Federal Prison Industries, Inc.
Annual Financial Statement
Fiscal Year 1999

Report No. 00-16
July 2000
Office of the Inspector General


Federal Prison Industries, Inc. (FPI) is a wholly-owned government corporation established by Congress on June 23, 1934, to provide job skills training and employment for inmates serving sentences in the Federal Bureau of Prisons (BOP). FPI is required to contribute to the safety and security of our Nation's correctional facilities by keeping inmates constructively occupied and producing market-priced quality goods for sale to the Federal Government. UNICOR, the FPI trade name, is a self-sustaining entity that derives revenues from the sale of products and services to other Federal agencies. Its operating expenses, such as the costs of raw materials and supplies, inmate wages, staff salaries, and capital expenditures are applied against these revenues, resulting in operating income or loss, which is reapplied toward operating costs for future production.

For FYs 1996 through 1998 FPI financial statements were consolidated, along with the BOP and Commissary Trust Fund financial statements, to present the Federal Prison System reporting component. However, starting with FY 1999, as directed by the Department's Chief Financial Officer, FPI became a separate financial statement reporting component and prepared stand-alone financial statements.

This audit report contains the Annual Financial Statement (AFS) of the FPI for the fiscal year ended September 30, 1999. FPI has historically prepared its financial statements using private sector generally accepted accounting principles. Since FPI is a manufacturing operation, that is profit-driven, it has financial reporting requirements different than most government reporting entities. In this report FPI includes the standard private sector financial statements: Statements of Financial Position, Statements of Operations and Cumulative Results of Operations and Statement of Cash Flows as of and for the years ended September 30, 1999 and 1998. For Department of Justice consolidating purposes, FPI submitted the applicable information in the format specified by the Office of Management and Budget Circular 97-01, "Form and Content of Agency Financial Statements," as amended.

The audit was performed by Urbach Kahn & Werlin PC (UKW) and resulted in an unqualified opinion on the financial statements. UKW determined that the entity's financial statements were fairly presented in all material aspects. There are no findings or recommendations in this report.