheABCAAttorneyMay1,2006-March13,2012..............................................20Table2:OvertimePositionstoABCAExemptPositionsFY2008-January2012......................................................................21Table3:ABCAEnforcementUnitPenaltyScheduleforLicenseeViolations.............................................................................35Table4:ViolationsAssessedSincetheDevelopmentofthePenaltySchedule.......................................................................36

ListofFiguresFigure1:HowhascommunicationsofABCApolicesandprocedureschangedsincethe2010surveywasconducted?.............................................................................................................................................................................. 9Figure2:HowhasthequalityandpracticalityofABCApoliciesandprocedureschangedsincethe2010surveywasconducted?............................................................................................................................................................... 9Figure3:Thinkofchangesthathavebeenimplementedsincethe2010survey...HowdoyoufeelthatthesechangesaffecttheEnforcementUnit’sabilitytofulfillitsgoals?...............................................................................11Figure4:Howhavetheresourcesandsuppliesavailabletoyoutocompleteyourjobdutieschangedsincethe2010surveywasconducted?...........................................................................................................................................12Figure5:Howhastheamountoftrainingavailabletoyouchangedsincethe2010surveywasconducted?...........13Figure6:Howhasthequalityoftrainingavailabletoyouchangedsincethe2010surveywasconducted?.............13Figure7:HowhastheresponsivenessoftheEnforcementUnit’smanagementchangedsincethe2010surveywasconducted?.............................................................................................................................................................14Figure8:Howhasthetreatmentoflicenseeschangedsincethe2010surveywasconducted?.....................................16

ListofAppendicesAppendixA:TransmittalLettertoAgency.............................................................................................................................................39AppendixB:Objective,ScopeandMethodology...............................................................................................................................41AppendixC:AgencyResponse..................................................................................................................................................................43

pg. � | West Virginia Legislative Auditor

Alcohol Beverage Control Administration

Performance Evaluation & Research Division | pg. 5


EXECUTIVE SUMMARY

This reporton theAlcoholBeverageControlAdministration (ABCA) isauthorizedbyWestVirginiaCode§4-2-5.TheLegislativeAuditorconductedafollow-uptothe2010surveyofABCAenforcementagentstodeterminewhetherrespondents’opinionsonimprovementshadbeenmadeintheareasofadministration,managementresponsiveness,andthetreatmentoflicensees.Additionally,theLegislativeAuditoridentifiedthatanagencyattorneywasunnecessarilybeingpaidovertime,improvementscanbemadeintimekeepinginternalcontrols,andthattheABCAshouldmaintainapenaltyschedulethatincludesalltypesofviolations.

Report Highlights:

Issue 1: A Follow-Up Survey of Enforcement Agents Shows That There Has Been Progress in Some Areas Since the 2010 Survey Was Conducted, But Further Improvements Can Be Made.

There is no consensus among survey respondents as to whether there have beenadvancementsinthepracticalityofpoliciesandproceduresandthecommunicationofthesepoliciesandprocedures toemployees,althoughmore respondents indicate theopinionthattherehasbeennochangethanthattherehasbeenanimprovementordecline.

Six respondents indicate that changes made by theABCA since the 2010 survey wasconductedmakeitharderfortheDivisiontoachieveitsgoals,threeindicatethatthesechangeshavehadnoimpactonthefulfillmentofDivisiongoals,andfourrespondentsindicatethatthesechangesbetterenablethemtoachieveDivisiongoals.

Eightrespondentsstatethattherehasbeennochangeintheadequacyofresourcesandsuppliesavailable to them,while theremainingfivestate that resourcesarenowmoreadequate.

Nearly85percentofrespondentsindicatethattherehasbeenanincreaseintheamountoftrainingavailabletothem,althoughopinionsregardingthequalityofthistrainingaremorevaried.

Threerespondentsstatethatmanagementhasbecomemoreresponsivetotheirneeds,fourindicatethatmanagementhasbecomelessresponsive,andsixrespondentsindicatethattheyhavenotseenanychangeintheresponsivenessofmanagement.

Themajorityofrespondentsindicatethatlicenseesarebeingtreatedmoreequitablythanin2010.

Issue 2: The Legislative Auditor Identified That the ABCA Was Paying Overtime to an Exempt Employee Who Was Not Required to Receive Overtime Compensation Under the Fair Labor Standards Act.

TheLegislativeAuditordiscovered that theABCAwaspayingovertimecompensationtoanattorneywhowasnotrequiredtoreceiveovertimepaymentsundertheFairLaborStandardsAct.Thesepaymentstotaledover$75,000duringasix-yearperiod.

pg. � | West Virginia Legislative Auditor


Anadditional$8,070waspaidtoaformerManageroftheEnforcementDivisionoverafour-yearperiod.

In response to the LegislativeAuditor’s findings, theABCA ceased overtime paymentstotheattorneyandhastakenstepstopreventunnecessaryovertimepaymentstoexemptemployeesinthefuture.

Issue 3: The ABCA Has Internal Controls in Place to Ensure the Accurate Reporting of Time Worked in the Field, But Improvements Can Be Made.

The Legislative Auditor evaluated timekeeping documents submitted by RegionalSupervisors in theABCA’s Enforcement Division to determine whether the Division isfollowingtimekeepingpoliciesandfoundthatpoliciesarebeingfollowedinmostinstances,butwrittenpolicieshavenotbeenupdatedtoreflectsomecurrentpolicies.

Issue 4: The ABCA Assessed Penalties for Ten Percent of License Violations Outside the Guidance of the Agency’s Penalty Schedule.

The LegislativeAuditor evaluated the 432 violations that have been assessed since thedevelopmentofapenaltyschedule forassessing themostcommon licenseviolations inFebruary2011andfoundthat388,or90percent,oftheseviolationswereevaluatedusingtheguidanceof thepenalty schedule and44, or 10percent,were evaluatedoutside thepenaltyschedule.

Precedent should enable the ABCA to develop guidelines that encompass all types ofviolations.Inordertomaintainconsistency,equity,andtransparency,theABCAshoulddevelopguidelinesthatincludeallviolationsandfollowtheseguidelinesinallcases.

Recommendations

1. TheLegislativeAuditorrecommendsthattheABCAincludechangesinitsplannedpolicymodificationstostrengtheninternalcontrolsovertimekeeping.

2. The Legislative Auditor recommends that the ABCA develop penalty guidelines forassessingalllicenseviolationsandusetheseguidelinesinallcases.



ISSUE1

A 2010 survey of enforcement agents within the ABCA Enforcement Divi-sion conducted by the Legislative Au-ditor revealed several potential con-cerns within the Division.

A Follow-Up Survey of Enforcement Agents Shows That There Has Been Progress in Some Areas Since the 2010 Survey Was Conducted, But Further Improvements Can Be Made.

Issue Summary

The Legislative Auditor conducted a follow-up survey ofEnforcement Agents within the Enforcement Division (Division) ofthe Alcohol Beverage Control Administration (ABCA) to determinewhetherissuesreportedina2010surveystillexistfollowingachangein administration. The opinions expressed by respondents varied onmostmatters,withsomeagentsindicatingimprovement,someindicatingdecline, and some indicating no change regarding topics such as thequalityandpracticalityofpoliciesandprocedures,theeffectofchangesmadebytheABCAontheDivision’sabilitytofulfillitsgoals,andtheresponsivenessofmanagementtoemployees’needs.Therewasagreementonsomeissues.Amajorityofrespondentsindicatedthatimprovementshave been seen in the amount and quality of training available, thattherehasbeena lackof change in thecommunicationofpolicies andprocedures, and that the adequacy of resources and supplies availabletocomplete their jobdutieshas remainedunchanged. TheABCAhasindicated thatchangeshavebeenandcontinue tobemade to improvetheoperationsoftheagencyandtheenvironmentinwhichenforcementagentswork. TheABCAshoulduse the informationprovidedby thisfollow-upsurveytoguidefurtherimprovements.

The Follow-up Survey Explored Whether Improvements Have Been Seen in Administrative Areas, Interaction With Management, and Treatment of Licensees.

A 2010 survey of enforcement agents within the ABCAEnforcement Division conducted by the Legislative Auditor revealedseveralpotentialconcernswithin theDivision. Respondents indicatedissues such as poor communication and practicality of policies andprocedures, lack of responsiveness of management to agents’ needs,andinequityinthetreatmentoflicensees.Somerespondentsalsostatedthattrainingwasinadequateandthattherewereinadequatesuppliesandresources todo their job.Toupdate this issue, theLegislativeAuditorresurveyed enforcement agents to determine whether the conditionsreported in 2010 still exist following changes in administration. Thesurveywassenttothe18enforcementagentsandinspectorsstillemployed

pg. 8 | West Virginia Legislative Auditor


attheABCAwhohadbeenemployedatthetimethe2010surveywasconducted.Itconsistedof10closed-endedquestionsand4open-endedquestionsandrespondentswereinvitedtoprovidecommentstofurtherexplaintheiranswersthroughoutthesurvey.Ofthe18individualsinvitedtoparticipate,13completedthesurvey.Elevenindicatedthattheyhadparticipatedinthe2010surveyandtwowereunsure.

Administration

Thefirstsectionofthefollow-upsurveydealtwithadministrativetopicssuchaspolicies,resources,andtraining.Thirteen,or65percent,of the20 individualswho responded to thequestion“Are thepoliciesandproceduresof theABCAclearlycommunicatedandpractical?” inthe2010surveyansweredno.Sincethattime,theABCAindicatesthatstepshavebeentakentoincreaseagentknowledge,understandingof,andcompliancewithagencypoliciesandproceduresbyproviding trainingseminarsthatincludedtopicssuchas:

• PolicyandProcedures;

• HarassmentintheWorkplace;

• LiquorStoreRules;

• LicensingPolicies;

• AdministrativePolicies;

• ReportWriting;

• AdministrativeCitations;and

• EvidenceCollectionandProcedures.

Thefollow-upsurveysought todeterminewhetherrespondentsfindtherehasbeenanimprovementinthecommunicationandpracticalityofpolicies.Figures1and2providetheresponsestothesequestions.

Steps have been taken to increase agent knowledge, understanding of, and compliance with agency policies and procedures.





There is no consensus as to whether there have been advancements in the practicality of policies and procedures and the communication of these poli-cies and procedures to employees.

Although there is no consensus as to whether there have beenadvancements in the practicality of policies and procedures and thecommunication of these policies and procedures to employees, morerespondentsindicatetheopinionthattherehasbeennochangethanthattherehasbeenanimprovementordecline.

TheABCACommissionerhasindicatedthatanumberofchangesandimprovementshavebeenmadesincethe2010surveywasconducted.Someofthesechangesinclude:

• providinglicenseeinformationinanelectronicformat;

• providingEnforcementDivisionemployeeswithscannersforuseinthefield;

• providing reports such as Licensee Status ChangesReports, Stagnant Violations Reports, and ComplaintFormsReportselectronically;

• makingthemonthlytimeformavailableonline;

• consolidatingpaperformssuchasIncidentReportFormsintoanonlineformat;

• realigning of enforcement regions to assure an equaldistributionofwork;and

• enablingphotostobeuploadedbyfieldstafftotheshareddrive.

In the follow-up survey, the Legislative Auditor sought todetermine whether Enforcement Division staff found these changesbeneficial to the performance of their duties. As Figure 3 illustrates,responses were varied, with six respondents indicating these changesmakeitharderfortheDivisiontoachieveitsgoals,threeindicatingthatthesechangeshavehadnoimpactonthefulfillmentofDivisiongoals,andfourrespondentsindicatingthatthesechangesbetterenablethemtoachieveDivisiongoals.



Of respondents who answered the question of whether theyagreedwith thestatement“Ihavesufficient resources tocompletemyjob duties” in the 2010 survey, nearly 48% indicated that they agreedwhilealmost43%indicateddisagreement.Inthe2012follow-upsurvey,the Legislative Auditor sought to determine whether there has beenanychangeintheresourcesandsuppliesavailabletoagents.Figure4providestheresponsestothisquestion.



Eight respondents state that there has been no change in the adequacy of re-sources and supplies available to them, while the remaining five state that re-sources are now more adequate.

Asthisfigureshows,eightrespondentsstatethattherehasbeennochangeintheadequacyofresourcesandsuppliesavailabletothem,whiletheremainingfivestatethatresourcesarenowmoreadequate.Norespondentsindicatedadeclineintheadequacyofresourcesandsupplies.Commentsindicatedthatmakingscannersandprintersavailabletofieldagentshasbeenasignificantimprovement,althoughitisalsoindicatedthatbeingabletoprintincolorwouldbeanadditionalasset.

Inresponsetoaquestiononthe2010surveyaskingwhetheragentsreceiveadequatetraining,11agentsindicatedtheyfeltthetrainingtheyreceivedwas adequatewhile 9 indicated that trainingwas inadequate.Respondentstothefollow-upsurveyweremoreinagreement.AsFigure5 shows, nearly 85% of respondents indicate that there has been anincreaseintheamountoftrainingavailabletothem,although,asshowninFigure6,opinionsregardingthequalityofthistrainingaremorevaried.Althoughamajorityofrespondentsstatetherehasbeenanincreaseinthequalityoftraining,fivestatetherehasbeennochangeinthequalityof trainingandone respondent indicates that traininghasdecreased inquality.

0 (0%)

Nearly 85% of respondents indicate that there has been an increase in the amount of training available to them, although opinions regarding the qual-ity of this training are more varied.

Performance Evaluation & Research Division | pg. 1�


0 (0%)

pg. 1� | West Virginia Legislative Auditor


Three respondents state that manage-ment has become more responsive, four indicate that management has become less responsive, and six re-spondents indicate that they have not seen any change in the responsiveness of management.

Inadditiontoinvitingcommentstoexpandonresponsestothequestionsabove,thesurveyalsoincludedanopen-endedquestionaskingwhattypeoftrainingagentswouldfindbeneficial.Severalrespondentsindicatethattrainingcouldbeimprovedbyeliminatingredundancyandincreasing the relevancy of training to the specific knowledge neededbyagents.Thoughmostrespondentsdidnotofferspecificexamplesoftrainingtheywouldliketoreceive,somesuggestionsincludedtrainingon how to write reports so that all agents write reports the same wayandcomputerclassestailoredtowardfillingouttheformsandpaperworkagentsareexpectedtocomplete.

Management Responsiveness

The follow-up survey included one question concerning theresponsivenessofmanagement. Respondentswhoanswered the2010surveyquestion“DoyoufeelthatthemanagementoftheEnforcementUnitisresponsivetoyourneeds?”werenearlyevenlydivided,with10respondentsindicatingthatmanagementwasnotresponsivetotheirneedsand 9 indicating that management was responsive. Responses to thefollow-upquestionwerevaried.AsshowninFigure7,threerespondentsstate thatmanagementhasbecomemore responsive, four indicate thatmanagementhasbecomelessresponsive,andsixrespondentsindicatethattheyhavenotseenanychangeintheresponsivenessofmanagement.



Several respondents indicate that they are now better able to communicate with management while others indi-cate that there is a lack of fairness or respect in their dealings with their su-pervisors.

Comments included with this question and responses to threeopen-ended questions asking respondents what overall improvementshavebeenmadeintheagencysincethe2010surveywasconducted,whatfurtherimprovementsareneeded,ifany,andanyotherissuesrespondentsmightwanttoshare,revealedavarietyofopinionsregardinginteractionswithmanagement.Severalrespondentsindicatethattheyarenowbetterabletocommunicatewithmanagement,expresstheiropinions,andhavequestionsanswered,whileothers indicate thatmicromanagement isanissueorthereisalackoffairnessorrespectintheirdealingswiththeirsupervisors.TheABCACommissionerindicatesthefollowing:

TheActingEnforcementDirector,at thedirectionof theCommissioner,hasgonetogreatlengthstomaintainanenvironmentoffairtreatment. Furthermore,theagencyas a whole expects each employee to be treated withrespect. Beyond reminding and encouraging this valuein every employee of the WVABCA, we have providedclassestoaddressthisissueandhaveremindedeveryoneof the Commissioner’s open door policy. While thechainofcommandisaprocess thatensuresconsistencyand fairness, if a situation arises with an employee’simmediatesupervisortheyareencouragedtoconsulttheActingEnforcementDirector,HumanResources,oreventheCommissioner’sOffice.

Treatment of Licensees

The ABCA issues licenses to business owners for handling,serving, and selling alcoholic beverages in the state and ensures thatlicensees comply with applicable West Virginia laws. When licenseesviolatetheselaws,theABCAisresponsibleforassessingpenalties.Atthetimeofthe2010survey,52%ofsurveyrespondentsanswered“no”tothequestion“Doyoufeelthatlicenseesaretreatedequallywithinyourregion?”.Commentsindicatedthatsomerespondentshadtheperceptionthatpoliticsorfavoritismplayedaroleindeterminingwhatpenalties,ifany,wereassessedforviolationsagainstsomelicensees.Thefollow-upsurvey asked respondentshow the treatmentof licenseeshad changedsincethe2010surveywasconducted.AsFigure8belowillustrates,themajorityofrespondentsindicatetheperceptionthatlicenseesarebeingtreatedmoreequitablythanin2010.Fiverespondents,or38.5percent,indicatethattherehasbeennochangeintheequitywithwhichlicenseesaretreatedandonerespondentindicatestheperceptionthatlicenseesarebeing treated less equitably. This topic is discussed in more detail inIssue4.

The majority of respondents indicate the perception that licensees are being treated more equitably than in 2010.



Additional Concerns

Aspreviouslymentioned,thefollow-upsurveyincludedseveralopen-ended questions asking respondents what improvements havebeen made in the agency overall since the 2010 survey, what furtherimprovements can be made, if any, and whether there were any otherissuesrespondentswouldliketoshare.Additionalmattersdiscussedbyrespondentsincludedthefollowing:

• Some respondents indicate that safety in the field is aconcern to themandadesire isexpressed tohavemoreinput as to whether a police presence is needed whenworkingincertainareas.

• Several comments indicate dissatisfaction with salaryinequality, which was also a concern expressed in the2010survey.TheABCACommissionerhasindicatedthataninternalevaluationwasconductedandfoundthatpayinequityexistsbetweeninspectorsandagentswhoperformsimilar job duties but have different job classifications.Salaries for the 23 classified enforcement agent andinspector positions are subject to compliance with theWestVirginiaDivisionofPersonnel’scompensationplanwhilesalariesfor the15exemptpositionsarenot. It is



The results of this follow-up survey should provide the agency with infor-mation necessary to guide further im-provements.

anticipatedbytheABCACommissionerthattheDivisionofPersonnelwillupdatetheseclassificationsandeliminatethisinequality.

• Theneedfordocumentsusedbyagentstobemoreuser-friendlywasdiscussedbysomerespondents.

Conclusion

The Legislative Auditor conducted a follow-up survey ofenforcementagentsandinspectorstodeterminewhetherimprovementshavebeenmadesincetheinitialsurveywasconductedin2010.Opinionsvariedonmostmatters,withsomeagentsindicatingimprovement,someindicatingdecline,andsomeindicatingnochangeregardingtopicssuchas thequalityandpracticalityofpoliciesandprocedures, theeffectofchangesmadebytheABCAontheDivision’sabilitytofulfillitsgoals,and the responsiveness of management to employees’ needs. Therewas agreement on other topics, such as, a majority of respondentsindicatedthatimprovementshavebeenseenintheamountandqualityoftrainingavailabletothem,whilenochangehasbeenseeninboththecommunicationofpoliciesandproceduresandtheadequacyofresourcesand supplies available to complete their job duties. The ABCA hasindicated thatchangeshavebeenandcontinue tobemade to improvetheoperationsoftheagencyandtheenvironmentinwhichenforcementagents work. The results of this follow-up survey should provide theagencywithinformationnecessarytoguidefurtherimprovements.Forexample,theABCAshouldconsider:

• findingoutwhat trainingwouldbenefitagentsandmakingthistrainingavailable;

• updatingdocumentstobemoreuser-friendly;

• eliminatingtheperceptionofinequityinthetreatmentoflicenseesby complying with recommendations made in Issue 4 of thisreport;

• makingcolorprintersavailableinthefield,ifpossible;

• workingwithagentstoensuresafetyinthefield;and

• consultingwithagentswhendeterminingwhetherpolicepresenceisneededwhenworkingincertainareas.





According to the West Virginia Divi-sion of Personnel, the Attorney III position is not required to receive overtime compensation, nor was the Attorney II position required to re-ceive overtime compensation when it existed.

The Legislative Auditor Identified That the ABCA Was Paying Overtime to an Exempt Employee Who Was Not Required to Receive Overtime Compensation Under the Fair Labor Standards Act.

Issue Summary

Duringthecourseoftheaudit,theLegislativeAuditordiscoveredthattheABCAwaspayingovertimecompensationtoanattorneywhowasnotrequiredtoreceiveovertimepaymentsundertheFairLaborStandardsAct.Thesepaymentstotaledover$75,000duringasix-yearperiod.Anadditional $8,070 was paid to a former Manager of the EnforcementDivision over a four-year period, although overtime payments are notbeingmade to thecurrentEnforcementDivisionManager. AccordingtotheDepartmentofRevenue,nootherattorneyswithintheDepartmenthavereceivedovertimecompensation.In response to the Legislative Auditor’s findings and confirmation through consultation with state and federal representatives, the ABCA ceased overtime payments to the attorney and has taken steps to prevent unnecessary overtime payments to exempt employees in the future. TheABCAalsoindicatedthatitplanstochangeitspolicytorequireapprovalofbothanemployee’simmediatesupervisorandtheOfficeoftheCommissionerbeforeovertimeispermitted.TheLegislativeAuditorcommendstheABCAfortakingactiontostopunnecessaryovertimepaymentsandpreventsuchmistakesinthefuture.

An ABCA Attorney Has Been Paid Over $75,000 in Overtime Compensation Despite Being Exempt From FLSA Overtime Compensation Requirements

TheABCAliststwoattorneypositionsonitsorganizationchart–AttorneyI,apart-timepositionthatiscurrentlyvacant,andAttorneyIII,afull-timepositionthathasbeenfilledbythesameindividualsinceAugust2009.Thisindividual(Attorney)wasemployedintheAttorneyII position, which no longer exists, from May 2006 until assumingtheAttorney III position. According to theWestVirginia Division ofPersonnel, theAttorneyIIIpositionisnotrequiredtoreceiveovertimecompensation,norwastheAttorneyIIpositionrequiredtoreceiveovertimecompensationwhenitexisted.Thedeterminationofthesepositionsasnot required to receiveovertime isbasedon theFairLaborStandardsAct(FLSA),whichestablishesstandardsforminimumwage,overtimepay,recordkeeping,andyouthemploymentintheprivatesectoraswellasfederal,state,andlocalgovernments.Section13(a)(1)oftheFLSA

Issue2



The Attorney has been paid over $75,000 in overtime compensation since being hired in May 2006.

providesexemptionsto theminimumwageandovertimerequirementsforemployeesthatmeetcertainprovisions,includingthoseemployedina“bonafideprofessionalcapacity,”whichincludesthepracticeoflawasdescribedin29CSR§541.304.

TheABCACommissioner indicates that theagencydetermineswhether employees receive overtime based on FLSA standards. Theagency has an Overtime/Compensatory Policy that has been in placesince2008toestablishguidelinesincompliancewiththeFLSA.Thispolicydefinesanexemptemployeeasfollows:

“Exempt employees include the Commissioner, DeputyCommissioner,andcertainExecutiveAdministrativeandProfessional employees as described in the Fair LaborStandardsAct.”

Additionally, the policy specifically states that the outlinedstandards for overtime and compensatory time apply only to coveredemployees, as exempt employees are not required to receive paymentfor hours worked in excess of 37.5 hours per week. However, theLegislativeAuditorfoundthattheAttorneyhadbeenreceivingovertimecompensation despite being classified exempt.1 Table 1 provides thetotalamountofovertimecompensationpaidtotheAttorneyfromthedateofhire throughMarch13,2012asrecordedin theWestVirginiaStateAuditor’sEmployeePayroll InformationControlSystem(EPICS). Asthistableillustrates,theAttorneyhasbeenpaidover$75,000inovertimecompensationsincebeinghiredinMay2006.

Table 1Overtime Compensation Paid to the ABCA Attorney

May 1, 2006 – March 13, 2012

Fiscal Year Total Overtime CompensationFY2006 $14.11FY2007 $13,850.84FY2008 $12,574.69FY2009 $15,239.96FY2010 $20,009.74FY2011 $10,109.27FY2012 $3,416.18

Total $75,214.79Source: LegislativeAuditorcalculationsofcompensationfiguresreportedintheStateAuditor’sEPICS.

1ThePostDivisionof theOfficeof theLegislativeAuditorreleasedareport inJune2012(PA_2012_500)whichidentifiedthat23%ofstateagenciesprovidecashovertimepaymentstoFLSAexemptemployees.



The Attorney has been notified, as a result of this review, that he will no longer be receiving overtime compen-sation.

The ABCA Has Stopped Overtime Payments to the Attorney and Taken Steps to Prevent Unnecessary Overtime Payments in the Future

There are nine other agencies besides the ABCA within theWest Virginia Department of Revenue. Of these nine, five employattorneys. None of the attorneys for these five agencies are paidovertimecompensation,althoughtheseagenciesdoallowovertimefornon-exemptemployees. According to the Cabinet Secretary of the Department of Revenue, no other attorneys in the Department have received overtime compensation.

TheLegislativeAuditorinquiredastowhytheABCAAttorneywas receiving overtime compensation. The ABCA CommissionerindicatedthatthepreviousABCAadministrationallowedtheAttorneytoreceiveovertimecompensation,andthattheAttorneyhasbeennotified,asaresultofthisreview,thathewillnolongerbereceivingovertimecompensation.

In order to determine if there were other employees thatunnecessarilyreceivedovertimecompensation,theLegislativeAuditorevaluatedABCAOvertimeReportsforFY2008-FY2012asofJanuary2012andfoundthatthepreviousmanageroftheEnforcementDivision,whovacatedthepositioninJanuary2011,wasalsopaidovertimeduringthistimeframe.TheamountsofovertimepaymentsmadetotheformermanagerareprovidedinTable2below.

Table 2Overtime Positions to ABCA Exempt Positions

FY 2008 – January 2012Fiscal Year Total Overtime Compensation

2008 $3,251.482009 $3,365.342010 $4,734.302011 $1,454.01

Total $8,070.83Source:ABCAOvertimeReports,FY2011-2012

As this table illustrates, the former Enforcement Division Manager received a total of just over $8,070 in overtime payments over a four-year period, despite the position being exempt from overtime requirements under the FLSA.



In addition to immediately ceasing overtime payments to theAttorney,theABCACommissionerindicatedthatthefollowingactionshavebeentaken:

Representatives of the West Virginia Alcohol BeverageControlAdministration(ABCA)metwithrepresentativesoftheWestVirginiaDivisionofPersonnel(DOP)andtheState Budget Office and consulted by telephone with arepresentativeoftheUnitedStatesDepartmentofLaborto discuss policies relating to overtime, including DOPpolicy, the Fair Labor Standards Act and the currentABCA policy and practice for administering overtime. Based on these discussions we have not identified anyadditional issues with regard to overtime. However, inanefforttomaximizeeconomywithintheagencywehavereviewedABCApoliciesandhavereorganizedourchainofcommand…

Prior to this reorganization, fivepositionswereexempt fromovertimerequirements:

1. Commissioner

2. DeputyCommissioner

3. EnforcementDivisionManager

4. Comptroller

5. PublicHealthEducatorIII

FollowingthereorganizationoftheABCAchainofcommand,whichbecameeffectiveMay1,2012,therearenow13positionsthatareexemptfromovertimerequirements:

1. Commissioner

2. DeputyCommissioner

3. AdministrativeServicesManagerIV

4. AttorneyIII(andotherAttorneypositions)

5. UnitManager,Enforcement

6. StaffDevelopmentSpecialist

7. UnitManager,WineandSpirits

8. Administrative Service Assistant II (director of HumanResources)

9. ProcurementOfficer

10.Comptroller



11.DatabaseAdministratorI

12.WarehouseManager

13.UnitManager,Beer

AnOvertimePre-ApprovalFormhasalsobeendevelopedthatrequiresthe approval of an employee’s direct supervisor and the Office of theCommissionerbeforeovertimeispermitted.

Conclusion

The Legislative Auditor brought to the ABCA’s attention thatovertimecompensationwasbeingpaidtoanattorneywhowasnotrequiredtoreceiveovertimecompensationundertheFLSA.TheAttorneyreceivedover$75,000inovertimepayoverasix-yearperiod.Anadditional$8,070waspaidtoaformermanageroftheEnforcementDivisionoverafour-yearperiod.InresponsetotheLegislativeAuditor’sreview,theABCAhasceasedovertimepaymentstotheAttorneyandtakenstepstopreventunnecessaryovertimepaymentstoexemptpositionsinthefuture.Theagencyconsultedwithstateandfederalrepresentativesregardingovertimepoliciesandstandardsand,followingtheseconsultations,madechangestotheovertimeeligibilityofequivalentpositions.Agencypolicyisbeingchangedtorequireapprovalofbothanemployee’simmediatesupervisorandtheOfficeoftheCommissionerbeforeovertimeispermitted.TheLegislativeAuditor commends theABCAfor taking immediate actiontostopunnecessaryovertimepaymentsandpreventsuchmistakesinthefuture.





Since field employees do not work a 9 to 5, Monday through Friday work schedule and are not in an office set-ting where their presence is easily ver-ified by management, it is important that the agency be able to ensure these employees are working the required number of work hours and perform-ing their work duties.

The ABCA Has Internal Controls in Place to Ensure the Accurate Reporting of Time Worked in the Field, But Improvements Can Be Made.

Issue Summary

TheABCAhasseveralpoliciesinplaceregardingtimekeeping.TheLegislativeAuditorevaluatedtimekeepingdocumentssubmittedbyRegionalSupervisorsintheABCA’sEnforcementDivisiontodeterminewhethertheDivisionisfollowingtimekeepingpolicies.Itwasfoundthatpoliciesarebeingfollowed inmost instances,but thatwrittenpolicieshavenotbeenupdatedtoreflectsomecurrentpolicies,suchasrequiringthesubmissionoftheWeeklyActivityReportbyRegionalSupervisorsandtheOvertimeHoursformbytheUnitManagerreportingovertimehoursworkedbyRegionalSupervisors. TheABCAhas indicated thatthe agency is in the process of updating its written policies to reflectadministrative and operational changes. It is recommended that theagency include in its policy updates changes to strengthen internalcontrolsovertimekeeping.

The ABCA Has Several Policies Related to Timekeeping

TheABCA’s Enforcement Division has several employees - 5EnforcementSupervisorsand38EnforcementAgentsand Inspectors -whose duties are performed in the field, based out of their homes, inABCA’sfivedistricts.Sincefieldemployeesdonotworka9to5,MondaythroughFridayworkscheduleandarenotinanofficesettingwheretheirpresenceiseasilyverifiedbymanagement,itisimportantthattheagencybeabletoensuretheseemployeesareworkingtherequirednumberofwork hours and performing their work duties. The establishment ofadequate internal controls for reporting time and attendance helps toreduce the riskof fraudandabuse. TheLegislativeAuditorsought todeterminewhatcontrolstheABCAhasinplacerelatedtotimekeepingforitsEnforcementDivision.TheUnitedStatesGeneralAccountingOffice(GAO)’stimeandattendanceguidancedocument,MaintainingEffectiveControloverEmployeeTimeandAttendanceReportingandtheDefenseContractAuditingAgency(DCAA)ContractAuditManualwereusedtoestablishthefollowingcriteria:

• Theagencyshouldhaveapolicyinplaceforrecordingtimeandattendance information and maintaining documentation of thisinformation.

Issue3



• The supervisor has primary responsibility for authorizing andapproving timekeeping transactions. The supervisor shouldreviewandauthorize:

o plannedworkschedules,

o applicationsforleave,

o changes to work schedule (preferably prior tooccurrence),

o employeesubmissionsofactual timeworkedandleavetaken,and

o adjustmentsorcorrectionstotimerecords.

• Recorded information should be complete, accurate, timely,valid,incompliancewithanylegalrequirements,andsufficientlydetailedtoallowforverification.Toachievetheseobjectives,thefollowingshouldberecordedforeachemployeeduringeachpayperiod:

o employeename;

o payperioddates;

o hoursworked;

o hoursofovertimepaytowhichemployeeisentitled;

o datesandhoursofleave,credithours,andcompensatoryhoursearnedandused;

o evidenceofapproval;and

o supportingdocumentationorrecordsforabsences.

• Theemployeeandsupervisorshouldsignthetimecard/timesheetinaccordancewithprocedurestoverifytheaccuracyofthetimereported.

TheABCAhasseveralpolicies inplace regarding timekeepingfortheEnforcementDivision:

• PolicyNumberE-105requiresemployeestodocumentthedutiesthattheycompleteviaaWeeklyActivityReport;

• PolicyNumbersE-122andP-109requireemployeestosubmitaMonthlyTimeRecordindicatingthenumberofhoursworkedorleaveusedeachdayforthemostrecentmonth;and



• Policy P-100 details the process for working and beingcompensated for overtime hours, including the submission ofanOvertimeHoursformasacoversheetfortheMonthlyTimeSheet.

TheABCAalsorecentlybeganrequiringthesubmissionofanOvertimePre-ApprovalformthatmustbeapprovedbytheOfficeoftheCommissionerandanemployee’s immediatesupervisorbeforeovertime ispermitted.Althoughthisformisnotyetrequiredbypolicy,theABCAindicatesthatpoliciesandproceduresarebeingupdatedtoreflectadministrativeandoperationalchangessuchasthisone.

ABCA Policies Should Be Updated to Reflect Changes in Timekeeping Practices

Inorder toverify thatcontrolsarebeingutilizedby theABCAinpractice,theLegislativeAuditorevaluatedthefollowingtimekeepingdocuments for the five Enforcement Supervisors within the ABCAEnforcementDivision:

• MonthlyTimeRecordsfor2009-2011

• OvertimeHoursFormsfor2009-2011

• WeeklyActivityReportsfor2011

Monthly Time Records

TheABCApoliciesP-109andE-122governingMonthlyTimeRecordsestablishseveralchecksforensuringthaterrorsinthereportingoftimearenotmade.EmployeesmustcompletetheMonthlyTimeRecordinitsentirety,explaininganyovertimeworkedintheCommentssection,andsigntheformtoattesttoitsaccuracy.Anemployee’sdirectsupervisormust then sign the form to verify its accuracy. The Unit Manager isresponsibleforverifyingtheaccuracyofformssubmittedbyEnforcementSupervisors.Finalresponsibilitylieswiththeimmediatesupervisorforensuringthattheinformationisaccurateandcorrect.Althoughthepolicyrequiresthattheimmediatesupervisorensurethatinaccuraciesorerrorsarecorrected,nostipulationsaremadefordocumentingthesecorrections,suchasthatchangestofinalformsbeinitialedorsignedbytheindividualmakingthechangesandthesupervisorwhoapprovesthem.FollowingapprovalbytheUnitManager,formsareforwardedtoandmaintainedbythePayrollSupervisor,whousestheinformationreportedtoverifyandcalculateregular,overtime,andleavehours.



Upon reviewing the Monthly Time Records submitted forEnforcementSupervisors,theLegislativeAuditorfoundthefollowing:

• Formshavebeensubmittedasrequiredbypolicy.

• Enforcement Supervisors have certified to the truth andaccuracyofformsbysigningasrequiredbypolicy.

• DescriptionsofovertimeworkedareprovidedintheCommentssectionasrequiredbypolicy.

• TheUnitManageror,insomecases,theABCACommissioner,hascertifiedthateachformisaccuratebysigningasrequiredbypolicy.

• ThereisevidencethathoursreportedhavebeenverifiedbyPayroll.

• Onallbutoneformonwhichovertimewasreported,overtimeearningshavebeencomputedbyPayroll.

• The Unit Manager and the ABCA Commissioner haveapprovedtheovertimeearningscomputedbyPayroll.

• In 11 instances, changes had been made in writing oncompletedforms.Onthreeoftheseforms,thechangeswereinitialedbytheindividualmakingthechange.Oneformhadbeenchangedinfiveplaces,oneofwhichwasinitialedandtheotherfourwerenot.Sevenalteredformshadnoinitialsindicatingwhohadmadeorapprovedthechanges.

Overtime Hours Forms

OvertimeHoursformsarecompletedbyanemployee’ssupervisorand,forEnforcementUnitemployees,aretoindicatethefundingsourcetheovertimehoursfallunder.AlthoughPolicyE-122doesnotspecifythattheUnitManagercompleteandsigntheseformsindicatingovertimehoursworkedbyEnforcementSupervisors, this is thepractice. Uponreviewing Overtime Hours forms, the Legislative Auditor found thefollowing:

• Forms are attached to Monthly Time Records on whichovertimehourshavebeenclaimedasrequiredbypolicy.

• FormsaresignedbytheUnitManagerorCommissioner.

• Forms indicate the funding source under which overtimehoursfallasrequiredbypolicy.



Although the ABCA has policies in place that help establish internal con-trols for preventing timekeeping fraud and abuse and ensuring that field em-ployees are accurately reporting the work duties they perform, some im-provements can be made to strengthen these controls.

Weekly Activity Reports

WeeklyActivityReportsarecompletedby theemployeeandmustincludedates,times,generaldutiesperformed,andabriefdescriptionofspecificdutiesoneachday.AlthoughPolicyE-105requiresanemployee’ssupervisortoensuretheformiscompletedandthattheemployeeisondutyasindicatedontheform,neithertheemployeenorthesupervisorisrequiredtosigntheformtoattesttoitsaccuracy.AswiththeOvertimeHoursform,policyappliesonlytoRegionalSupervisors’subordinates,butinpractice,RegionalSupervisorscompleteWeeklyActivityReportsandsubmitthemtotheUnitManagerforreview.

PolicynumbersP-100,P-109,andE-122allstipulatethatfalsifyingaMonthlyTimeRecordisafelonyunderWestVirginiaCode§61-3-22,and that failing to complete the form or falsifying information on theformwillresultindisciplinaryactionbytheABCAuptoandincludingdismissal. PolicyP-100 further indicates that falsifyingany recordofhoursworkedorovertimehourswillresultindisciplinaryaction.PolicyNumberE-105containsnosuchstipulations.

UponreviewingWeeklyActivityReports,theLegislativeAuditorfoundthefollowing:

• Four of the five Regional Supervisors submitted formsas required by policy for the entire evaluated timeframe.However, one Regional Supervisor submitted a written logonnotebookpaperforJanuary-July2011,afterwhichWeeklyActivityReportsweresubmitted.

• Only two of the four Regional Supervisors who turned informsfortheentireyearconsistentlyfilledoutthesectionoftheformindicatinggeneraldutiesperformedeachday.ThereportssubmittedbytheRegionalSupervisorwhoprovidedformsforAugust-Decemberalsohadthissectionfilledout.OneoftheseRegionalSupervisorsplacedan“X”nexttoeachactivityperformedratherthananumberindicatinghowmanyofeachactivity,suchasphonecalls,wascompleted.

• Thereisvarianceinthedegreeofspecificityindescriptionsofactivitiescompleted.Oneagentmaydescribeactivitiesforadayas“officeduties,emails,paperwork,calls”whileanotherdescribesindetailthespecificindividualstowhomcallsweremadeoremailssent.

Although theABCA has policies in place that help establish internalcontrols forpreventing timekeepingfraudandabuseandensuring thatfieldemployeesareaccuratelyreportingtheworkdutiestheyperform,someimprovementscanbemadetostrengthenthesecontrols.Therefore,

pg. �0 | West Virginia Legislative Auditor


In order to decrease the possibility of timekeeping fraud and abuse, it is im-portant that an agency have adequate internal controls in place.

the Legislative Auditor recommends that the ABCA include changes in its planned policy modifications to strengthen internal controls over timekeeping. Some updatesthatshouldbeconsideredforenhancinginternalcontrolsinclude:

• PoliciesnumbersP-109andE-122shouldstipulatethatchangestocompletedformsmustbeinitialedorsignedbytheindividualmakingthechangesandthesupervisorapprovingthechanges.

• Policy numbers E-105 and E-122 should stipulate thatWeeklyActivity Reports be filled out showing Regional Supervisors’workdutiesperformedand thatOvertimeHour formsshowingovertime worked by Regional Supervisors must be filled out.Thoughthisisthecaseinpractice,policyhasnotbeenupdatedaccordingly.

• PolicyNumberE-105shouldcontainthestipulationthatprovidingfalseinformationorneglectingtocompletetheWeeklyActivityReportasrequiredbypolicywillresultindisciplinaryactionfromtheABCA.

• Policy Number E-105 should indicate that employees mustprovidethenumberofeachactivityperformedandspecificdetailswhendescribingtheseactivitiesontheWeeklyActivityReportsinordertoensureconsistencyandaccountability.

• PolicyNumberE-105shouldrequireasignatureontheWeeklyActivityReportsattestingtotheiraccuracy.

• PolicynumbersP-109andE-122shouldincludestipulationsforwhen documentation is required for leave and what form thisdocumentationshouldtake.

Conclusion

In order to decrease the possibility of timekeeping fraud andabuse,itisimportantthatanagencyhaveadequateinternalcontrolsinplace.TheABCAhasseveralpoliciesinplaceregardingtimekeeping.TheLegislativeAuditorevaluatedtimekeepingdocumentssubmittedbyRegionalSupervisors in theABCA’s EnforcementDivision and foundthat policies are being followed in most instances, but that writtenpolicieshavenotbeenupdatedtoreflectsomechangesintimekeepingpractices.TheABCAhasindicatedthattheagencyisintheprocessofupdating its policies to reflect administrative andoperational changes.WhiletheLegislativeAuditorcommendstheABCAforhavingpoliciesinplaceestablishingcontrolsovertimekeeping,itisrecommendedthat

Performance Evaluation & Research Division | pg. �1


theagency include in itspolicyupdateschanges tostrengthen internalcontrolsovertimekeeping.

Recommendation

1. The Legislative Auditor recommends that the ABCA includechangesinitsplannedpolicymodificationstostrengtheninternalcontrolsovertimekeeping.



Performance Evaluation & Research Division | pg. ��


The ABCA Assessed Penalties for Ten Percent of License Violations Outside the Guidance of the Agency’s Penalty Schedule.

Issue Summary

The ABCA issues licenses for handling, serving, and sellingalcoholicbeveragesinthestateandensuresthatlicenseescomplywithapplicableWestVirginialaws.InordertodeterminewhethertheABCAis assessing penalties for licensee violations in a fair and impartialmanner, theLegislativeAuditorevaluated the432violations thathavebeenassessedsincethedevelopmentofapenaltyscheduleforassessingthemostcommonlicenseviolationsinFebruary2011.Itwasfoundthat388,or90percent,oftheseviolationswereevaluatedusingtheguidanceof thepenalty schedule and44, or 10percent,were evaluatedoutsidethe penalty schedule. Of the 10 percent assessed outside the penaltyschedule,theLegislativeAuditordidnotfindanydisturbingissues.TheABCAindicatesthatsomeviolationsarenotabletobereviewedusingtheguidanceofthepenaltyscheduleduetoavarietyofcircumstances.However,precedentshouldenabletheABCAtodevelopguidelinesthatencompassalltypesofviolations.Inordertomaintainconsistency,equity,andtransparency,theABCAshoulddevelopguidelinesthatincludeallviolationsandfollowtheseguidelinesinallcases.

The ABCA Has Developed a Penalty Schedule for Assessing the Most Prevalent License Violations

Asdiscussed in Issue1,a2010surveyofEnforcementAgentsfoundthat52%ofrespondentsfeltthatlicenseeswerenotbeingtreatedequitably. TheLegislativeAuditor’sfollow-upsurveyofEnforcementAgents found that 7 of the 13 respondents state there has been animprovementintheequitywithwhichlicenseesaretreated,onerespondentstatestherehasbeenadeclineinequity,andfivestatethattherehasbeennochange.Commentsrangedfromindicatingthatthenewadministrationistreatinglicenseeswithmorefairnessandstandardizationtostatingthatpenaltiesstilldependon“whoyouknow.”

FourevaluationsoftheABCAissuedbythePostAuditDivisionoftheOfficeoftheLegislativeAuditorhavefoundthatthelackofaformalpenalty schedule for violations provided an opportunity for licenseescommitting the same violations to be fined unequally. Although theABCAhadnotcompliedwiththePostAuditDivision’srecommendationstodevelopapenaltyschedulewhenthelastPostAuditreportonABCAwas released in 2009, a penalty schedule was developed in February2011forthemostprevalentviolations.TheABCAindicates,however,

Issue4

Four evaluations of the ABCA issued by the Post Audit Division of the Of-fice of the Legislative Auditor have found that the lack of a formal pen-alty schedule for violations provided an opportunity for licensees commit-ting the same violations to be fined unequally.

A penalty schedule was developed in February 2011 for the most prevalent violations.

pg. �� | West Virginia Legislative Auditor


thatnotallviolationscanbeassessedusingthepenaltyscheduleduetothe“natureandcomplexityofperformingourregulatoryfunctions,”andthatuniqueviolations require takinganumberof factors intoaccount,includingthefollowing:

• natureoftheviolation;

• preventability;

• severity (whether violence was involved, whether the licenseewasinvolved,publicsafetyissues);

• historyofviolations;

• durationbetweenoccurrences;

• periodoftimethelicenseehasbeeninoperation;

• commentsandconcernsofthepublic;

• concerns,reports,andcriminalcitationsfromlawenforcement;

• dueprocessandthepreponderanceandavailabilityofevidence;

• correctiveactionsandtheindicationofwillingnessonthepartofthe licensee to improveoperations toprevent futureviolations;and

• licenseeoperatingprocedures.

TheABCA’spenaltyscheduleforClassAandClassBlicenseeviolationsisprovidedinTable3below.ClassAlicensesarethoseissuedforon-premiseconsumption,suchastoatavernorprivateclub.ClassBlicensesarethoseissuedforoff-premiseconsumption,suchastoaliquorretailoutlet.Indeterminingwhetheranoffenseisafirstorsubsequentoffense, theABCAtypically looksat theprevious twoyears,althoughtheagencyindicatesthatthe“severityorfrequencyofpreviousviolationsorotherextenuatingcircumstances”mayleadtooffensesdatingfurtherbackthantwoyearsbeingtakenintoconsideration.



Table 3ABCA Enforcement Unit Penalty Schedule for Licensee Violations

Class A On-Premise License

Basic Offenses

Class B Off-Premise License

Basic Offenses1stoffense–WarningLetter 1stoffense–WarningLetter

2ndoffense-$350fine 2ndoffense-$150fine3rdoffense-$550fine,3-daysuspensionoflicense(Thursday,Friday,Saturday) 3rdoffense-$350fine

4thoffense–discretionoftheCommissioner 4thoffense-$550fine,2-daysuspensionoflicense

Source:TheABCA’sViolationsGuidelinesdocument.

The Majority of Penalties Assessed Since the Development of a Penalty Schedule Have Followed Penalty Schedule Guidelines

Inorder todeterminewhetherpenaltiesarebeingassessed inafairandimpartialmanner,theLegislativeAuditorobtainedviolationandpenaltydatafrom2006throughApril17,2012.BetweenthedevelopmentofthepenaltyscheduleonFebruary11,2011andApril17,2012therewere432violations,ofwhichtheABCAindicates24wereassessedoutsidethe penalty schedule due to the severity of the violations committed.Upon reviewing the 432 violations, the LegislativeAuditor found anadditional20licenseesthatwerepenalizedoutsidethepenaltyschedule.Seventeenofthesewerefinedmorethantheamountrecommendedbythe schedule and one was fined less than the recommended amount.Additionally, two ClassA licensees with no prior offenses were fined$150although,as thepenaltyscheduleshownabove illustrates,a firstoffenseforaClassAestablishmentshouldresultinawarningletterandthe lowest recommendedfine foraClassAestablishmentwithaprioroffenseis$350.AsTable4shows,atotalof388,or90percent,ofthe432violationsassessedsince thedevelopmentof thepenalty schedulehavefollowedtherecommendedpenalties.

A total of 388, or 90 percent, of the 432 violations assessed since the develop-ment of the penalty schedule have fol-lowed the recommended penalties.



Table 4Violations Assessed Since the Development of the Penalty Schedule

Number PercentageTotal Violations 432 100%Assessed Using Penalty Schedule Guidance 388 90%

Assessed Outside the Penalty Schedule 44 10%

Source:LegislativeAuditorcalculationsbasedonassessmentofABCAViolationDetailreports.

The ABCA’s Penalty Schedule Can Be Improved to Ensure Equity, Consistency, and Transparency in the Assessment of Penalties Against Licensees

The ABCA indicates that violations are determined to be ofgreaterseverityandthereforeassessedoutsidethepenaltyscheduleiftheyresultinbodilyinjury,consistofmultipleorcomplexsituations,involveriotousconditions,and/orinvolvepublicsafetyconcerns.AlthoughtheagencyindicatesthattheCommissioner,DeputyCommissioner,ActingEnforcementDirector, andGeneralCounsel review theseviolations inorder tomaintainconsistency,no records aremaintaineddocumentingthedecisionprocess.TheABCApointstotheuniquenatureofviolationsand the discretionary powers of theABCA Commissioner set forth inWestVirginiaCodetosupportthispractice.However,it is the opinion of the Legislative Auditor that the ABCA should be able to establish penalty guidelines based on precedent that will encompass all manner of violations. Such a penalty schedule might incorporate penaltyrangesthatwouldallowtheABCAsomediscretionarypowerwhilestillpreventing the appearance of unfairness or bias in the assessment ofpenalties. Therefore, the Legislative Auditor recommends that the ABCA develop penalty guidelines for assessing all license violations and use these guidelines in all cases.

Conclusion

TheABCAdevelopedapenaltyscheduleforassessingthemostcommon license violations in February 2011. In order to determinewhether licensee penalties are being assessed in a fair and impartialmanner, theLegislativeAuditorevaluated the432violations thathave



beenreviewedsincethattime.Itwasfoundthat388,or90percent,oftheseviolationswereevaluatedusingtheguidanceofthepenaltyscheduleand44,or10percent,wereevaluatedoutsidethepenaltyschedule.TheABCAindicatesthatsomeviolationsarenotabletobereviewedusingtheguidanceofthepenaltyscheduleduetoavarietyofcircumstances.However,itistheopinionoftheLegislativeAuditorthatpastprecedentshould enable the ABCA to develop guidelines that encompass allmannerofviolations.Thelargestpenaltythatcanbeassessedis$1,000perviolation.Thelargestpenaltyassessedusingthepenaltyguidelinesis$550perviolation.TheLegislativeAuditoracknowledgesthatthereisnotalargeamountofdiscretiononthepartoftheABCACommissionerwhenassessingpenaltiesoutsideofthepenaltyguidelines.Nonetheless,inordertomaintainconsistency,equity,andtransparency,theLegislativeAuditorrecommendsthattheABCAdevelopguidelinesforallviolationsandfollowtheseguidelinesinallcases.

Recommendation

2. The Legislative Auditor recommends that the ABCA developpenalty guidelines for assessing all license violations and usetheseguidelinesinallcases.





AppendixA:TransmittalLetter





AppendixB:Objective,ScopeandMethodology

This report on the Alcohol Beverage Control Administration (ABCA) isauthorizedbyWestVirginiaCode§4-2-5.

Objective

Theobjectivesofthisreportweretodeterminethefollowing:whethertherehasbeenanyimprovementintheissuesmentionedina2010surveyofenforcementagentswithintheABCAEnforcementDivision;whetheritwasnecessary tomakeovertimepayments toanABCAattorney;whetheradequateinternalcontrolsexisttoverifythehoursreportedbyfieldemployeesintheEnforcementDivision;andwhetherpenaltiesforlicenseviolationsareassessedinaconsistentandimpartialmanner.

Scope

Thescopeofthisreviewincludedtheopinionsofenforcementagentsonwhetherornot improvementshavebeenmadeby theagencysince theLegislativeAuditor’ssurveyofenforcementagentswasconductedin2010.Thesurveywassentonlytoenforcementagentswhowereemployedatthetimeofthe2010survey.TheissueofovertimepaidtotheABCAattorneycovered FY 2006 through March 13, 2012. The analysis of timekeepingdocumentsforRegionalSupervisorscovered2009-2011,andtheLegislativeAuditor reviewed licensee violation and penalty data from 2006 throughApril17,2012. Theanalysisofviolations todeterminewhetherpenaltiesfellwithin theABCA’spenalty schedule includedviolations thatoccurredfollowingtheadoptionofthepenaltyscheduleinFebruary2011.Thisreviewonlyfocusedontheenforcementdivisionandtheworkhoursofemployeesintheadministrativeoffices.AuditorsdidnotreviewothersectionsoftheABCAsuchasthelicensingdivisionorthewarehouseoperations.

Methodology

In order to determine whether issues discussed by respondents inthe2010 survey still exist, theLegislativeAuditor conducted a follow-upsurvey of enforcement agents employed in 2010, and corresponded withthe Commissioner ofABCA to determine what changes or improvementshavebeenmadetorespondtotheenforcementagents’concerns. InordertodeterminewhetherovertimepaymentsmadebytheABCAfollowpolicyguidelines, the LegislativeAuditor evaluated overtime payments recordedby the agency and the West Virginia State Auditor’s Employee PayrollInformation Control System (EPICS); consulted with the West VirginiaDivisionofPersonnel; reviewed theFairLaborStandardsAct andABCApolicy documents; and corresponded with the ABCA and Department ofRevenue.Inordertoevaluatetheimpartialityofpenaltiesassessedforlicenseviolations, the LegislativeAuditor evaluated the 432 violations that havebeenassessedsincethedevelopmentofapenaltyscheduleandcorrespondedwiththeagencyregardingtheassessmentprocess.





AppendixC:AgencyResponse

















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Documents

PERFORMANCE REVIEW ALCOHOL BEVERAGE CONTROL ADMINISTRATION › Joint › PERD › perdrep › ABCA_7_2012.pdf · 2013-05-02 · PERFORMANCE REVIEW ALCOHOL BEVERAGE CONTROL ADMINISTRATION