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Audit finds N.H. Liquor Commission overwhelmed by enforcement duties

  • The new New Hampshire State Liquor and Wine Outlet at the Epsom traffic circle on Feb. 5. GEOFF FORESTER / Monitor staff

Monitor staff
Published: 2/23/2021 6:26:02 PM

New Hampshire’s Liquor Commission has struggled to review, regulate and enforce state alcohol laws in recent years, according to an audit of the state agency released this month. 

A 368-page report produced by the Legislative Budget Assistant, found that the Liquor Commission had inconsistent standards over how to regulate and investigate direct shippers of alcohol into the state, license holders and its stores. 

The audit, which covered activity between mid-2017 and mid-2019, found that while the Liquor Commission had proven capable of driving profits, it lacked a strategic plan that could help it regulate the alcohol industry in the state. Without a good system of regulations, the Commission had not “adequately protected the public,” the audit stated. 

Part of the problem lay in priorities. Past administrations had expanded the scope of what the agency was supposed to regulate. That meant it couldn’t sufficiently focus and wasted energy, the audit said. 

“Ineffective and inefficient deployment of resources, often outside the scope of the Division’s responsibilities, led to uninspected and unexamined licenses while extra-jurisdictional tasks were accomplished,” the report stated. 

Part of the problem also lay in the sheer amount of licenses the agency was juggling: 45 license and permit types with more than 100 sub-types, the audit noted. 

The audit painted a picture of an agency that was overwhelmed.

“Ultimately, the Commission did not know what was being directly shipped into the state, whether noncompliance was consistently identified, or whether the state received the correct amount of tax revenue and permit fees,” the audit stated.

Responding to the report, the Commission concurred with many of its points of concern. But a representative said that because of the time period of the audit, the report didn’t capture the progress the agency has been making during and after the period under review.

“This audit represents a single snapshot in time nearly three years ago,” spokesman E.J. Powers said Tuesday. “It doesn’t reflect the significant work the Liquor Commission has made since then to improve operations of the Division of Enforcement and Licensing.”

The enforcement division had an overhaul beginning in 2017, Powers said; 63% of rank and file officers and 75% of the command had turned over since then, resulting in a changed department.

He said Enforcement Chief Mark Armaganian had been hired by the agency from State Police in 2017, and had already taken on a number of reforms, including a new set of rules in 2019 that were not represented in the audit. 

The executive summary of the audit took that into account, to a point.

“Management reported undertaking a review of internal practices, identifying some of the same issues we identified,” the audit read. “However, there is no holistic approach to management control, risk management, strategy development, planning, and performance management that could help ensure the issues we presently identify will be fully remediated and remain effectively controlled.”

Without applying a broader strategy, the agency risked making changes that would only affect a few of the issues it faced. 

In his own letter in response to the audit, Liquor Commission Chairman Joseph Mollica noted that the agency had seen explosive growth, with revenue through licenses and fees leaping from $12.7 million per year in 2012 to $18.2 million in 2020. 

“In light of this unprecedented growth, the Commission acknowledges that its internal controls and procedures need to be strategically assessed and refined to appropriately manage the risks associated with the Commission’s operations,” Mollica wrote. 

Mollica said the agency would be hiring a new Internal Audit and Compliance Officer, who would head a unit dedicated to independent review, and to addressing the findings in the recent report. 

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