Improvements Needed in the Management of Federal Prison Industries' Factories

GGD-80-67: Published: Jun 9, 1980. Publicly Released: Jun 9, 1980.

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GAO conducted an examination of the fiscal year 1979 financial statements of the Federal Prison Industries, Inc. (FPI).

FPI needs to improve the management of its factories. Problems exist in pricing products, determining manufacturing costs, purchasing materials, maintaining inventories, collecting accounts receivable, authorizing and reimbursing travel, and internal reporting of financial information. These problems affect the efficiency of FPI operations and its net profit. They have often occurred because staff at FPI factories did not follow established policies and procedures. In some cases, however, policies and procedures need to be clarified and strengthened. A number of these problems are also attributable, in large part, to inexperienced personnel.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Commissioner of FPI should direct the Associate Commissioner to complete the development of additional guidelines to factories to ensure that: (1) selling prices are based on market prices; (2) accumulated cost data are complete and accurate; and (3) cost variances are analyzed and appropriate corrective action is taken. The Associate Commissioner should also be directed to: revise overhead accounting procedures to ensure that nonmanufacturing costs, such as permanent change of station costs, are not included as manufacturing overhead; revise overhead accounting procedures to provide for the development of stable overhead rates; and develop a training program for factory financial management personnel.

    Agency Affected:

 

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