UNITED STATES GENERAL ACCOUNTING OFFiCE DALLAS REGIONAL Ol-FICE ROOM BOO 1512 COMMERCE STREET DALLAS, TEXAS 75101 Mr. R. M. Weaver Superintendent of Industries Federal Prison Industries, Inc. Federal Correctional Institution Seagoville, Texas 75159 Dear Mr. Weaver: We have completed an examrnatlon of the financial statements of the Federal Prison Industries, Inc. (FPI), Seagoville, Texas, for the fiscal year ended June 30, 1970. The examination was made pursuant to the Government Corporation Control Act (31 U.S.C. 841). Our review, which was completed in September 1970, was made in accordance with generally accepted auditing standards and mn- eluded such tests of accounting records and financial transactions as we consldered necessary m mew of the nature and volume of transactions and the effectiveness of internal controls. We con- sidered the most recent audit performed by the FPI examiners which was completed in November 1969. Our findings, which were discussed with you and lnstltution officials at the conclusion of our review, included minor deficiencies on which corrective action had been taken or promised. Other findings concerning matters which are within your authority and responsibility are summarized below for your information and such additional action as you deem necessary. BEST ~~~~~~~~~ AVA1LABLE PROCUREMENT OF FIXED ASSETS AND SUPPLIES Cur review disclosed several weaknesses In the procedures for acquiring fixed assets and supplies both in the Furniture Refinishing Industry and in the Vocational Training Department. Regulations provide that only authorized contracting officers can obligate government funds by placing orders for goods and servicesI In addition, although the regulations provide that small purchases which do not exceed $2,500 do not Justify procedures of advertised procure- ment; they do provide that competitzon reasonably available should be obtained and the files should document the decisions made and the actions taken. -2- During our review we found several instances where purchases were made by unauthorized personnel wlthout going through the proper pro- cedures and two lnvolces dated prior to the date of the purchase req- ulsltlon. We found very little lndlcatlon that available competltlon was sollclted or that the Items procured were sole-source items. The business manager, who 1s also the certifying officer, informed us that this was a common practice. The FPI examiners also commented on this deficiency in their report coverlng their November 1969 review. We believe that purchases of the nature cited above are contrary to good procurement practices. Since both you and vocational tralnlng offlclals agreed to take corrective action to comply with the regula- tions, we are maklng no recommendations on this matter at this time. YEAR-END PROCUREMENTS 0;d1'#3T AVAILABLE Our review disclosed that the Vocational Tralnlng Department ex- pended funds at the end of the fiscal year for material to be used in the following year. We noted that during the month of June 1970, the Vocational Train- lng Department procured materials which apparently could not be used before the end of the fiscal year. These items were expensed when pur- FL - _-- 'chased and no Inventory records malntalned. For example , we noted two purchase orders dated June 29, 1970, totaling $658.50 for 43 rolls of video tape. The receiving reports showed that the tapes were delivered on that date, We discussed this matter with vocational training offlclals who acknowledged that they did stockplle materials that would be needed in the succeeding fiscal year at the end of the year if funds were avall- able. Annually, the Congress has placed a llmltatlon on the amount of funds to be expended for vocational tralnlng. In our opinion, funds llmlted annually by the Congress should be used only for expenses applicable to that fiscal year and that year-end spending for stock- piling material supplements the followrng year's llmltatlon. Since both you and vocational tralnlng officials agreed to correct this practice, we are making no recommendation at this time. NEED FOR IMPROVED TOOL CONTROL IN VOCATIONAL TRAINING DEPARTMSNT Our physical inspection and dlscusslons with vocational tralnlng personnel disclosed a weakness in the control of tools used in the automotive repazr and machine shop. Some tools, especially those used -3- in automotive repair, were stored during the day in four unlocked and untended roll-around cabinets which were available to anyone in the area. Each of these cabinetb contained valuable tools such as precision ln- struments and ratchet wrench sets as well as numerous common-use tools. In addition, other tools, used in the machine shop were to be stored on shadow boards which would reveal at a glance which tools were m use. These tools were to be returned to the shadow board when not in use. We were informed by the shop foreman that in many instances he does not perform a dally check of the shadow board or of the roll-around cabinets. At other locations in the IInstltutlon, tool control was a constant procedure. FPI, for example, made a daily tool count and either located all missing tools or was required to file a report with the Control Department. Many of the tools cost less than $100, which according to FPI manual instructions are expensed upon procurement and memorandum stock cards are required to be malntalned for such tools. We found that the memorandum cards were not being maintained. BEST ~~~~;\rl~ii-ii AVAILABLE We recognize the problem of maintaining constant control over the tools, particularly since there are only two clvlllan employees in the shop and, In automotive repair there was a constant need for using many different tools on one job. However, we believe that the Vocatronal Training Department should devise such tool controls that are feasible and practxal. We belleve that memorandum stock records should be established to Identify the tools to be controlled and that the roll- around cabinets should be locked when not In use to provide addltlonal controls. Vocational Tralnxng Department offrclals acknowledged the weaknesses and agreed to establish better control over tools, including the maln- tenance of memorandum stock records* We are therefore, making no recommendation at this time. We wish to acknowledge the courtesies and cooperation shown our representatives during the review. We would appreciate your comments and advice as to any further action taken on the matters discussed herezn. Copies of this letter are being sent to the Assistant Attorney General for Administration, Department of Justices the Commxssloner of -4- Industries, Federal Prison Industries, Inc.; and the Warden, Federal Correctional Institution, Seagovllle, Texas. Sincerely yours, W. H. Sheley, Jr, Regional Manager
Examination of Financial Statements, Federal Prison Industries, Inc., Seagoville, Texas
Published by the Government Accountability Office on 1971-01-12.
Below is a raw (and likely hideous) rendition of the original report. (PDF)