(Source: MIRS.news, Published 03/19/2024) Spirits are missing from the state inventory and there isn’t a teenager alone in the house to blame.
The Office of Auditor General reported Tuesday that slack controls within the Michigan Liquor Control Commission account for nearly $1 million in missing booze from three of the 11 authorized distribution agent warehouses.
Those 62,294 missing bottles of liquor made up 20 percent of the total value of state-owned inventory at the time. The total inventory was worth nearly $5 million between the three sites.
One warehouse was missing 24,049 of the 78,100 bottles of liquor that were supposed to be there, which was 36 percent of the owned value at the site.
In order to rectify the inventory discrepancy, there should be a physical inventory count, where the state would conduct a review of the warehouses, but the audit found there was no count at the three audited warehouses between October 2019 and July 2022. The auditors were told by the Liquor Control Commission it was because of the COVID-19 pandemic and staffing shortages.
The commission wasn’t able to document where the missing alcohol went. A refund for businesses was processed for the 62,294 missing bottles.
The audit found that there was no reason for 7 of the 65 spirit products to be missing and told auditors “it was a common occurrence in ADA warehouses for various reasons.”
The auditor also found that the warehouses were delivering product to retailers without the state ever taking possession of the product, which, according to audit, violates the duty and statutory authority of the Liquor Control Commission. There is no current legislation defining the responsibilities of the ADA.
“With orders made directly to ADAs, MLCC should have a mechanism in place, whether through MILO or another method, to be notified of all retailers’ orders,” the audit stated.
The way the auditor described the system is that the retailers order spirits from the state's online system, named MILO, or directly from the ADA. The warehouses process the orders and send the commission the daily orders. The commission uses the daily orders to calculate the quantity of each product it would need to buy. The state then buys the order and updates the inventory. After the ADAs deliver the bottles, the inventory is again updated.
The Commission agreed with the audit that it needed to have a better system of control over the warehouse inventory.
The response said the commission would be launching a new Scanning and Image Processing System plus, or SIPS+, this year that would modernize the ordering and inventory system for the state.
The new system would require that all orders have an order number; require an invoice matching the order number; would require all orders to go through MILO, including orders by phone from ADA, electronic orders from chain stores, and orders from salespeople.
The commission said the new system would allow it to independently verify liquor orders and invoice amounts.
There is also an auditor job that was open, according to the Commission's response to the audit.
There are about 29,500 liquor retailers in Michigan and the revenue for spirits in 2022 was about $1.6 billion.
Michigan Licensed Beverage Association Executive Director Scott Ellis said his association was getting fewer and fewer complaints of product not being delivered by the warehouses.
“We still always wonder why sometimes the smaller locations can’t seem to get certain product, and we’re told that a lot of times that manufacturers choose how much product gets sent to a state,” Ellis said.
In September, Stephen Burnette went to the commission as one of those small party stores in Michigan that couldn’t get one case of a popular bourbon, but was told by delivery drivers there were 50 cases going to one store (See “Liquor Control To Update 40-Year-Old System By 2024, Supply Shortages Remain,” 9/21/23).
Ellis said he hadn’t dug into the report but was curious about the discrepancies being shown in the audit.
He said the combination of the increased demand and the COVID-19 pandemic made things tough for the people selling spirits.
“I can’t say there aren’t larger places that stock up on things, where the smaller retailer can’t afford to do that, cash flow wise and storage wise,” Ellis said. “But we don’t know. We’re always curious about that."
