Prevent. Protect. Prepare.
Pat McCrory, Governor / Kieran J. Shanahan, Secretary
MEMORANDUM
TO: Mr. Richard Terry, Superintendent
Craggy Correctional Center, #4630
FROM: Timothy D. Harrell
DATE: February 21, 2013
SUBJECT: Audit of Craggy Correctional Center
Internal Audit has completed a Change of Command Audit of Craggy Correctional Center. The audit report and a completed Certificate of Responsibility are attached.
The purpose of the audit was to evaluate the effectiveness of the systems of management control by:
· reviewing and appraising the adequacy, accuracy, and soundness of accounting, financial, and operating controls
· determining the extent of compliance with established policies and procedures
· determining the extent to which assets and resources are accounted for and safeguarded
We thank you and your staff for your assistance and cooperation during this audit. If you have questions or need further assistance, please contact our office.
TH/he
Attachments
cc: Audit File #4630
MAILING ADDRESS: OFFICE LOCATION:
4201 Mail Service Center 512 N. Salisbury Street
Raleigh, NC 27699-4201 Raleigh, NC 27604-1159
Telephone: (919) 733-2126 Fax: (919) 715-8477
www.ncdps.gov
An Equal Opportunity employer
Mr. Richard Terry
February 21, 2013
Page 2
ec: Bennie Aiken
W. David Guice
Tim Moose
Joe Prater
Ginger Chinnis
Roger Moon
Marvin Mervin
Jean Burke
Joan Taylor Saucier
Roberta Morgart
Council of Internal Auditing
MAILING ADDRESS: OFFICE LOCATION:
4201 Mail Service Center 512 N. Salisbury Street
Raleigh, NC 27699-4201 Raleigh, NC 27604-1159
Telephone: (919) 733-2126 Fax: (919) 715-8477
www.ncdps.gov
An Equal Opportunity employer
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY 1
II. INTERNAL AUDIT RATING SCALE 3
III. FINDINGS AND RECOMMENDATIONS 6
A. SAFES 6
B. CANTEEN OPERATIONS 6
C. INMATES’ TRUST FUND 7
D. ACCOUNTS PAYABLE AND PROCUREMENT 7
E. FIXED ASSETS 9
F. inmate service clubs 10
MAILING ADDRESS: OFFICE LOCATION:
4201 Mail Service Center 512 N. Salisbury Street
Raleigh, NC 27699-4201 Raleigh, NC 27604-1159
Telephone: (919) 733-2126 Fax: (919) 715-8477
www.ncdps.gov
An Equal Opportunity employer
i. executive summary
Craggy Correctional Center is located in Asheville, North Carolina. The facility houses approximately 403 medium and minimum custody inmates and has 129 employees.
Internal Audit conducted a Change of Command Audit September 24 through October 1, 2012. The previous audit was completed in May 2010.
The scope of the audit included examination of the Safes, Canteen Operations, Inmates’ Trust Fund, Accounts Payable and Procurement, Fixed Assets, and Inmate Service Clubs.
Our audit disclosed no exceptions, strong internal controls, and a knowledgeable staff in the Safes and Inmates’ Trust Fund areas.
A few exceptions, minor in nature, were noted in the Canteen Operations, Accounts Payable and Procurement, and Fixed Assets areas. In the Canteen Operations area, unannounced inventories were not sufficiently varied to maintain the element of surprise, and month-end reports were not properly verified. In the Accounts Payable and Procurement area, two purchases of over $500 were not supported by competitive bid documentation, two former employees remained in NCAS and/or E-Procurement systems as either an approver or with cycle count access, and thirteen outstanding Purchase Orders, totaling $46,931.67, were more than sixty days old. In the Fixed Assets area, several updates and changes were needed on the Equipment Report, the Equipment Report was inaccurate, and monthly firearms inventory reports were not properly signed.
Some improvement was needed to strengthen internal controls and safeguard assets in the Inmate Service Clubs area. The DC-750 (Inventory-Inmate Service Club), Deposit Transmittals (DC-592s), and E-595E (Streamlined Sales and Use Tax Agreement Certificate of Exemption) were not completed. Also, there were incorrect payments of sales taxes, and vendor receipts were not signed by the Staff Coordinator. Due to the significance of our findings in the Inmate Service Clubs area, Internal Audit will conduct a Follow-up to verify corrective action has been implemented.
These appraisals are reflected in the Internal Audit Rating Scale and the Findings and Recommendations included with this report.
We held an exit conference on October 10, 2012, to inform facility management of our findings and recommendations. The following were present.
· Richard Terry, Superintendent
· Donald Watkins, Buncombe Correctional Superintendent
· Roger Moon, Western Region Director
· Carol Carver, Administrative Officer
· Tim Harrell, Internal Audit Director
· Vicki Braddy, Internal Audit Special Assistant
· George Randlett, Internal Auditor
· Libby Elder, Internal Auditor
During the course of the audit and exit conference, we provided facility personnel with schedules as needed to explain exceptions and to serve as supporting documentation.
The Superintendent acknowledged agreement with all but one of our findings and recommendations in the Accounts Payable and Procurement area regarding two DC-702 purchases over $500 that were not supported by at least two competitive bids.
In addition to our normal distribution, we may send excerpts from this report to other DPS managers as we deem appropriate.
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II. Internal Audit Rating Scale
Change of Command Audit
Craggy Correctional Center
#4630
Listed below are the major areas examined in this audit and overall ratings assigned by auditors. Major areas are comprised of individual categories as listed on the following pages. Ratings given to categories or major areas are not averages. Ratings are based on standard audit procedures, and reflect the auditors’ assessment of the facility’s performance in various categories. The risk associated with individual findings is a large component of this assessment and may significantly impact a rating.
Rating Scale Guidelines
1 - No exceptions, strong internal controls, staff appears knowledgeable
of policies and prescribed procedures
2 - Meets expectations, a few exceptions minor in nature
3 - Some improvement needed to strengthen controls or minimize risks
4 - Below expected performance level, significant improvement needed
Overall Rating
Rating
Safes /1
Canteen Operations /2
Inmates’ Trust Fund /1
Accounts Payable and Procurement /2
Fixed Assets /2
Inmate Service Clubs /3
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II. Internal Audit Rating Scale
Rating Scale Guidelines
1 - No exceptions, strong internal controls, staff appears knowledgeable
of policies and prescribed procedures
2 - Meets expectations, a few exceptions minor in nature
3 - To minimize risk, some improvement needed to strengthen controls
4 - Below expected performance level, significant improvement needed
Safes
/ 1 / 2 / 3 / 41. Drop-box Security / X
2. Drop-box Dual Lock Control / X
3. Safe Access Minimized / X
4. Transfer of Funds / X
Canteen Operations
/ 1 / 2 / 3 / 41. Separation of Duties / X
2. Purchases and Disbursements / X
3. Receipts and Deposits / X
4. Pricing / X
5. Inventory Control / X
6. Monthly Reporting / X
7. Canteen Security, Appearance, and Cleanliness / X
Inmates’ Trust Fund
/ 1 / 2 / 3 / 41. Trust Fund Account / X
2. Signature Card / X
3. Separation of Duties / X
4. Mailroom Operations / X
5. Deposits / X
6. Disbursements / X
7. Special Draws / X
8. DC-440 Administration / X
9. Account Balances and Reconciliation / X
Accounts Payable and Procurement
/ 1 / 2 / 3 / 41. Separation of Duties / X
2. Direct Processing (DC-702) Purchases / X
3. Procurement Card (P-Card) Purchases / X
4. Purchase Orders / X
5. NCAS/E-Procurement Security Access / X
Fixed Assets
/ 1 / 2 / 3 / 41. Separation of Duties / X
2. Annual Fixed Asset Inventory / X
3. Quarterly Laptop Inventory / X
4. Inventory Controls / X
5. Changes, Updates, and Follow-up / X
6. Transfers and Disposition of Assets / X
7. Vehicle Mileage and Maintenance Records / X
8. Monthly Firearm Inventory / X
Inmate Service Clubs
/ 1 / 2 / 3 / 41. Establishing/Approving an Account / X
2. Deposits and Withdrawals / X
3. Reporting of Sales Tax / X
4. Inventory Controls / X
5. Closing Accounts / X
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IIi. FINDINGS and recommendations
A. SAFES
We examined the facility’s internal controls to ensure the five safes and one drop-box provided secure storage for all currently authorized items. No exceptions were noted.
B. CANTEEN Operations
We conducted a review of the Canteen operations which included physical inventory test counts on October 1, 2012. We also observed the physical inventory process conducted by facility personnel in the two canteens, Canteen Supervisor’s Store, and the Mailroom store. All pertinent records and reports were examined to determine if canteen operations complied with the Prisons Cashless on the Net (CON) Users Manual and DPS Fiscal Policy and Procedure Manual at .0500. The following exceptions were noted.
1. Inadequate Review of Month-End Reports
Condition: The monthly CON Disbursements Reports (DC-195), the CON Sales Summary Reports (DC-263), and the Monthly Canteen Report (DC-194) were signed as verified by the back-up Canteen Supervisor instead of the Canteen Accounting Supervisor.
Criteria: Month-end reports should be signed as verified by the Canteen Accounting Supervisor. [Reference: CCM Canteen Operations, IV.G.]
Cause: The Canteen Supervisor indicated that she was unaware of this requirement.
Effect: Failure to properly review and sign reports by the appropriate level of management could result in errors being overlooked in addition to inaccurate and incomplete information in reports.
Recommendation: Facility Management should ensure canteen month-end reports are signed as “verified” in accordance with DPS policy requirements.
2. Unannounced Inventory
Condition: The canteens’ unannounced monthly inventories were not sufficiently varied to maintain the element of surprise. A review of canteen inventory reports for the period March through August 2012, disclosed where five of those inventories were conducted between the 12th and 16th of the month.
Criteria: At least one unannounced canteen inventory should be conducted during each month on various days. The time period covered for an unannounced canteen inventory should be between the first through the third week of each month, and never on the same day of each week or each month. The inventory date should be varied and unannounced in order to maintain uncertainty. [Reference: CCM Section 4, I.A.]
Cause: The Canteen Supervisor indicated that due to how shifts are scheduled, more staff is available during the middle of the month to conduct the inventories.
Effect: Failure to vary the dates of inventories could enable the inmate operator to be aware of the approximate date of the unannounced inventory and allow any dishonest operators time to adversely impact the outcome of the inventory. Accordingly, inmates may circumvent or delay discovery of stolen inventory.
Recommendation: Facility Management should implement procedures to ensure unannounced inventories are varied throughout the month.
C. INMATES’ TRUST FUND
We examined the Inmates’ Trust Fund disbursement bank account to determine if check signers were duly authorized and the bank signature card was accurate. We agreed deposits and disbursements recorded by the facility to Inmate Banking System (IBS) reports. Our examination also included review of the facility’s internal controls to ensure trust fund operations were in compliance with the DPS Fiscal Policy and Procedure Manual at .0100 and .1000, and the Prisons IBS Manual. No exceptions were noted.
D. ACCOUNTS PAYABLE AND PROCUREMENT
We reviewed the procedures used for purchase orders and local purchases processed on Direct Processing Forms (DC-702s) and Procurement Cards (P-Cards) for compliance with the DPS Fiscal Policy and Procedure Manual at .2600. The following exceptions were noted.
1. Inappropriate Access to NCAS and E-Procurement
Condition: Two former employees remained in NCAS and/or E-Procurement systems as either an approver or with cycle count and usage order access. This finding was noted in a prior audit and corrective action continues to be needed.
Criteria: Upon a change in position, retirement, or separation, the Site Security Coordinator should take the necessary action to terminate the employee’s accesses. [Reference: .2604 A.]
Cause: The Administrative Officer indicated this was due to oversight.
Effect: The integrity of the system could be jeopardized when the DPS Controller’s Systems Support Section is not notified of personnel changes made immediately.
Recommendation: Facility Management should ensure immediate action is taken when changes occur in personnel. Additions or deletions of an individual employee’s RACF access are necessary when a position changes. The SEC/DOC 1 form should be completed denoting changes to staff and sent through the chain of command for approval. Once approved, the form should be forwarded to the Controller’s Office Systems Support Section. Corrective action was initiated by facility staff during the audit.
2. Direct Processing (DC-702) Purchases
Condition: Two (18%) of eleven DC-702 purchases reviewed were over $500, but not supported by competitive bid documentation.
Criteria: For goods and services priced above $500, and up to the $1,000 limit, a fair and open solicitation of offers from more than one source is required. [Reference: .2609 B.2.]
Cause: The Administrative Officer indicated that she knew staff was getting quotes for purchase requests but not getting competitive bids was an oversight.
Effect: Failure to obtain competitive bids results in a weakness in providing fair and open solicitation for services.
Recommendation: Facility Management should ensure staff monitors and documents small purchases between $500 and $1,000 and obtain fair and competitive bids from relevant suppliers.
3. Purchase Orders Outstanding
Condition: A review of purchase orders having an open status in the North Carolina Accounting System (NCAS) disclosed thirteen purchase orders, totaling $46,931.67, that were more than sixty days old. A list of purchase orders was provided to facility personnel for corrective action. This finding was noted in a prior audit and corrective action continues to be needed.
Criteria: Each section should review the CORCOS Open Purchase Orders Report each month and take appropriate action to correct problem purchase orders that remain open after delivery or in which errors are noted. [Reference: .2606 G.3.]
Cause: The Accounting Clerk indicated that some purchase orders remained open because of transitioning into the new E-Procurement system at the end of the fiscal year and some older ones did not show on the CORCOS Open Purchase Orders Report which she regularly reviewed.