Summary

This operational audit, for the period March 2005 through July 2007, focused on the sale and safeguarding of cigarette tax stamps (tax stamps) by the Department of Business and Professional Regulation (Department), Division of Alcoholic Beverages and Tobacco (Division).  Our audit disclosed the following:

Finding No. 1:       The Division did not adequately monitor its contractor’s manufacture, storage, and destruction of tax stamps.

Finding No. 2:       Controls over the Division’s district office tax stamp inventory vaults could be improved.

Finding No. 3:       District offices did not always perform required observations of the physical inventory counts of stamping agents.

Finding No. 4:       Subsidiary records maintained to account for credit sales to stamping agents were not always complete.

Finding No. 5:       Tax refunds, credits, and stamp destruction were not always appropriately documented.

Finding No. 6:       Subsidiary records relating to tax refunds paid to stamping agents were not routinely reconciled to general ledger accounting records.

The Interim Secretary's response is included in its entirety at the end of this report as Appendix A.