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090342 1 (1976-04-15)

handle is hein.gao/gaobacvyt0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON REGIONAL OFFICE FIFTH FLOOR 803 WEST BROAD STREET FALLS CHURCH, VIRGINIA 22046 APR 15 1976 Mr. David C. Jelinek, Associate Commissioner Federal Prison Industries, Inc. HOLC Building 101 Indiana Avenue, NW. Washington, D.C. 20537 Dear Mr. Jelinek: Our audit of the Federal Prison Industries' (FPI) financial statements for fiscal year 1975 is completed and our report to the Congress is being processed. We thought it would be useful to summarize certain matters noted during our review which will not be discussed in our report to the Congress but which we feel warrant your attention. Need for improving inventory management During our examinations of the corporation for fiscal years 1974 and 1973 we noted that the inventory levels were increasing at the expense of cash and at a rate inconsistent with overall corporate asset growth. At June 30, 1975, the corporation's total inventory was valued at $33.3 million, an increase of $6 million or approximately 22 percent above the prior year's level. Inventories represented almost 46 percent of all corporate assets. An analysis of inventory turnover ratios for the past several years reveals a continuing decline in the inventory turnover rate from 2.32 to 1.90. While management has expressed concern over this con- tinuing situation and has stressed the need to improve the inventory turnover ratios, they have met with little success. In this regard, we again suggest you establish minimum/maximum inventory levels, preferably on a corporate wide basis, but at least by division. Prior period adjustments As part of our examination we analyzed the prior period adjustments made to the financial statements. In doing so, we found that while the adjustments followed FPI policy the

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