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093567 1 (1974-01-11)

handle is hein.gao/gaobacxfx0001 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 I JAN 19 O r Mr. David C Jelinek, Associate Commissioner Federal Prison Industries, Inc HOLC Building 101 Indiana Avenue, NW P 00-7 / L Washington, D.C 20537 Dear Mr Jelinek Our audit of the Federal Prison Industries (FPI) fiscal year 1973 financial statements is completed and our report to the Congress is in preparation Accounting discrepancies at the Washington office disclosed in our work were either corrected during our examination or corrective action was promised and we see no need for further comment on our part We would, however, like to share our observations on the corporation's management of its working capital position, particularly cash and inventory, which we are aware has been of concern to you As you know, working capital, the excess of current assets over current liabilities, constitutes a safety margin for meeting obligations within the normal operating cycle of a business Good business practice is to maintain sufficient working capital to pay current liabilities as they mature and to finance current operations An analysis of the corporation's total assets since fiscal year 1969 reveals an aggregate growth rate of about 10 percent However, as shown in the enclosure, the corporation over the same time frame has increased its level of inventory at the expense of cash at a rate inconsistent with the overall corporate asset growth Inventory levels have increased about 78 percent from $13 7 million in 1969 to $24 4 million in 1973 Concurrently, cash has decreased by 79 percent from $12 4 million to $2 6 million Since 1969, corporation sales have not increased significantly as shown below. Fiscal Annual sales year (millions) 1969 - $52.9 1970 - 58 4 1971 - 47.3 1972 - 54 0 1973 - 58.8 -le-) I AzJ

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