oversight

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)

                 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