oversight

Financial Statements of the Federal Prison Industries, Inc., Federal Reformatory, Petersburg, Virginia

Published by the Government Accountability Office on 1971-12-07.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  UNITED STATES GENERAL ACCOUNTING OFFICE
                               REGIONAL OFFICE
                        ROOM 226.8 70 NORTH MILITARY HIGHWAY         0°
                            NORFOLK, VIRGINIA 23502




                                                               DEC ? 1971
Mr. W. G. Haase,
Superintendent of Industries
Federal Prison Industries, Inc,        A60.1
Petersburg, Virginia 23803

Dear Mro Haase:

     We have completed an examination of the)financial statements of.
the Federal Prison Industries, Inc.       4---s Federal Reformatory,
                                          <E4-a
Petersburg, Virginia7 for fiscal yZar ended June 30, 1971. The
examination was made'pursuant to the Government Corporation Control
Act (31 U.S.C. 841).

     Our review showed that substantially all financial transactions
examined were handled in a satisfactory manner. However, we noted
several matters which needed attention. These matters, which were
discussed with you, are summarized below together with your comments
on the actions taken or to be taken.

     --The ending work-in-process inventories for the electronic
       cable shop and the tire reconditioning plant were under-
       stated because they did not include charges for direct
       labor and overhead for partially finished units. In addition,
       the electronic cable shop work-in-process inventory was over-
       stated by the cost of materials which should have been charged
       to the raw materials inventory. You stated that the misunder-
       standings and practices resulting in these mischarges would
       be corrected.

     --Our test counts of the raw materials and supply inventories
       showed that stock card balances for 37 percent of the items
       tested were incorrect. We believe improvements are needed to
       achieve more accurate physical counts of materials; also,
       that improved internal controls over inventories can be achieved
       by limiting the number of personnel permitted access to storage
       areas, segregating duties so that persons not responsible for
       managing inventories take or check the physical counts and using
       a locator card system for raw materials and supplies inventorieso
       You agreed to improve each of the matters we observed; also, that
       consideration would be given to using a locator card system for
       materials in storage.




                       50TH ANNIVERSARY           1921-1971               7   /
Mr. W. G. Haase                  - 2-



     --A total of eight purchase orders were not properly recorded on
       the report of unliquidated obligations at the year end, resulting
       in a net understatement of $1,427.25. The business manager stated
       the details supporting unliquidated obligations would be more
       closely reviewed to avoid improper recording of purchase orders
       in the future.

     --The financial statement included amounts for claims against
       common carriers which were in dispute. The contingent nature
       of these amounts were not disclosed. You agreed that con-
       tingencies such as those discussed should be disclosed by foot-
       note in the future.

     In addition, we noted that certain interindustry and intraindustry
transactions were incorrectly recorded in the miscellaneous sales and
cost of miscellaneous sales accounts. This occurred because no account
has been established for such transactions. The following transactions
were improperly recorded in these accounts:

     --Certain travel costs incurred by FPI, Petersburg, which were
       later reimbursed by FPI, Washington.

     --Rental charged by one department for use of a loading platform
       by another department.

     --Purchases made by one department, but applicable in part to other
       departments.

You explained that the FPI central office will have to authorize a new
account before corrective action can be taken. We accordingly expect
to discuss this matter further at Washington.



     We wish to acknowledge the cooperation extended to our representa-
tives during the audit. We will appreciate receiving your comments
on any further actions taken or planned on the above matters.
Mr. W. G. Haase                 - 3 -



     Copies of this letter are being sent to the Assistant Attorney
General for Administration, Department of Justice; the Commissioner
of Industries, Federal Prison Industries, Inc.; and the Warden,
Federal Reformatory, Petersburg, Virginia.

                                  Sincerely yours,




                                  Walter H. eroon
                                  Regional Manager



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