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PENNSYLVANIA AUDITOR GENERAL BARBARA HAFER RELEASES AUDIT REPORT OF PENNSYLVANIA LIQUOR CONTROL BOARD

PENNSYLVANIA AUDITOR GENERAL BARBARA HAFER RELEASES AUDIT REPORT
 OF PENNSYLVANIA LIQUOR CONTROL BOARD
 HARRISBURG, Pa., Sept. 10 /PRNewswire/ -- Auditor General Barbara Hafer today announced the release of an audit report of the Liquor Control Board (LCB) which indicated that 75 of the state's liquor stores lost money in the fiscal year ended June 1991.
 "This audit is a prime example of my department's ability to identify waste in government," Hafer said. "My auditors found that 75, or 11 percent, of the LCB's 680 stores incurred aggregate operating losses of more than $870,000 during the year audited."
 Of the 75 stores that operated at a loss, 30 had individually incurred aggregate losses in excess of $30,000 over a three-year period. These 30 stores, however, reduced total losses from $570,046 in 1990 to $482,532 in 1991. A condition of operating losses of $10,000 for three consecutive years could justify the closing of these stores, according to the LCB.
 The audit disclosed that LCB management has taken appropriate steps to reduce costs in certain stores. These steps include closing three stores, initiating a one-manager/two-store concept, eliminating full-time positions and implementing the shared complement concept. An audit of the LCB released last year had revealed that during the fiscal year 1990, 88 stores incurred aggregate operating losses of nearly $1 million.
 "Some of the stores identified are still not providing sufficient benefits for the costs incurred," Hafer said. "We recommend that the LCB continue to implement profit enhancing measures and consider closing stores which exhibit little or no potential for turnaround."
 As cited in the prior audit, this year's report once again disclosed that throughout the audit period, the LCB employed full-time hearing examiners who worked less than full time. The report noted that 192 liquor license, and eight heart and lung hearings were conducted between Jan. 1 and Dec. 31, 1991. The 200 hearings equate to an average of 1.4 per month per examiner, with each case requiring up to three working days to complete. Twelve hearing examiners were employed during the calendar year 1991 with salary and benefit expenses totaling approximately $642,000.
 As of Jan. 1, 1992, 10 hearing examiners were employed with annual salaries ranging from $31,413 to $39,765. Their salary and benefit expenses totaled approximately $539,000.
 "An audit I released in September 1990 revealed that the full-time employment of 13 hearing examiners was not justified by their current work load," Hafer said. "It also indicated that the examiners, whose jobs had been mandated by the legislature, averaged less than one hearing a month. These hearing examiners are attorneys with private law practices. Their cost to Pennsylvania taxpayers is more than $50,000 a year each in salary and benefits.
 "After the release of my audit in 1990, the general assembly voted decisively to abolish these positions," Hafer said. "This year they reversed that decision and passed legislation retaining five of these positions, which was subsequently signed into law by the governor.
 "Reinstating these positions is just another example of the failure to control spending," Hafer said. "We once again recommend that the responsibility for license hearings be transferred to the Office of Administrative Law Judge."
 The audit report also noted that legislatively mandated wine specialty stores are unprofitable. Since the enactment of Act 1987-14, the LCB has opened five wine specialty stores. These stores, located in Pittsburgh, Camp Hill, Philadelphia, Monroeville and State College, had total operating losses of $38,068 for the year.
 Auditors recommended that the LCB continue to seek modification of Act 1987-14 in order to market premium wines more effectively. For instance, allowing the stores to sell distilled products may enhance their profitability. In the absence of amended legislation, the LCB should closely monitor the profitability of these stores and discontinue operations at stores which consistently incur losses.
 Various instances of accounting and internal control deficiencies were also noted in the report.
 Overall net income of the LCB increased during the last three fiscal years from $23.6 million for the year ended June 27, 1989, to $39.8 million for the year ended June 25, 1991.
 /delval/
 -0- 9/10/92
 /Editors: Audit copies and listings of unprofitable stores may be obtained by calling:/
 /CONTACT: Steve Schell of the Pennsylvania Office of the Auditor General, 717-787-1381, or 717-787-4486/ CO: Pennsylvania Office of the Auditor General; Pennsylvania Liquor
 Control Board ST: Pennsylvania IN: SU:


MK-MJ -- PH010 -- 7917 09/10/92 10:30 EDT
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Date:Sep 10, 1992
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