Federal Prison Industries, Inc. Annual Financial Statement
Fiscal Year 2005

Audit Report 06-18
March 2006
Office of the Inspector General

Commentary and Summary

This audit report contains the Annual Financial Statement of the Federal Prison Industries, Inc. (FPI) for the fiscal years (FYs) ended September 30, 2005, and September 30, 2004. Under the direction of the Office of the Inspector General (OIG), PricewaterhouseCoopers LLP (PWC) performed the audit, which resulted in an unqualified opinion on the FY 2005 financial statements. An unqualified opinion means the financial statements present fairly, in all material respects, the financial position and results of the operating activity of the entity. The FPI FY 2004 financial statements also received an unqualified opinion (OIG Report No. 05-09).

The FPI corrected several vulnerabilities in their information security program during FY 2005 and also implemented new financial reporting control measures that allowed it to easily meet the Departmentís financial reporting submission deadlines. Specifically, the FPI addressed several audit recommendations regarding access to and monitoring of their financial system, and compliance with federal standards for system design and security. As a result, the auditors did not identify any reportable conditions or instances of noncompliance with laws and regulations or other matters.

The OIG reviewed PwCís report and related documentation and made necessary inquiries of its representatives. Our review, as differentiated from an audit in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, an opinion on FPIís financial statements, conclusions about the effectiveness of internal control, conclusions on whether FPIís financial management systems substantially complied with FFMIA, or conclusions on compliance with laws and regulations. PwC is responsible for the attached auditorsí reports dated October 24, 2005, and the conclusions expressed in the report. However, our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.