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093091 1 (1974-11-04)

handle is hein.gao/gaobacwzc0001 and id is 1 raw text is: 1 1 - ~ .~ ~§~%& ~Ccou~~ 0430q UNITED STATES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE ROOM 201, 415 FIRST AVENUE NORTH SEATTLE, WASHINGTON 98109 NOV 4 1974 Mr. Paul Ward, Superintendent Federal Prison Industries, Inc. Department of Justice P. 0. Box 500 Steilacoom, Washington 98388 LM093091 Dear Mr. Ward: We have completed our examination of the financial statements of the Federal Prison Industries, Inc. (FPI), McNeil Island, Washington, for fiscal year 1974. The primary purpose of our audit this year was to review the work performed by the Department of Justice's Office of Internal Audit in March and April of this year, and to determine the adequacy of the industry's cash and inventory management. Overall, we concluded that cash and inventory management was satisfactory. As discussed with you on October 11, 1974, we did note the following minor matters which can be corrected locally: (1) understatement of accounts payable; (2) high number of slow and non- moving items in inventory; (3) maximum inventory levels for common use items not established; (4) lack of internal inventory control; and (5) possible underpayment to inmates working in Industries. At the time of our discussion, you had not decided what specific actions would be taken on these matters. A brief discussion of each of the areas follows. Understatement of accounts payable At the end of fiscal year 1974, accounts payable were understated by $20,000, or 7 percent, due to the accounting treatment of materials paid for but physically returned to the vendor for repair or replacement. The returned materials were recorded as a reduction of both assets and liabilities by crediting one of the asset accounts for inventory and by debiting the accounts payable subaccount, Vouchers in Transit. 0 t-

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