GR-30-01-006
May 30, 2001
Office of the Inspector General
FINDING AND RECOMMENDATIONS
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 48,355 |
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 |
|
- 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 |
Audit Exceptions |
Net Amounts |
Note |
|
|
|
|
|
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
Notes:
- 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 Exceptions |
Net Expense |
Note |
|
|
|
|
|
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
- 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.
- 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.
- 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 |
- 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.
- 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 |
Insurance: |
|
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 |
|
- 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 Claimed |
Use Allowance @ 6.67% |
Audit Exception |
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 |
- 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.
- 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.
- OMB Circular A-87, Attachment B, Number 23.a., General
Government Expenses states that the general costs of government are
unallowable.
- 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.
- 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 |
|
- 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).
- 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.
- 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.
- 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.
- 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.
Summary
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.
Recommendations
We recommend that the contracting officer, INS:
- Remedy the audit costs questioned.
- Negotiate a revised jail day rate based on the information in the audit report.
- The WCDC fiscal year is July 1 to June 30. The audit focused on FY 2000,
which included 366 days due to leap year.
- From the daily prisoner counts compiled by WCDC guard personnel.
- 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.