A Performance Audit
An Audit Report on Agribusiness at the Department of Criminal Justice
March 2021
Summary Analysis
Texas Government Code, Section 497.112(b), requires the Department of Criminal Justice (Department) to develop and improve its agricultural operations using information from the annual Cost Statement prepared by its Agribusiness, Land and Minerals Division (Agribusiness).
The Department reported that it has largely been successful in managing its agricultural operations, having saved $160.3 million from calendar years 2014 to 2018 by producing food and fiber items instead of purchasing those products externally. However, the Department’s processes for managing its agricultural operations are not comprehensive enough to ensure that these operations are consistently cost-effective. Although the Department reported that most of its agricultural operations were cost-effective from 2014 to 2018, the Department consistently produced a significant number (46 percent) of items that were not cost-effective during that time. The Department should implement processes to identify products that are not cost-effective and make management decisions based on that analysis. In addition, the Department should produce its Cost Statements timely to enable Agribusiness and Laundry, Food and Supply (Food Service) to use this data to determine the following year’s purchases.
In its Agribusiness/Food Service Resource Coordination Guidelines (Guidelines), the Department communicated its expectation that Agribusiness is to manage production of food and fiber for its incarcerated offenders in a cost-effective manner. The Guidelines state that the Department will measure the cost-effectiveness of its agricultural operations by comparing its cost to produce products against the market value of “like or closely similar” products.
The Department’s processes for managing its agricultural operations are not comprehensive enough to ensure that these operations are consistently cost-effective. Although most of the agricultural operations were cost-effective from 2014 to 2018, the Department consistently produced a significant number of items that were not cost-effective during that time. The Department should implement processes to identify products that are not cost-effective and make management decisions based on that analysis. Auditors examined the accuracy of the 2018 Cost Statement, which was the most recent cost statement available at the time of the audit.
Cost Statement data would be more useful if the Department produced the Cost Statement in time for Agribusiness and the Laundry, Food and Supply (Food Service) division to use the data to plan food purchases for the next fiscal year. The Guidelines list the Cost Statement as a deliverable, but they do not require Agribusiness to produce the Cost Statement or other cost data in a timely manner.
Agribusiness and Food Service followed most of the requirements from the Guidelines that were tested. The Department designed these Guidelines to help these areas coordinate efforts to maximize resources used to provide food for offender consumption.
Most of the data in the 2018 Cost Statement was accurate. Cost Statement data was generally consistent with data in the Farm Business System (FBS), which is the Department’s cost accounting system.
The Department reported $92.6 million in sales revenues. Most revenues in the 2018 Cost Statement are intra-agency sales ($71.4 million).
The intra-agency sales total was consistent with the market values used in the Cost Statement and the amounts of products that the Department reported that it sold.
The Department reported $57.9 million in cost of goods sold and $3.5 million other operating expenses in the 2018 Cost Statement. Direct materials transactions that were tested matched with supporting documents and corresponding transactions in the Advanced Purchasing and Inventory Control System (ADPICS), which is the Department’s purchasing system. The Department also reported transfers accurately.
Although the data in the 2018 Cost Statement was generally accurate, the Department should improve some of its key processes to reduce the risk of significant errors in future cost statements. The Department should document policies and procedures describing creation of the Cost Statement, document the connection between the Cost Statement and its supporting data, and implement reconciliations that ensure that data in its cost accounting system (FBS) is consistent with source data.
Auditors identified weaknesses in the Department’s controls over access to certain information systems. To minimize security risks, auditors communicated details about the identified weaknesses related to access separately to the Department in writing.
Pursuant to Standard 9.61 of the U.S. Government Accountability Office’s Generally Accepted Government Auditing Standards, certain information was omitted from this report because that information was deemed to present potential risks related to public safety, security, or the disclosure of private or confidential data. Under the provisions of Texas Government Code, Section 552.139, the omitted information is also exempt from the requirements of the Texas Public Information Act.
The Department Should Continue Strengthening Information Technology Controls over Its Financial Data
The Department implemented controls to address findings from a previous audit concerning access to its main financial accounting system. The Department addressed segregation of duties issues noted in the prior audit. The original findings were in An Audit Report on Financial Processes at the Department of Criminal Justice (State Auditor’s Office Report No. 18-035, June 2018).
However, the Department could further strengthen these controls. The Department should ensure that it consistently monitors access to its financial accounting system to ensure that only current employees can use the system. Appropriately managing access to key information systems would help decrease the risk of inappropriate transactions being processed without proper review.
The Department’s Advanced Purchasing and Inventory Control System (ADPICS) has controls in place to ensure that purchases undergo a 3-way match between the purchase order, receiving report, and invoice before payment is issued to the vendor. However, the Department allows its departments to choose not to enforce this 3-way match for certain transactions.
All 25 purchases tested had all elements of a 3-way match. However, 15 (60 percent) of those purchases were made by an employee who also received the purchased items.
The 3-way match provides a critical control over expenditures, reducing the risk that employees could make unauthorized orders or divert items. Allowing the same person to make a purchase and receive the purchased item compromises this control.
Graphics, Media, Supporting documents