south carolina - core · cei>tral supply it i]'.'teragency ma il serv ce (803)734-7919...

I I

SOUTH CAROLINA DEPARTMENT OF CORRECTIONS

AGENCY

I I I I I I I I I I I I I I I I I I I

STATE OF SOUTH CAROLINA

~btte 7!iluoget ana Oiontrol 1Moaro DIVISION OF GENERAL SERVICES

~.·. ~- .~, - .J/Ia) ~ ("'

1: I JOHN DRUMMOND CARROLL A. CAMPBELL, JR., CHAIRMAN GOVERNOR

1•" ·~·· .. ._ ..

I I _J, _I ·,· ! CHAIRMAN, SENATE FINANCE COMMnTEE

' ~ ·- WJLUAM D. BOAN \ - ·.r -- \ _, /\..- . - . -< CHAIRMAN, WAYS AND MEANS COMM!TfEE

GRADY L PA ITERSON, JR. STATE TREASURER

EARLE E. MORRIS, JR. COMPTROLLER GENERAL

M9-rch 10, 1994

Mr. Richard W. Kelly Director

HELEN T. ZEIGLER DEPliTY DIRECTOR

MATERIALS MANAGEMENT OFFICE 1201 MAJN STREET, SUITE 600

COLUMBIA, SOI.J'rn CAROLINA 29201 (803) 737-0600

HARDY L MERRrrr, Ph.D. ASSIST ANT DIVISION DIRECTOR

Division of General Services 1201 Main Street, Suite 420 Columbia, South Carolina 29201

Dear Rick:

Ll.J'rnER F. CARTER EXECUllVE DIRECTOR

I have attached the Department of Correction's procurement audit report and recommendations made by the Office of Audit and Certification. I concur and recommend the Budget and Control Board grant the Department a three ( 3) year . certification as noted in the audit report.

Sincerely,

Si/4.~ Hardy L. Merritt Assistant Division Director

HLM/jj

Attachment

MARION U. DORSEY, P.E. OFFICE OF 1lffi

STATE ENGINEER (803) 737-0770

JAMES J. FORTH, JR. STATE

PROCUREMENT (803) 737-0000

RON MOORE INFORMATION TECHNOLOGY MANAGEMENT (803) 737-0600

VOIGHT SIIEAL Y AUDIT

4t CERTIFICATION (803 ) 737-0000

LARRY G. SORRELL CUSTOMER ASSURANCE

PROGRAM (803) 737-0600

WALTTAYLOR STATE & FEDERAL

SURPLUS PROPERTY

(803) 822·5490

WALTTAYLOR CENTRAL SUPPLY & IKTERAGENCY MAIL SERVICE (803) 734-7919


SOUTH CAROLINA DEPARTMENT OF CORRECTIONS

PROCUREMENT AUDIT REPORT

OCTOBER 1, 1990 - SEPTEMBER 30, 1993

I I I I I I I I I I II

I I I I I I I I

TABLE OF CONTENTS

PAGE

Transmit tal Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Summary of Audit Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Results of Examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Certification Recommendations ................................ 25

Follow-up Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

NOTE: The Department's responses to issues noted in this report have been inserted immediately following the issues they refer to.

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~tate 'Thluoget ano <rrnntrnl 7tilnaro DIVISION OF GENERAL SERVICES

JOHN DRUMMOND CARROLL A. CAMPBELL, 1R., CHAIRMAN GOVERNOR CHAIRMAN, SENATE FINANCE COMMilTEI!

GRADY L PA lTER.SON,1R. STATE TREASURER


Dr. Hardy Merritt

HELEN T. ZEJGLER DEPl!TY DIRECTOR

MATERIALS MANAGEMENT OFF1CE 1201 MAIN STREET, SUITE 600

COLUMBIA, SOI.ITH CAROLINA 29201 (803) 737-0600

HARDY L MERRilT, Ph.D. ASSISTANT DIVISION DIRECTOR

March 10, 1994

Assistant Division Director Division of General Services 1201 Main Street, Suite 600 Columbia, South Carolina 29201

Dear Hardy:

WILUAM D. BOAN CHAIRMAN, WAYS AND MEANS COMMlTfEE

LI.ITHER F. CARTER EXEClJilVE DIRECTOR

We have examined the procurement policies and procedures of

the South Carolina Department of Corrections for the period

October 1, 1990 through September 3 0 , 199 3. As part of our

examination, we studied and evaluated the system of internal

control over procurement transactions to the extent we considered

necessary.

The evaluation was to establish a basis for reliance upon

the system of internal control to assure adherence to the

Consolidated Procurement Code and State and internal procurement

policy. Additionally, the evaluation was used in determining the

nature, timing and extent of other auditing procedures necessary

for developing an opinion on the adequacy, efficiency and

effectiveness of the procurement system.

MARION U. DORSEY, P.E. OFFICE OF 1HE

STATE ENGINEER (803) 737-0710

JAMES J. FORrn, JR. STATE


RON MOORE INFORMATION TEOiNOLOGY MAN AGEMEJI.'T (803) 7 37-0600

VOIGHT SHEALY AUDIT

& CERTIFICATION (803) 737-0600


PROGRAM (803) 737-0600

WALTTAYLOR STATE It FEDERAL

SURPLUS PROPERTY

(803) 822-5490

WALTTAYLOR CEI>TRAL SUPPLY It I]'.'TERAGENCY

MAIL SERV ICE (803)734-7919

The administration of the South Carolina Department of

Corrections is responsible for establishing and maintaining a

system of internal control over procurement transactions. In

fulfilling this responsibility, estimates and judgements by

management are required to assess the expected benefits and

related costs of control procedures. The objectives of a system

are to provide management with reasonable, but not absolute,

assurance of the integrity of the procurement process, that

affected assets are safeguarded against loss from unauthorized

use or disposition and that transactions are executed in

accordance with management ' s authorization and are recorded

properly.

Because of inherent limitations in any system of internal

control, errors or irregularities may occur and not be detected.

Also, projection of any evaluation of the system to future

periods is subject to the risk that procedures may become

inadequate because of changes in conditions or that the degree of

compliance with the procedures may deteriorate.

Our study and evaluation of the system of internal control

over procurement transactions, as well as our overall examination

of procurement policies and procedures, were conducted with

professional care. However, because of the nature of audit

testing, they would not necessarily disclose all weaknesses in

the system.

The examination did, however, disclose conditions enumerated

in this report which we believe need correction or improvement.

2



Corrective action based on the recommendations described in

these findings will in all material respects place the Department

of Corrections in compliance with the South Carolina Consolidated

Procurement Code and ensuing regulations.

~~~~ ~E, Manager Audit and Cer~i~~~ion

3

INTRODUCTION

We conducted an examination of the internal procurement

operating policies and procedures of the South Carolina

Department of Corrections October 7 through December 10, 199 3.

We did so under authority described in Section 11-35-1230(1) of

the South Carolina Consolidated Procurement Code and Section 19-

445.2020 of the accompanying regulations.

Our examination was directed principally to determine

whether, in all material respects, the procurement system ' s

internal controls were adequate and the procurement procedures,

as outlined in the Internal Procurement Operating Procedures

Manual, were in compliance with the South Carolina Consolidated

Procurement Code and its ensuing regulations.

Additionally our work was directed toward assisting the

Department in promoting the underlying purposes and policies of

the Code as outlined in Section 11-35-20, which include:

(1) to ensure the fair and equitable treatment of all persons who deal with the procurement system of this State

(2) to provide increased economy in state procurement activities and to maximize to the fullest extent practicable the purchasing values of funds of the State

(3) to provide safeguards for the maintenance of a procurement system of quality and integrity with clearly defined rules for ethical behavior on the part of all persons engaged in the public procurement process

4



BACKGROUND

Section 11-35-1210 of the South Carolina Consolidated

Procurement Code states:

The (Budget and Control) Board may assign differential dollar limits below which individual governmental bodies may make direct procurements not under term contracts. The Division of General Services shall review the respect ive governmental body's internal procurement oper ation, shall verify in writing that it is consistent with the provisions of this code and the ensuing regulations, and recommend to the Board those dollar limits for the respective governmental body ' s procurement not under term contract.

Most recently, on February 26, 1991, the Budget and Control

Board granted the South Carolina Department of Corrections the

following procurement certifications:

Category Requested Limit

1. Goods and Services $ 50,000 per commitment

2. Construction

3. Construction Materials and Equipment

4. Consultant Services

25,000 per commitment



Since that certification expires February 26, 1994, this

audit was performed primarily to determine if recertification is

warranted. Additionally, the Department requested the following

increased certification limits:

5

Category

1. Goods and Services

2 . Construction Services

3. Construction Materials and Equipment

4. Consultant Services

5. Information Technology

6

Requested Limit

$100,000 per commitment






I SCOPE

I We conducted our examination in accordance with Generally

I Accepted Auditing Standards as they apply to compliance audits.

I I I

,I I I I I I

I I

It encompassed a detailed analysis of the internal procurement

operating procedures of the South Carolina Department of

Corrections and its related policies and procedures manual to the

extent we deemed necessary to formulate an opinion on the adequacy

of the system to properly handle procurement transactions.

We selected systematic samples for the period October 1,

1990 through September 30, 1993, of procurement transactions for

compliance testing and performed other audit procedures that we

considered necessary to formulate this opinion. As specified in

the Consolidated Procurement Code and related regulations, our

review of the system included, but was not limited to, the

following areas:

(1) All sole source and emergency procurements and trade-in sales for the period October 1, 1990 - September 30, 1993

(2) Purchase transactions for the period October 1, 1990 -September 30, 1993

a) Three hundred forty-seven procurement transactions, each exceeding $500 from the following areas: 1) Goods and Services - 87 2) Consultants - 41 3) Information Technology - 104 4) Construction - 80

b) Block samples from Prison Industries, Wateree Farm and the Division of Construction, Engineering and Maintenance

(3) Minority Business Enterprise Plans and reports

(4) Procurement staff and training

(S) Procurement procedures

(6) Information Technology Plan Approvals

(7) Permanent Improvement Projects 7

SUMMARY OF AUDIT FINDINGS

Our audit of the South Carolina Department of Corrections,

hereinafter referred to as the Department, produced findings and

recommendations in the following areas:

I . Sole Source, Emergency and Trade-in Sale Procurements

A. Inappropriate Sole Sources

We have identified 29 sole source trans

actions totalling $69,656.73 as being

inappropriate.

B. Sole Source Procedural Weakness

The Department ' s use of a blank sole

source determination for its equipment

maintenance agreements was an internal

control weakness. Since the determin-

ation was not specific to any vendor,

we believe the potential for abuse was

too great.

C. Reports of Trade-in Sales

The Department failed to follow through

with a plan to correct a reporting problem

identified in our last audit.

8

PAGE

12

12

14

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I I I I I I I II I I I I I I I I I I I

II. Construction Procurements

We found all procurements and files that

we tested to be in order with one

exception area. Out of eleven

architectural/engineering contracts we

reviewed, four did not have evidence

that the Federal Standard Forms 254

and 255 were submitted. These forms

are required in the evaluations of firms '

qualifications for contracts.

III. General Code Compliance Exceptions

A. Blanket Purchase Agreement Procedure

One of the Department's blanket purchase

agreement procedures did not comply with

the procurement regulations.

B. Blanket Purchase Agreement Procedures Not Followed

At the Wateree Farm, we identified four

areas of blanket purchase agreement use

that did not conform to either Department

procedures or the Procurement Code. This

resulted in $123,014.97 in expenditures to

one vendor with virtually no competition.

C. Procurement Without Competition

A contract in the amount of $12,000 for

consulting services for the Bright

Futures Project was awarded with no

9

16

17

17

18

20

solicitations of competition.

D. Freight Paid But Not Authorized

We identified $1,543.68 of freight charges

paid without authorization.

E. Procurement Procedures Manual Needs Updating

A number of items should be added to the

manual.

IV. Prison Industries

A. Procurement Procedures Manual Needs Updating

The procurement procedures manual at

Prison Industries was last updated in

August 1981. Substantial changes to the

Procurement Code have been made since that

time, yet the Division has failed to make

any updates.

B. Separation of Duties

We found that an accounts payable clerk

and an assistant accounts payable clerk

signed the procurement officers name to

purchase orders. Internal control theories

on separation of duties require that

procurement and payment functions be

distinct in order to avoid employees

having sole possession of a transaction.

10

20

21

22

22

23


I I I I I I I I I I II

I I I I I I I I

C. Freight Paid Without Authorization

For one particular vendor, Prison

Industries paid $2,930.85 of unauthorized

freight charges over 15 purchase orders.

D. Petty Cash Policy Not Followed

The written policy at Prison Industries

limits petty cash disbursements to $25.00.

However, the practice was $50.00 per

disbursement.

11

23

24

RESULTS OF EXAMINATION

I. Sole Source, Emergency and Trade-in Sale Procurements

We examined the quarterly reports of sole source, emergency

and trade-in sale procurements for the period October 1, 1990

through September 30, 1993. This review was performed to

determine the appropriateness of the procurement actions taken and

the accuracy of the reports submitted to the Division of General

Services as required by Section 11-35-2440 of the Consolidated

Procurement Code. The following problems were noted.

A. Inappropriate Sole Sources

We noted 29 sole source transactions which we believe were

inappropriate. Most of these inappropriate sole source

transactions were made to one vendor. Instead of listing the

individual purchase order numbers for that vendor, we have listed

the number of transactions with the total amount expended.

PO# Description Amount

21 transactions Kitchen equip . repair parts 16,093.13 0100095701 Green house 10,149 . 00 0100095766 Green house 12,227.00 0100116568 Employee honesty bond 6,260.00

insurance 0100107362 Employee honesty bond 6,260.00

insurance 010098483 Employee honesty bond 6,117.00

insurance H000145170 Paint 7,830.00 0100111775 Paint 4,185.00 0100113623 Paint 535.60

Total $ 69,656.73

For the kitchen equipment repair parts, we recognize the

Department's need to limit its specifications to name brand only.

12



However, we called another vendor in the Columbia area and asked

if he could provide these same repair parts. The vendor said he

could. Further, the Department justified the sole source on the

basis that the manufacturer was cheaper than the distributors.

These transactions were not sole sources. Competition should have

been solicited.

The two transactions for the green houses were for new green

houses. More than one company makes green houses . Competition

should have been solicited.

The employee honesty

insurance companies.

competition.

We

bond insurance

recommend the

is offered

Department

by other

solicit

The three transactions for paint were for ordinary wall

paint. The Department indicated it needed to match existing paint

already applied. However, even if this requirement justified

limiting competition to one brand of paint, there are numerous

distributors of that paint from which competition could have been

solicited.

Finally, the Department made 36 sole source procurements of

epoxy paint totalling $217,866.92. The epoxy paint, which is used

in heavy traffic areas, was selected based on its durability. At

the end of the audit period, the Department submitted a

requisition to the State Procurement Office and an unsuccessful

attempt was made to locate competition . For the Department ' s

specifications, this epoxy paint is a sole source. However, one

vendor offered to attempt to develop a comparable epoxy paint for

testing in the Department's facilities. We recommend the

Department consider the vendor ' s offer.

13

The Department should reevaluate its decisions on sole

source procurements and restrict use of them to unique items only

available from a single source.

DEPARTMENT RESPONSE

1. The 21 transactions for kitchen equipment repair parts. Competition will be sought for repair parts when generic parts can be used. Should 0. E. M. parts be available from manufacturer's dealers, solicitation will be made to the authorized dealers. A sole source will be declared only when the O.E.M. parts can be obtained only from the manufacturer or a dealer with exclusive territorial selling rights.

2. Purchase Orders 0100095701 and 0100095766 for Greenhouses. With your help we found Nexus has a manufacturing plant located in Darlington, South Carolina. Our specifications on future requirements for Greenhouses will be generic.

3. Purchase orders 010011656 8, 0100107 362 and 01009 84 83 for Employee's honesty bond insurance. We will cease from using a broker for this insurance. Our agency has a current audit and we can solicit bids directly from the insurance companies rather than through insurance agents.

4. Purchase orders H000145170, 0100111775 and 0100113623 for Sherwin Williams paint. Future requirements for paint to match existing colors will be solicited from the various dealers of the manufacturer's paint.

5. 36 sole source procurements for epoxy paint. We have requested Rose Talbert to supply our agency with their best epoxy paint to be tested in a heavy traffic area.

B. Sole Source Procedural Weakness

On 89 sole source transactions totalling $372,385.97, the

Department used a blank sole source determination which read

"Various Vendors" and attached a separate list of those vendors.

We observed that the list of vendors changed as necessary to

accommodate different vendors. As a result of this practice, the

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- -----------·

I I I I I I I I I I I I I I

I I I I

high level authority required to approve sole sources was being

bypassed.

We do acknowledge that the Department limited this type of

sole source to equipment maintenance agreements from the original

equipment manufacturer. We did not take exception with the

appropriateness of those transactions. However, we be 1 ieve the

potential for abuse over sole source transactions was greatly

increased with this type of procedure.

We recommend the Department stop using this "Various

Vendors" sole source determination. Each sole source

determination should be specific to each vendor. The Department

may prepare blanket determinations to each vendor for maintenance

on specified types of equipment.

DEPARTMENT RESPONSE

"Various Vendors" sole source procedural weakness. Future sole source determinations shall be specific to each vendor. Blanket determinations shall be to each vendor for maintenance on specific types of equipment.

c. Reports of Trade-in Sales

Under authority of Section 11-35-3830 of the Consolidated

Procurement Code, the Materials Management Section asks agencies

to report trade-ins of personal property each quarter. During

our last audit of the Department we noted that it was reporting

the net purchase prices of new i terns bought rather than the

trade-in allowance received for the old items. We discussed this

point with appropriate agency officials. However, because the

15

Department issued a written memorandum dated January 21, 1991,

directing correction of this practice, we did not take official

exception with the practice. Unfortunately, the current audit

revealed that the problem was never corrected.

We recommend that the Department report the trade-in value

of items being traded in, not the net purchase price of new items

being procured.

DEPARTMENT RESPONSE

Our new internal reporting procedures require we report the trade-in value of i terns being traded in, not the net purchase price of the new items being procured. All improper reports have been amended to reflect the proper trade-in value.

II. Construction Procurements

Our review of construction procurements included

procurements of goods and services related to construction,

construction-related professional service contracts and

construction contracts. This review included twenty-two contracts

within eleven permanent improvement projects. We found all

procurements and files that we tested to be in order with one

exception area.

Of the eleven architectural/engineering contracts we

reviewed, the Department could provide no evidence on four

contracts that the required Federal Standard Forms 254 and 255

were obtained. The contracts were as follows:

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Project#

9522

9522

9524

9538

Description Contract Amount

Quality assurance testing for $ 89,500 Turbeville Medium Security Facility

Project management service - 564,941 Turbeville Correctional Inst.

Design of library 56,200

Indefinite delivery 38,940

These forms are required /by Section 11-35-3220 of the

Procurement Code and are used in evaluating the qualifications of

firms for projects.

We recommend the Department retain these forms for all firms

awarded contracts for professional services related to

construction.

DEPARTMENT RESPONSE

Federal forms 254 and 255 have been submitted to your office on the cited projects: 9522, 9524 and 9538.

III. General Code Compliance Exceptions

We tested random samples from the four procurement areas of

goods and services, consultants, construction and information

technology, as well as performed other tests in accordance with

our standard audit program. These tests revealed the following

exceptions.

A. Blanket Purchase Agreement Procedure

One of the Department's blanket purchase agreement (BFA)

17

procedures is not in compliance with Procurement Code Regulations.

The Department uses the total cost per line i tern on invoices

. versus the total commitment in determining competition

requirements. By using each line i tern to determine competition

requirements, the Department has underestimated the competition

requirements.

We recommend

manual to reflect

the Department change this

total commitment amounts

competition requirements on its BPA's.

section of its

for determining

B. Blanket Purchase Agreement Procedures Not Followed

Due to concerns raised during our review of random samples,

we expanded our testing of BPA's at the Wateree Farm.

Regulation 19-445.2100(C)(2) states, "To the extent

practicable, blanket purchase agreements for i terns of the same

type should be placed concurrently with more than one supplier.

All competitive sources shall be given an equal opportunity to

furnish supplies or services under such agreements."

1) At the farm, BPA's were not spread around to vendors for

items of the same type. The farm had five BPA's of which three

were issued exclusively to a single vendor, and two were issued

to separate vendors for auto parts.

We recommend the farm adhere to the provision of the

regulations listed above.

2) For one particular BPA where the vendor was used

exclusively, the farm expended $123,014.97 over the period June

30, 1991 through October 1, 1993 for tractor repair parts with

virtually no competition. Only invoice line items which exceeded

$500 each had solicitations of competition regardless of the

18



total invoice amount.

Considering the amount of money spent for just over 2 years,

we recommend the Department solicit a contract for these repair

parts.

3) Often times, when invoices for these BPA's were sent for

payment, there was no receiving signature on the invoices. The

farm has a list of individuals authorized to place calls, the

dollar limitation of those calls and who may make pickups against

the BPA's. If the invoices are not signed, there is no evidence

that authorized individuals were making calls or pickups.

4) Additionally, for the invoices which were signed, the

dollar authority given by the list was completely ignored.

We recommend the farm adhere to the requirements of

Regulation 19-445.2100 for Blanket Purchase Agreements as well as

its own internal procedures.

DEPARTMENT RESPONSE

The Wateree Farm purchasing office procures goods/services for four different budget units:

Agriculture Services Wateree Farm Operations Walden Farm Operations MacDougal Farm Operations

24601 24602 24603 24604

Our automated order entry and financial accounting does not permit a combining of budget units, therefore, it is necessary for us to issue a blanket purchase agreement for each budget unit. Almost all the farm equipment and vehicles are repaired at the Wateree Farm facility even though the equipment / vehicles may be used at Walden, Columbia, SC or MacDougal, Ridgeland, SC which have different budget units.

The John Deere tractor parts purchased from Manning Tractor were competed prior to issuing a blanket purchase agreement. Manning Tractor quoted us John Deere parts at list less 10% discount. Payne & Kennedy quoted list price plus 15% and offered a 10%

19

discount. discount.

Guess Farm Equipment quoted list price with no

John Deere Tractor was 1999.

parts have been bid by MMO, B400640 and Manning low bidder and this contract will be used through

Our procedure for BPA's will required signatures on the shipping/receiving/invoice documents depending on method of shipment or pickup. These procedures will list individuals who are authorized to place orders with dollar limitations and make pickups.

C. Procurement Without Competition

The Department awarded a contract for the Bright Futures

Project in the amount of $12,000 with no solicitations of

competition, nor sole source or emergency determination for

consultant services. (Ref. Purchase Order 1000148402).

At that time the Procurement Code required a minimum of 10

sealed bid solicitations of competition for procurements of

$10,000 or more.

We recommend the Department solicit competition on this type

procurement in the future.

DEPARTMENT RESPONSE

We agreed and will solicit competition for consultant services in the future.

D. Freight Paid But Not Authorized

We noted six instances of unauthorized freight payments.

They were as follows:

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PO# Description Freight

1. 0100102253 Scanner equipment $420.00 2. 0100113808 Instructional materials 292.56 3. 0100113913 Instructional materials 389.66 4. 0100113807 Instructional materials 280.16 5 . 0100098279 Software 127.34 6. I000148222 Mobile radio 33.96

Total Paid $1,543.68

We recommend the Accounts Payable section not pay freight

unless it has been authorized by the Procurement Department.

DEPARTMENT RESPONSE

In the past accounts payable would call the procurement officer and obtain verbal approval to pay freight on an invoice. We will continue to use this procedure, however, the accounts payable person will annotate on the invoice and purchase order the procurement officer's name, date and sign. The procurement officer will fill out a SCDC purchase order change form #20-31 and submit to accounts payable to be attached to the invoice and purchase order in question.

E. Procurement Procedures Manual Needs Updating

Our review of the procurement procedures manual identified

a number of items which should be added. We do not believe the

manual is adequate as it is, considering the current

certification level of the Department.

We recommend the Department revise its manual adding those

elements we identified during the audit. This will need to be

accomplished prior to us recommending recertification.

DEPARTMENT RESPONSE

We have updated our manual to include all the suggestions from the auditing staff. Submitted to you was a draft which included

21

these changes. Should we need to make other changes please advise while it is still in draft form.

IV. Prison Industries

The Division of Prison Industries section of the Department

is, for the most part, exempt from the Procurement Code.

Specifically, raw materials used in the manufacture of goods sold

by this Division are exempt. However, not all of its

procurements are exempt. For this reason we performed an audit

of Prison Industries' activity. The results were as follows:

A. Procurement Procedures Manual Needs Updating

The procurement procedures manual was last updated in August

1981. This was when the Procurement Code was originally enacted.

Many changes have occurred over the years including the enactment

of the State Government Accountability and Reform Act, which

substantially changed the Procurement Code. Prison Industries

has failed to update its manual to keep current with these

changes.

We recommend the Division of Prison Industries update its

manual and submit it to our office for approval. This needs to

be accomplished before we recommend recertification.

DEPARTMENT RESPONSE

Prison Industries procurement manual has been updated to include SCDC 1100.1 Purchasing Policy.

22



B. Separation of Duties

Our review of purchase orders at Prison Industries revealed

that the accounts payable clerk and the assistant accounts

payable clerk signed the procurement officer's name to purchase

orders.

Separation of duties between procurement and payment is a

key element of internal control. We can see no reason why the

accounts payable clerk should be signing purchase orders.

Regardless, no one should sign another person's name.

We recommend the practice of accounts payable personnel

signing purchase orders be stopped immediately. Also, the

practice of signing another person's name to any documents should

be stopped.

DEPARTMENT RESPONSE

Accounts Payable personnel will no longer be allowed to sign purchase orders. Only the designated procurement officer will sign purchase orders. In his absence the Director of Management Services or Director of Industries will be designated to sign purchase orders.

C. Freight Paid Without Authorization

For one particular vendor, Prison Industries paid $2,930.85

of freight charges over 15 purchase orders which were not

authorized to be paid.

We recommend accounts payable not pay freight unless it is

authorized on the purchase orders. Any discrepancies over

freight should be sent to the procurement officer for resolution

before they are paid.

23

DEPARTMENT RESPONSE

Freight will only be paid upon authorization of the procurement officer.

D. Petty Cash Policy Not Followed

Prison Industries ' procurement procedures manual authorizes

employees to access petty cash for up to $25 per commitment .

However, we observed on petty cash vouchers that the practice was

to access petty cash up to $50 per commitment.

We recommend Prison Industries either adhere to the current

policy or revise its manual to reflect the current practice.

DEPARTMENT RESPONSE

We will adhere to agency policy on petty cash procurements.

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CERTIFICATION RECOMMENDATIONS

As enumerated in our transmittal letter, corrective action

based on the recommendations described in this report, we

believe, will in all material respects place the Department of

Corrections in compliance with the South Carolina Consolidated

Procurement Code.

The Department should complete this corrective action by

March 1, 1994. We will perform a follow-up review to determine

if this has been completed. If so, we recommend the South

Carolina Department of Corrections be recertified to make direct

agency procurements for three ( 3) years up to the limits as

follows:

Procurement Areas

Goods and Services

Construction Materials and Equipment

Construction Services

Consultant Services

Information Technology in accordance with the approved information technology plans

Recommended Certification Limits

*$100,000 per purchase commitment

*$100,000 per purchase commitment

*$ 50,000 per purchase commitment



*Total potential purchase commitment whether single year or multi-term contracts are used.

R&!:/t,~ Audit Manager

25



~tate ~uaget ana <!tontrol Lara DIVISION OF GENERAL SERVICES

JOHN DRUMMOND CARROLL A. CAMPBELL, 1R., CHAIRMAN GOVERNOR CHAIRMAN, SENATE FINANCE COMM11TEE

GRADY L. PATTERSON, JR. WILUAM D. BOAN

STATE TREASURER CHAIRMAN, WAYS AND MEANS COMMITrEE


March 10, 1994

HELEN T. ZEIGLER DEPliTY D!REC1UR

MATERIALS MANAGEMENT OFF1CE 1201 MAIN STREET, SUITE tn:J

COLUMBIA, SOU1li CAROLINA 29201 (803) 737-0600

HARDY L. MERRI1T, Ph.D. ASSISTANT DIVISION DIREC1UR

Hardy L. Merritt, Ph.D. Assistant Division Director Division of General Services 1201 Main Street, Suite 600 Columbia, South Carolina 29201

Dear Hardy:

LU1liER F. CARTER EXECtmVE DIRECroR

We have performed a follow-up to our audit report of the South Carolina Department of Corrections covering the period October 1, 1990 September 30, 1993. This follow-up combined with the Department's response to the report has satisfied the Office of Audit and Certification that the Department has corrected the problem areas found and that internal controls over the procurement system are adequate.

We, therefore, recommend that the certification limits for the South Carolina Department of Corrections outlined in the audit report be granted for a period of three (3) years.

Sincerely,

:~~~tCFE, Manager Audit and Cert~~tion RVS/jj

MARION U. DORSEY, P.E. OFFICE OF THE

STA"ffi ENGINEER (803) 737-0710

JAMES J. FORni, JR. STA"ffi


RON MOORE INFORMATION "ffiCHNOLOGY MANAGEMENT (803) 737-0000

26

VOIGHT SIIEAL Y AUDIT

& CERTIFICATION (803) 737-0000

Total Copies Printed - 33 Unit Cost- .74 Total Cost - 24.42


PROGRAM (803) 737 -0600

WALTTAYLOR STA"ffi &t FEDERAL

SURPLUS PROPERTY

(803) 822-5490

WALTTAYLOR CENTRAL SUPPLY &t INl,RAGENCY MAIL SERVICE (803) 734·7919

-------- -

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DATE DUE

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