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Audit of Intergovernmental Service Agreement for Housing Federal Detainees
Wicomico County, Maryland

May 30, 2001
Office of the Inspector General


Results of Review of Daily Rate - FY 2000

In FY 2000 the INS overpaid the auditee for the housing of INS prisoners. The INS reimbursement was based on a billed daily rate of $50 per INS prisoner day. The daily rate calculated using actual expenditures for the services provided to the WCDC average daily prisoner population is $42.82. The total overpayment for 48,355 INS prisoner days during the period was $347,189.

We reviewed the WCDC FY 2000 expenditures and population levels. We compared the billed rate and the audited adjusted rate, which reflects actual costs for FY 2000. Following is a summary of questioned costs and explanatory notes.

Summary of Questioned Costs
Description FY 2000 Report Section
Wicomico County Billed Rate $50.00  
Less: Rate per Audit $42.82 Audit Rate
Questioned Daily Rate (a)
INS Prisoner Days (b)
$ 7.18
Prisoner Days
Audit Costs Questioned (a x b) $347,189  

Audit Rate

Our audit of actual costs and average daily population provided for an audit adjusted daily rate, which was calculated as follows:

Daily Rate

  Per Audit  
Costs (a) $8,806,926 Paragraph A
Daily Cost [a÷3661] (b) 24,063  
Average Daily Population (c) 562 Paragraph B
Daily Rate [b÷c] $42.82  

  1. Allowable Cost

    The auditee did not categorize WCDC operating costs relevant to INS prisoners for FY 2000. Accordingly, we requested that the auditee assign actual FY 2000 costs in an INS form entitled "Jail Services Cost Statement" (Cost Statement), which provides distinct categories for operating costs relevant to IGSA detention centers. The following table provides a breakdown of costs by Cost Statement category and audit exceptions.

    Summary of FY 2000 Costs

    Costs Cost Category per
    Cost Statement
    Amounts per WCDC
    Cost Statement
    Salaries $4,410,790 $ 43,416 $4,367,374 1
    Benefits 1,163,010 1,227 1,161,783 2
    Subcontracts 230,688 (817,899) 1,048,587 3
    Direct Costs 3,422,434 617,902 2,804,532 4
    Indirect Costs 346,571 346,571 -0- 4
    Income/Credits -0- 575,350 (575,350) 5
    Total $9,573,493 $766,567 $8,806,926  
         () = increase


    1. Salaries - There are 164 positions directly involved with the operation of the WCDC. We noted exceptions to the auditee's salary expenditures, as follows:

      Salary Costs

      Item Description FY 2000 Audit
      Regular Guard Salaries $3,520,213 $49,955 $3,470,258 a
      Regular Guard Overtime 3,581 (6,539) 10,120 b
      Premium Guard Overtime 342,440 -0- 342,440  
      Other Guard Earnings 7,749 -0- 7,749  
      Clerical Salaries 536,807 -0- 536,807  
      Total Salaries $4,410,790 $43,416 $4,367,374  
      () = increase

      1. We took an audit exception to the allocability of the claim for the annual salary of the following employee job category:

        Home Detention Investigator (2) $49,955

        Personnel costs dedicated to the home detention program do not directly benefit the INS detention population. Therefore, we do not consider them to be an allocable cost to the IGSA. We have deleted the census of home-detention prisoners from the calculation of the daily rate, as described in the Average Daily Population section of the report.

      2. Wicomico County Public Safety employees are paid a premium for hours worked exceeding 40 hours weekly. If during that period, their hours involve leave status, they are paid at their regular hourly rate until the hours worked exceeds 40 hours. They are then paid at the premium overtime rate. The cost for overtime paid at the regular pay rate was not included in the initial cost statement submission; therefore, we added the amount to the schedule as an allowable salary expenditure.

    2. Benefits - We noted one exception that applies to the salaries of the employee category in Note 1.a. We adjusted FICA claimed from $337,425 to $333,603 ($3,822 decrease) to compensate for the audit excepted salary costs of the home detention personnel. We found one unemployment expense in the amount of $2,595, which was not claimed on the Cost Statement. Thus, we reduced the excepted amount of FICA by $2,595 to recognize the unemployment cost. Accordingly, total audit excepted benefit cost is $1,227 ($3,822 - $2,595).

      Audit Excepted Benefit Costs
      Category Amount
      Home Detention Investigator (2) $49,955
      Excepted FICA @ 7.65% (a) 3,822
      Less: Unclaimed Unemployment (b) 2,595
      Total Audit Excepted Benefit Costs (a less b) $ 1,227

    3. Subcontracts - The auditee subcontracted for medical service, dental service, mental health service, and general services, including groundskeeping and emergency maintenance. The auditee applied a 22 percent federal inmate allocation rate to WCDC total subcontract cost, in accordance with instructions for the INS Cost Statement. This was based on the ratio of the proposed average annual INS detainees to the proposed average annual total WCDC detainee population.

      In our judgment this methodology for allocating subcontract costs produces only a partial allocation of subcontract costs. To arrive at a fair and equitable allocation of subcontract costs, total subcontract costs associated with the cost of maintaining the total WCDC population should be recorded on the statement. This would be consistent with the approach to determine the average daily cost to support one housed prisoner, whether federal or local. Based on records provided to us, we determined that total subcontract costs for FY 2000 were $1,048,587. Therefore, we added $817,899 to the $230,688 proposed for subcontract costs for a total allowable cost of $1,048,587.

    4. Direct Costs - We reviewed the $3,422,434 per the Cost Statement plus $346,571 (total of $3,769,005) that we reassigned from the Indirect Costs category. In the Cost Statement, the auditee claimed several items of cost in the Indirect Costs category because they were allocations of Wicomico County costs. These costs are more representative of the Direct Costs category as indicated by their use by WCDC. A schedule of that reassignment of $346,571 from the Indirect Costs category to the Direct Costs category follows:

      Costs Reassigned from Indirect To Direct Costs
      Item Description Amount
      Equipment > $5,000 $214,163
         Property (Building and contents) 25,143
         Automobile 2,740
         Law Enforcement Liability 17,992
      Human Resources Support 28,750
      Independent Auditor Fees 3,478
      Internal Auditor Fees 2,275
      Public Information Officer 3,256
      County Council 10,538
      Legal Office 18,019
      Administrative Director 10,447
      County Finance 9,770
      Total $346,571

      We took an audit exception of $964,472 against 6 items totaling $1,633,271. Our review of a sample of transactions in the remaining $2,135,734 of the $3,769,005 disclosed no significant discrepancies. A schedule of the audit exceptions follows:

      Costs Claimed and Audit Exceptions
      Item Description Claimed Exceptions Note
      Equipment Over $5,000 $ 214,163 $199,878 a
      Building Depreciation 1,309,028 654,514 b
      Home Detention Electronics 71,076 71,076 c
      County Council 10,538 10,538 d
      Legal Office 18,019 18,019 d
      Administrative Director 10,447 10,447 d
      Total Direct Costs $1,633,271 $964,472  

      1. In FY 2000 the auditee elected to expense equipment with an acquisition cost greater than $5,000. OMB Circular A-87, Attachment B, Paragraph 19.d. provides that items of equipment with an acquisition value of less than $5,000 are considered to be supplies and may be charged as a direct expense to the federal award. Equipment with acquisition cost over $5,000 should follow the governmental unit's depreciation procedures (OMB Circular A-87, Attachment B., Paragraph 15.a.) or be subject to a standard use allowance of 6.67 percent per year. In our judgment absent a depreciation policy from the auditee, the equipment should be capitalized in accordance with INS guidance in its Cost Statement and OMB Circular A-87. The following table depicts the disallowed equipment costs:

        Equipment Over $5,000
        Item Description Cost
        Allowance @
        Security Equipment $113,035 $ 7,540 $105,495
        Drug Screening Machine 39,900 2,661 37,239
        Gym Equipment 21,171 1,412 19,759
        Computer System 40,057 2,672 37,385
        Total $214,163 $14,285 $199,878

      2. The auditee incurred construction costs totaling $13,635,433 in 1989 for the main building and $6,000,000 for an administrative building addition in 1998. The auditee proposed to recover the costs for billing purposes by depreciating the building and the addition based on a 15-year life. In our judgment both should be depreciated over a 30-year life. The 30-year period is consistent with the depreciation criteria for prison construction used by the Department of Justice (DOJ), Federal Bureau of Prisons. Additionally, we referred to guidance from the Internal Revenue Service (IRS) for depreciation rates of selected tax exempt property in order to have a recognized standard to apply. IRS Publication 946, How To Depreciate Property provides the guidance. According to Section 3, Modified Accelerated Costs Recovery System, the paragraph entitled When To Use ADS (Alternative Depreciation System), ADS must be used for "any tax-exempt use property." Page 28 of the Publication provides the table of ADS Recovery Periods for classes of property, which indicates that nonresidential real property should be depreciated over 40 years. We applied the more conservative DOJ criteria of 30 years since this is a DOJ sponsored activity. Accordingly, we adjusted the $1,309,028 annual depreciation by one-half to $654,514 to compensate for increasing the depreciation period from 15 years to 30 years.

      3. We disallowed as unallocable to the IGSA the cost of electronic equipment associated with home detention because the program's services do not benefit the INS prisoner population.

      4. OMB Circular A-87, Attachment B, Number 23.a., General Government Expenses states that the general costs of government are unallowable.

    5. Income/Credits - Our exceptions represent amounts that the auditee needs to recognize and apply against costs incurred to reduce the amount of revenue required from appropriations and outside sources to support operations. There are three sources of revenue totaling $575,350 that are not included in the auditee's Cost Statement, but are used to support operations:

      • Telephone Commissions ($186,954). This amount is received by WCDC as a commission for the public telephone usage within the jail. The WCDC income should be an offset to the direct cost of the WCDC operation.

      • Work Release Income ($368,626). As a condition of sentencing to the Work Release Program, a percentage of the prisoner income is paid to the WCDC on a sliding scale schedule. We included the recorded WCDC income in FY 2000 as an offset to the cost of the WCDC operation.

      • Weekend Room and Board ($19,770). As a condition of sentencing to the Week-end Program, prisoners are charged for room and board on a sliding scale. We included the recorded WCDC income in FY 2000 as an offset to the cost of the WCDC operation.

  2. Average Daily Population

    Initial census figures for FY 2000 provided by the WCDC included all individuals formally committed to the custody of the Director. This figure included INS detainees, general county prisoner population, those committed to a home detention sentence, those committed to a week-end or work-release sentence, and prisoners temporarily out to another institution (housed elsewhere). During the audit the Director proposed a revision to the FY 2000 average daily population that would exclude prisoners of select programs, such as home detention and housed elsewhere. Costs associated with the home detention program were disallowed in the Audited Daily Rate section of the report.

    A breakdown of the initial census data submission and the revision to the average daily population follows:

    Summary of Average Daily Population
    Category Average Daily Population Note
    Initial Census
    from WCDC
    Per Audit2
    INS detention3 134 134 1
    General Population (County) 289 291 1
    Home Detention Program 5 0 2
    Work-Release Program 121 121 3
    Housed Elsewhere 46 0 4
    Holding 16 16 5
      Total 611 562  

    1. During our review of daily census figures, the WCDC provided revised census data that showed an average of 136 prisoners in the INS Detention category for FY 2000. However, the increase of 2 should have been added to the general population based on the INS Eastern Shore Detention and Deportation Office census report as the controlling authority (see discussion on Prisoner Days).

    2. We removed the average number of Home Detention Program participants from the daily population because the participants are not housed at the facility. We took an audit exception for the associated salary, benefit, and equipment costs in the Allowable Cost section of the report.

    3. To account for the variation between full and part-time sentencing, the Director proposed a percentage based on the amount of time a prisoner is in the direct custody of the WCDC. The terms of the work-release sentence specify that the prisoners in the program be in WCDC custody for 12 hours per day, 6 days per week and 24 hours on Sunday. As a result, the Director proposed allocating 57 percent (96 hours/168 hours per week) for work-release detainees based on the time in custody versus the time spent outside of the facility.

      In our judgment, an allocation based on time spent inside the jail fails to recognize the fixed and variable nature of the costs associated with the program. A reduction in variable costs due to the prisoner time spent working away from the facility, such as guard salaries and benefits and prisoner meals, are already reflected in the WCDC annual operating costs. In accordance with the work-release sentencing agreement, laundry and medical costs are the prisoner's responsibility and are also reflected in reduced WCDC annual operating costs.

      Fixed costs, on the other hand, are incurred whether the prisoner is in custody or on work status. Fixed costs associated with the prisoner, whether physically within the facility or on work-release status, are incurred at the same rate as the remaining prisoner population. Since the work-release population is a sub-section of the total facility population, we included the total work release count in the calculation of the average daily population.

    4. WCDC prisoners are routinely held in temporary custody of another facility. These prisoners, although formally committed to the custody of the Director of WCDC and carried in the WCDC census as WCDC's responsibility, are housed elsewhere and are not incurring costs to WCDC. Therefore, we removed them from the calculation of Average Daily Population.

    5. The general holding area serves as the initial screening and disbursal area for arriving prisoners. It houses individuals in temporary custody, awaiting hearing or to make bail, who may be released or converted to the general population. The number of prisoners who are to be released during a single day's count is judgmental; therefore, we included the total area average census in the calculation of the average daily population.

Prisoner Days

As discussed in the Average Daily Population section of the report, the WCDC deferred to the INS Eastern Shore Detention and Deportation Office census report as the controlling authority for monthly billing of INS prisoner days. This resulted in 1,285 fewer days reimbursed to WCDC in FY 2000 than reflected by an average daily census compiled from the guard daily counts. We discussed this issue with the auditee and the INS Detention & Deportation officer during field work. The WCDC has acknowledged that this is a potential problem and has taken steps to address it by hiring a chief accountant, working under the Assistant Warden for Administration, whose office is responsible for a monthly reconciliation of the number of INS prisoner days per the WCDC census with the number of INS prisoner days per the INS report.

For the purpose of this audit, we relied on the number of INS prisoner days reimbursed to WCDC in FY 2000. We examined the INS Eastern Shore Detention and Deportation Office monthly jail day reports on a sample basis and found that the figures presented were supported by adequate INS prisoner tracking documentation and were calculated accurately. According to the INS Eastern Shore Detention and Deportation Office records there were 48,355 Federal Prisoner Days reimbursed to WCDC in FY 2000.


Based on the results of our review, the auditee billed INS for $347,189 more than it should have in FY 2000. This is a result of applying the difference ($7.18) between the billed rate of $50 per day and the audit rate of $42.82 per day to the 48,355 prisoner days in FY 2000. Additionally, the INS can save additional funds in FY 2001 by reimbursing the auditee at the audit determined rate. According to INS from July 2000 through April 2001 the auditee charged INS for 34,530 prisoner days, or an average of 3,453 prisoner days per month. Annualized, the total equals 41,436 prisoner days (12 months x 3,453 prisoner days per month). Applying the $7.18 audit determined rate difference to these days results in a potential savings to INS of an additional $297,510. We classified this amount as Funds to Better Use.


We recommend that the contracting officer, INS:

  1. Remedy the audit costs questioned.

  2. Negotiate a revised jail day rate based on the information in the audit report.


  1. The WCDC fiscal year is July 1 to June 30. The audit focused on FY 2000, which included 366 days due to leap year.

  2. From the daily prisoner counts compiled by WCDC guard personnel.

  3. Throughout FY 2000 WCDC deferred to the INS prisoner census data as the controlling authority in the event of inconsistency between INS data and WCDC data.