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Internal Control and Compliance Assessment Internal Control and Compliance Assessment Legislative Joint Auditing Committee State Agencies Financial and Compliance Audit Section Arkansas Department of Correction June 30, 2010 INTRODUCTION This report is issued to inform the Legislative Joint Auditing Committee of compliance with state fiscal laws and regulations as well as deficiencies in internal controls for the Arkansas Department of Correction. As discussed in the Results of Assessment section below, our procedures disclosed the Agency did not have an acceptable, consistent valuation method for livestock. SCOPE AND METHODOLOGY We performed an internal control and compliance assessment of the Arkansas Department of Correction, a department of Arkansas state government, as of and for the year ended June 30, 2010, and have issued our report dated August 26, 2011. Management of the Agency is responsible for establishing and maintaining internal controls and complying with applicable laws and regulations. The assessment included cash on deposit, cash receipts, expenditures, purchasing, inventories, capital assets, and data entry to the Arkansas Administrative Statewide Information System (AASIS). The assessment consisted principally of inquiries, observations, analytical procedures, and selected tests of internal control policies and procedures, accounting records, and other relevant documents. We relied on financial data in AASIS recorded by the Agency and audit work conducted in the fiscal year 2010 State Comprehensive Annual Financial Report (CAFR) and Single Audit Report. The methodology used in conducting this assessment was developed uniquely for this engagement and, therefore, was more limited in scope than an audit or attestation engagement performed in accordance with Government Auditing Standards issued by the Comptroller General of the United States. RESULTS OF ASSESSMENT Assessment procedures disclosed the following internal control or compliance matter that was discussed with Agency officials during the assessment and at the exit conference: The Agency did not properly and consistently apply an acceptable valuation method for livestock as required by industry standards.* The Agency estimated its livestock to have a value of $3,903,519 at June 30, 2010, but could not provide reliable data for the basis of this estimate. Lack of a reliable valuation method for livestock could lead to misstatements in the Agency’s accounting records. *American Institute of Certified Public Accountants (AICAPA) Audit and Accounting Guide (AAG) Agricultural Producers and Agricultural Cooperatives (APC) section 5.10. ARKANSAS DIVISION OF LEGISLATIVE AUDIT 172 State Capitol, Little Rock, AR 72201 Phone: 501-683-8600 Fax: 501-683-8605 www.arklegaudit.gov Report ID: SR1348010 Report Date: August 26, 2011 Arkansas Department of Correction We recommend the Agency develop and implement an acceptable valuation method for livestock and apply it consistently. The Agency should retain relevant, sufficient, and reliable data as a basis for this valuation to ensure the accuracy of accounting records. ENABLING LEGISLATION AND ORGANIZATIONAL STRUCTURE Act 50 of 1968, as amended, established the Agency under the supervision, control, and authority of the Board of Corrections. The Agency’s functions include providing the following: Exclusive jurisdiction over the care and rehabilitation of all offenders committed to the state penitentiary. Management and control over the daily operation of the state penal system. Public safety by carrying out mandates of the courts. A safe, humane environment for staff and inmates. Programs to strengthen the work ethic of inmates. Opportunities for spiritual, mental, and physical growth of inmates. In addition to the director, the Agency is managed by seven deputy directors, as illustrated in Exhibit I on page 3: Chief Deputy Director Institutions is responsible for the East Arkansas Regional, Varner, Varner Super Maximum Security, Cummins, Ouachita River, Diagnostic, Pine Bluff, and Randall L. Williams units and manages emergency preparedness, farm, and industry. Deputy Director Operations is responsible for the North Central, Tucker, Grimes, McPherson, and Tucker Maximum Security units and manages the work-release program, coordinates vocational education, and determines inmate classification. Deputy Director Health/Programs manages services related to chaplaincy, medical needs, mental health, and pre-release, as well as sex offender assessment, grievances, accreditation, and the federal Prison Rape Elimination Act. Deputy Director Administrative Services manages accounting operations, accounting control, budget, information systems, human resources, training academy, purchasing, and warehouse. Assistant Director Institutions is responsible for the Delta and Benton units, Texarkana (TRCC), Wrightsville Complex, Northwest Arkansas Work Release Center, and Mississippi County Work Release Center. In addition, the Assistant Director Institutions manages transportation and the K-9 unit and serves as substance abuse treatment coordinator. Assistant Director Construction/Maintenance manages construction, maintenance, design, and development of facilities. Assistant Director Public Services manages research, planning, and public information, as well as coordinates policies, volunteer services, library services, and constituency services. 2 Arkansas Division of Legislative Audit Exhibit I Arkansas Department of Correction Organizational Chart Director Ray Hobbs, Director Chief Deputy Deputy Director Director Institutions Operations 6814 Princeton Pike Deputy Director Health/ Deputy Director Pine Bluff, AR 71611 Programs Administrative Services Telephone: (870) 267-6335 Assistant Director Assistant Director Construction/ http://adc.arkansas.gov Institutions Maintenance Assistant Director Public Services Source: Arkansas Department of Correction As illustrated in Exhibit II on page 4, the Agency is comprised of 22 facilities. Certain programs are administered at each facility, as listed below: Administrative Annex East: Human resources, information systems, farm, industry, accounting, procurement, inmate banking, and sex offender assessment. Benton Unit: Work release, regional maintenance, and education. Central Office: Director’s office and staff, construction, deputy and assistant directors of operations, administrative services, health and correctional programs, and upkeep and maintenance of institutions. Cummins Unit: Substance abuse treatment program, special management barracks for mental health, education, vocational education, agricultural operations, industrial operations, and Principle Application Life Skills (PALS) program. Delta Regional Unit: Regional maintenance, janitorial supply, education, jail operation, and substance abuse treatment program. Diagnostic Unit: Male inmate intake, Special Programs Unit (SPU) for mental health, hospital facility, canine unit, horse operation, and inmates with special medical needs. 3 Arkansas Department of Correction Exhibit II Arkansas Department of Correction Facilities Map Izard County Jackson County NCU NWA Miss. County Work Release Washington County Grimes McPherson Saline County Wrightsville Boot Camp Hawkins EARU Benton Lee County Hot Spring County ORCU Tucker Lincoln County Tucker Cummins Max Varner Central Varner Office Super Max Admin. East Texarkana PB Unit Work Release Diagnostic Delta Miller County R.L. Chicot County Williams Source: Arkansas Department of Correction East Arkansas Regional Unit: Field crops, education, jail operations, dog program, and substance abuse treatment. Grimes Unit: Substance abuse treatment, education, regional maintenance, technical parole violator program, Inmate Care and Custody (ICC), garage, vocational education, college, PALS, story book projects, gardening, and industry. Hawkins Center for Women: Education, General Education Diploma (GED), substance abuse treatment, InnerChange Freedom Initiative, special programs, Even Start Family Literacy Program, and parenting classes. McPherson Unit: Female inmate intake, substance abuse treatment, education, vocational education, parenting, college, PALS, pre-release, SPU for mental health, Alcoholics Anonymous/Narcotics Anonymous, anger management, gardening, and industry. Mississippi County Work Release Center: Work release, regional maintenance, Alcoholics Anonymous, Narcotics Anonymous, and GED. North Central Unit: Education, regional maintenance, anger management, PALS, and pre-release. Northwest Arkansas Work Release Center: Work release. Ouachita River Unit: Construction, regional maintenance, education, chaplaincy services, livestock, and hay. 4 Arkansas Division of Legislative Audit Pine Bluff Unit: Work release, education, mental health, garment, grounds maintenance, warehouse, and construction. Randall L. Williams Correctional Facility: Regional maintenance, grounds maintenance, and assisted living. Texarkana Regional Work Release Center: Regional maintenance, work release, education, and substance abuse treatment. Tucker Maximum Security Unit: Male inmate facility, education, GED, PALS, pre- release, and “You and I Helping Teen Youth” (UNITY) program. Tucker Unit: Crops, mattress manufacturing, bus and fire truck refurbishing, school desk and chair repair, microfilming, substance abuse treatment, Reduction of Sexual Victimization Program (RSVP), education, and vocational education. Varner Super Maximum Security Unit: Super maximum security unit. Varner Unit: Regional maintenance, substance abuse treatment, education,
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