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Washington State Auditors Office Accountability Audit Report Doc Fy2010

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Washington State Auditor’s Office
Accountability Audit Report

Department of Corrections
Audit Period
July 1, 2009 through June 30, 2010
Report No. 1004550

Issue Date
November 15, 2010

WASH I N G T O N - - -

BRIAN SONNTAG
---STATE AUDITOR

Washington State Auditor
Brian Sonntag

November 15, 2010

Eldon Vail, Secretary
Department of Corrections

Report on Accountability
We appreciate the opportunity to work in cooperation with your Department to promote
accountability, integrity and openness in government. The State Auditor’s Office takes seriously
our role to advocate for government accountability and transparency and to promote positive
change.
Please find attached our report on the Department of Corrections’ accountability and
compliance with state laws and regulations and its own policies and procedures. Thank you for
working with us to ensure the efficient and effective use of public resources.
Sincerely,

BRIAN SONNTAG, CGFM
STATE AUDITOR

Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (360) 902-0370  TDD Relay (800) 833-6388
FAX (360) 753-0646  http://www.sao.wa.gov

Table of Contents
State of Washington
Department of Corrections
Audit Summary .......................................................................................................................... 1
Related Reports ......................................................................................................................... 2
Description of the Department.................................................................................................... 3
Schedule of Audit Findings and Responses ............................................................................... 5
Status of Prior Audit Findings ....................................................................................................11

Audit Summary
State of Washington
Department of Corrections
ABOUT THE AUDIT
This report contains the results of our independent accountability audit of the
Department of Corrections for the period from July 1, 2009 through June 30, 2010.
We evaluated internal controls and performed audit procedures on the activities of the
Department. We also determined whether the Department complied with state laws and
regulations and its own policies and procedures.
In keeping with general auditing practices, we do not examine every transaction, activity
or area. Instead, the areas examined were those representing the highest risk of
noncompliance, misappropriation or misuse. The following areas were examined during
this audit period:

•

•
•

Payroll
Fuel cards
Prison cash receipting

•

•
•

Duplicate payments
Monroe gate money loss
Fixed asset inventory

RESULTS
In most areas, the Department complied with state laws and regulations and its own
policies and procedures.
However, we identified one condition significant enough to report as a finding:

•

Employees do not consistently follow the Department’s policies and procedures
on universal fuel cards and management does not properly monitor use to
prevent or detect a misappropriation of public funds.

Washington State Auditor’s Office
1

Related Reports
State of Washington
Department of Corrections
FINANCIAL
We perform an annual audit of the statewide basic financial statements, as required by
state law (RCW 43.09.310). Our opinion on these financial statements is included in the
Comprehensive Annual Financial Report (CAFR) prepared by and available from the
Office of Financial Management. The CAFR reflects the financial activities of all funds,
organizations, institutions, agencies, departments and offices that are part of the state's
reporting entity. That report is issued by the Office of Financial Management in
December of each year and can be found at www.ofm.wa.gov.
Our opinion on the Department of Corrections’ basic financial statements is included in
the Department’s separate Comprehensive Annual Financial Report.

FEDERAL PROGRAMS
In accordance with the Single Audit Act, we annually audit major federal programs
administered by the state of Washington. Rather than perform a single audit of each
agency, we audit the state as a whole. The results of that audit are published in a report
issued by the Office of Financial Management in March of each year.

OTHER REPORTS
During the current audit period, the State Auditor’s Office will issue a report on a
misappropriation of public funds at the Department. That report is available upon
request.
During the current audit period, the State Auditor’s Office issued reports pursuant to the
State Employee Whistleblower Act (Chapter 42.40 RCW). Those reports are available
on our website, www.sao.wa.gov.

Washington State Auditor’s Office
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Description of the Department
State of Washington
Department of Corrections
ABOUT THE DEPARTMENT
The Department of Corrections was created in 1981 by the Washington State
Legislature (Chapter 72, RCW). Prior to 1981, the Department was a division of the
Department of Social and Health Services. The Department consists of the Office of the
Secretary and four operating divisions headed by three Assistant Secretaries and one
Health Services Director: the Prisons Division, the Community Corrections Division, the
Administrative Services Division and the Health Services Administration.
The Department is a highly decentralized agency, with approximately 8,000 employees
to administer and supervise over 16,000 offenders housed in 13 institutions and 15 work
release locations around the state. In addition, the Department provides oversight for
more than 28,000 offender field cases, of which over 19,000 are supervised offenders in
the community. In 2003 the Department began renting beds in local jails and other
jurisdictions to address a shortage of space in state prisons. Approximately 1,100 beds
are rented from these additional sources.
The Department also operates Correctional Industries, a business enterprise, at several
of its institutions. Correctional Industries is committed to maintaining and expanding
offender work/training programs which develop marketable job skills, instill and promote
a positive work ethic among offender workers and to reduce the tax burden of
corrections. Correctional Industries includes, but is not limited to, furniture and clothing
manufacturing, food processing and printing.
For the 2009-2011 biennium, the Department budgeted $1.54 billion for operations and
allocated $94 million to capital projects.

DEPARTMENT CONTACT INFORMATION
Address:

Department of Corrections
P.O. Box 41107
Olympia, WA 98504-1107

Phone:

(360) 725-8213

Website:

www.doc.wa.gov

Washington State Auditor’s Office
3

AUDIT HISTORY
We audit the Department annually. The past five audits of the Department have
reported four findings. The 2008 audit contained two findings, one involving internal
control weaknesses over local funds and one involving a misappropriation of funds from
the Offender Welfare and Betterment fund at McNeil Island Correctional Center. The
2009 audit contained two findings, one involving internal control weaknesses over cash
receipting in prison mailrooms and one involving internal control weaknesses over
universal fuel cards. No findings were reported in 2005, 2006 or 2007 audits.

Washington State Auditor’s Office
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Schedule of Audit Findings and Responses
State of Washington
Department of Corrections
1.

Employees do not consistently follow the Department’s policies and
procedures on universal fuel cards and management does not properly
monitor use to prevent or detect a misappropriation of public funds.
Background
The Department issues universal fuel cards to its field offices, prisons and regional
offices to pay for fuel for Department vehicles. It had issued 1,093 cards by the end of
January 2010. Department employees used only 643 of these cards to charge
approximately $202,000 from July 1, 2009 through January 31, 2010.
Department policy states employees may use the cards to purchase unleaded gasoline
or diesel fuel and up to six car washes per car per year. The policy states the cards may
not be used for any other items, including service or maintenance, except in the case of
emergency. In the case of emergency, employees may purchase only oil, wiper blades
and operating lights.
Headquarters assigns the fuel cards to each Department vehicle. The Northwest
Regional Office, Southwest Regional Office and Eastern Regional Office review their
regions’ fuel card bills and Headquarters issues the payments.
We reported a finding in our fiscal year 2009 audit regarding inadequate internal controls
over fuel cards. We found Department policies were inadequate and were not enforced
to ensure fuel cards were used for allowable purposes.
To address the weaknesses, the Department established audit procedures for fuel card
transactions. It switched to a different type of fuel card in July 2009 that more tightly
controls purchases. The cards can be used only at fuel pumps and do not work inside
stores.

Description of Condition
During our fiscal year 2010 audit, we reviewed the Department’s revised fuel card
policies. In addition, we reviewed 50 transactions totaling approximately $1,725 on the
October 2009 fuel card bill that either lacked descriptions or included questionable
descriptions, such as premium fuel or purchases described as miscellaneous. Despite
the Department’s new policies and procedures, we found the following control
weaknesses continue:
Lack of Mileage Logs
Of the 50 transactions we examined, 16 (32 percent) were not supported by the required
mileage log. Without completed mileage logs, the Department cannot determine if the
quantities of fuel purchased are reasonable.
Washington State Auditor’s Office
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Lack of Monitoring
We found mileage logs are not always compared to the monthly fuel card billing
statements and fuel card transaction reports are not reviewed for unallowable
purchases. Of the 50 transactions we reviewed, we found 33 transactions (66 percent)
totaling $1,326 did not have adequate support or were for unallowable items, such as
premium fuel and items described as miscellaneous.
Fuel Card Security
Department management does not consistently enforce the fuel card policy. The
Southwest Region Organizational Development Unit kept fuel cards inside vehicles
when not in use and stored PINs with some of the cards. On two occasions at this Unit,
someone broke into vehicles, took fuel cards, and was able to purchase fuel with them
since the PINs were attached to the cards. The mileage logs were also taken, so the
Department was unable to determine the date the cards were taken and the amount of
loss. The Unit discovered one of the losses and reported it to the police. We discovered
the second loss as part of our audit. The first loss was not communicated to our Office
as required by state law.
Lack of Signed Agreements with Fuel Card Users
Department policy does not require signed card user agreements that show employees
understand how the cards are to be used.

Cause of Condition
Although Department management has established policies to address card security,
vehicle use documentation, and allowable purchases, headquarters management does
not ensure field supervisors enforce Department policies, including reconciling mileage
logs to monthly fuel card bills.

Effect of Condition
By not ensuring employees comply with fuel card policies and properly secure the cards,
the Department lost two cards due to theft and was unable to determine the amount of
the loss, when the loss occurred and which employees were in violation of Department
policy.
Since the Department does not ensure all vehicle logs are complete, the monthly
reconciliation process has not identified unallowable purchases or who may have made
them.

Recommendation
We recommend the Department develop and enforce the fuel card policy and
procedures to ensure:

•

Employees record all vehicle use on mileage logs.

Washington State Auditor’s Office
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•

Someone compares activity recorded in mileage logs to the monthly billing
statement on fuel purchases.

•

Card users are aware of the types of purchases that are allowable and what
documentation they need to update and retain.

•

All locations properly secure fuel cards.

•

Employees sign fuel card user agreements indicating they agree to comply with
established procedures.

•

Report all known or suspected losses immediately to the State Auditor’s Office as
required by state law (RCW 43.09.185).

Department’s Response
We concur with the finding of the State Auditor’s Office. We are redesigning our
monitoring and review procedures to improve controls over and accountability of
universal fuel cards.

Auditor’s Remarks
We appreciate the Department’s commitment to resolving the identified weaknesses.
We will follow up with the Department at a later date to determine what corrective
actions have been taken.

Applicable Laws and Regulations
RCW 43.09.185 - Loss of public funds -- Illegal activity -- Report to state auditor's office.
State agencies and local governments shall immediately report to the
state auditor's office known or suspected loss of public funds or assets or
other illegal activity.
WAC 236-48-251 – Distribution of credit, charge cards or purchasing cards.
Agency heads (or their designees) shall institute a system for
responsibility, control and distribution of credit, charge or purchasing
cards within each agency.
SAAM 45.20.20.a states in part:
An agency should establish internal controls to address the use of the
purchase card as a means of expending state funds. The following is the
minimum level of controls acceptable:

•

Card users shall be given a copy of the agency purchase card
policies and procedures, should sign a card user agreement form,
and should complete training prior to a purchase card being
issued and used.

Washington State Auditor’s Office
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•
•
•

•

•

Promptly recording, properly classifying, and promptly reconciling
all transactions.
Assigning key duties and responsibilities to ensure a proper
separation of duties.
Safeguarding purchase cards and account numbers against loss,
theft, and unauthorized use. Cards should be kept by the
cardholder or card custodian in a secure (locked) location when
not in use.
Agencies utilizing department cards should create and maintain a
department card log to track card use. Designated card users
should check out and check in the card on a department card log
and describe the business purpose for each use in order to make
a purchase.
Reconciling and approving card statements at least monthly.

SAAM 45.10.70.c states in part:
The agency program administrator is the person responsible for
management and oversight of the purchase card program within the
agency, and is responsible for the following:

•

•
•

Developing and enforcing agency policies and procedures for
using the purchase card, including disciplinary procedures related
to unauthorized use of cards and card renewal procedures. The
agency policies and procedures should meet the minimum
requirements of the statewide policies and procedures contained
in this chapter. State ethics laws should also be considered when
developing agency policies.
Providing training to approving officials, cardholders, card
custodians, and designated card users in the management,
security, and use of the card.
Ensuring card users satisfy documentation requirements for
purchases.

SAAM 45.10.70.d
The approving official is assigned to monitor, review, and approve card
transactions to ensure compliance with purchase card policies and
procedures, and is responsible for the following:

•
•

Ensuring timely reconciliation of card statements, including ensuring
that supporting documentation is attached.
Monitoring card activity for unusual patterns of use or unacceptable
transactions, and taking appropriate disciplinary measures with card
users who misuse their purchase card.

SAAM 45.10.70.e states in part:
For agencies that choose to utilize department cards, the card custodian
administers and controls the use of department cards by authorized

Washington State Auditor’s Office
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designated card users within the card custodians’ workgroup and is
responsible for the following:
• Complying with all state, agency, and purchasing statutes, rules,
policies, and procedures.
• Training designated card users on the use of the card.
• Ensuring that designated card users obtain and submit valid
supporting documentation for each purchase made.
• Reconciling the card statement to the purchase card transaction log
and supporting documentation, at least monthly, and submitting to the
approving official for approval.
SAAM 45.10.70.f states in part:
For agencies who choose to utilize department cards, the designated
card user is an authorized user of a department card, and is responsible
for the following:

•

•
•
•

Using the purchase card in accordance with all state and agency
statutes, rules, policies, and procedures.
Obtaining and submitting valid supporting documentation for each
purchase made.
Checking card back in on department card log after use and
immediately returning card and supporting documentation to card
custodian.
Safeguarding card security at all times.

DOC Vehicle Use Policy 230.500, Section V, Part A states in part:
The operator will:
6. Report mileage driven, date, driver’s name, and purpose on DOC 05070 Vehicle Usage Log
Section V, Part B states in part:

•

•
•
•

•

Fuel cards should be used to purchase regular unleaded gasoline
or diesel whenever possible.
Universal fuel cards may be used to purchase fuels, oil, and
emergency repairs when using the Department of Transportation
fuel card would cause undue hardship.
Mileage logs, keys, and fuel cards will be kept in the local
Department office when the vehicle is not in use.
Fuel cards will not be marked with the 4 digit PIN and must be
kept secure. Mileage logs, keys, and fuel cards will be kept in the
local Department office when the vehicle is not in use.
If a fuel card is lost or stolen, staff will notify the Department fuel
card administrator as soon as possible.

Washington State Auditor’s Office
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Section XII, Part A states:
Each facility/office will maintain comprehensive records of staff travel and
motor vehicle usage that include:
1.
DOC 05-070 Vehicle Usage Log, and
2.
Cost records relating to the operation, gasoline, oil, and service.

Washington State Auditor’s Office
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Status of Prior Audit Findings
State of Washington
Department of Corrections
The status of findings contained in the prior years’ accountability report of the Department of
Corrections is provided below:
1.

The Department does not have adequate internal controls over Voyager fuel cards
to prevent or detect misappropriation of public funds.
Report No. 1002601 dated December 7, 2009
Background
We reviewed controls in place over Voyager fuel cards at the three regional offices and
found supporting documentation was not being kept, bills were not being reconciled to
receipts and mileage logs, support for “emergency” purchases was not being obtained,
users were not signing card user agreements, unallowable purchases were being made
and unused cards were not being canceled or deactivated.
We recommended the Department: 1) Establish and enforce adequate policies and
procedures to ensure fuel cards are used for allowable business purposes, and in
accordance with management’s expectations; 2) Ensure card users be trained on the
allowable use of the cards and types of documentation they need to retain and submit;
3) Obtain and review support documentation before paying fuel card bills; and 4)
Regularly eliminate cards that are not being used.
Status
We reviewed this area during the current audit and found that although the Department
made changes to try to address our concerns, including assigning cards to vehicles and
auditing some charges, the changes were not adequate to address our concerns. We
found issues with card security, enforcement of policies, user agreements, support
documentation, and unallowable purchases. We issued a finding over this area for the
current year. See Finding 1.

2.

The Department does not have adequate controls over cash-receipting in the
mailrooms at the prisons to prevent or detect misappropriation.
Report No. 1002601 dated December 7, 2009
Background
We reviewed the cash-handling for inmate accounts at the Washington Correctional
Center for Women (WCCW), the McNeil Island Correctional Center (MICC), the Monroe
Correctional Center (MCC) and Airway Heights Correctional Center (AHCC). The
prisons all use the same receipting system to log cash receipted in the mailrooms. We
found at all four prisons the mail was not opened by two people, money orders were left
Washington State Auditor’s Office
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unsecured on a table before they were entered into the system, no signature were
required when money orders were transferred from the mailroom to the Business Office,
and the receipting system allowed transactions to be permanently deleted, leaving no
record of the activity. We also found at MICC, MCC, and the WCCW a common log-on
was used, even though individual user accounts could be created, and not all money
received was recorded in the receipting system. Items such as money orders that were
not properly filled out and income tax refunds were set aside and returned to the sender
or forwarded to family members without being tracked. At AHCC after money orders
were entered into the system, the receipts were attached and left in an unsecured bin in
the middle of the mailroom until they were transported to the Business Office. At WCCW
no one was reconciling the bank deposit to the daily money order list.
Status
We reviewed the changes the Department made at each of the four prisons. The only
prison the Department said did not make any changes was MCC. We will perform onsite reviews during the next audit to determine if the stated changes adequately address
our concerns.

Washington State Auditor’s Office
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ABOUT THE STATE AUDITOR'S OFFICE
The State Auditor's Office is established in the state's Constitution and is part of the executive
branch of state government. The State Auditor is elected by the citizens of Washington and serves
four-year terms.
Our mission is to work in cooperation with our audit clients and citizens as an advocate for
government accountability. As an elected agency, the State Auditor's Office has the independence
necessary to objectively perform audits and investigations. Our audits are designed to comply with
professional standards as well as to satisfy the requirements of federal, state, and local laws.
The State Auditor's Office employees are located around the state to deliver our services effectively
and efficiently.
Our audits look at financial information and compliance with state, federal and local laws on the part
of all local governments, including schools, and all state agencies, including institutions of higher
education. In addition, we conduct performance audits of state agencies and local governments and
fraud, whistleblower and citizen hotline investigations.
The results of our work are widely distributed through a variety of reports, which are available on
our Web site and through our free, electronic subscription service. We continue to refine our
reporting efforts to ensure the results of our audits are useful and understandable.
We take our role as partners in accountability seriously. We provide training and technical
assistance to governments and have an extensive quality assurance program.
State Auditor
Chief of Staff
Deputy Chief of Staff
Chief Policy Advisor
Director of Audit
Director of Special Investigations
Director for Legal Affairs
Director of Quality Assurance
Local Government Liaison
Communications Director
Public Records Officer
Main number
Toll-free Citizen Hotline
Website
Subscription Service

(SAO FACTS.DOC - Rev. 06/09)

Brian Sonntag, CGFM
Ted Rutt
Doug Cochran
Jerry Pugnetti
Chuck Pfeil, CPA
Jim Brittain, CPA
Jan Jutte, CPA, CGFM
Ivan Dansereau
Mike Murphy
Mindy Chambers
Mary Leider
(360) 902-0370
(866) 902-3900
www.sao.wa.gov
https://www.sao.wa.gov/EN/News/Subscriptions/

 

 

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