Audit Report on the Department of Correction’s Controls over Commissary Operations

Executive Summary

The New York City Department of Correction (DOC) provides for the care, custody, and control of persons accused of crimes and those convicted and sentenced to one year or less of jail time.  As part of the criminal justice system, DOC seeks to enhance public safety by maintaining a safe and secure environment for the staff, while providing inmates with the tools and opportunities they need to successfully re-enter their communities.

The average daily inmate population of DOC is approximately 8,896 individuals.   Most of the inmates in DOC custody are housed on Rikers Island, which has 10 individual jails (8 active and 2 inactive) that can house as many as 15,000 inmates.  DOC operates 11 commissaries—8 on Rikers Island and 3 in borough facilities—where inmates may purchase various items, such as toiletries, batteries, snacks, and beverages.

DOC utilizes the Inmate Financial Commissary Management system (IFCOM) to electronically perform the accounting functions for inmate accounts, commissary transactions, and commissary inventory.  IFCOM is also utilized to record the inventory activities at each commissary, including the actual count of all items in each commissary on a monthly basis, the comparison of physical inventory counts with the IFCOM “on hand counts” at the time such physical inventory counts are undertaken, the reconciliation of any discrepancies, any adjustments for damaged inventory, and approval by the Commissary Manager of any adjusted inventory balances.

DOC’s Financial Services Division, through its Central Commissary Unit (CCU), has responsibility for maintaining an adequate supply of inventory at each commissary through the procurement or transfer of commissary merchandise.  According to the Commissary Operation Financial Report, in Fiscal Year 2017, the 11 commissaries had inventory expenses totaling $9,147,697.  Two of the 11 commissaries, the Anna M. Kross Center (AMKC) and the Eric M. Taylor Center (EMTC), both located on Rikers Island, had the highest inventory expenses, totaling $1,831,602 and $1,236,703 respectively, that year.

 Audit Findings and Conclusions

Our audit found that DOC’s commissaries are providing the intended services for the inmates but that the controls need to be strengthened to prevent duplicate payments to vendors and waste, and to ensure proper accounting for inventory.  We found, that despite having segregated duties for the procurement of items, monitoring of inventory levels, receipt of merchandise, commissary transactions, and commissary inventory, DOC made duplicate payments for a number of purchases, which remained undetected until they were discovered through our audit.  Specifically, DOC made duplicate payments to 16 vendors totaling $109,701 because the agency did not follow New York City Comptroller’s Directive #11 and DOC’s Directive # 1501R-A, both of which stipulate that payment should be made only on the required original invoice bearing the proper approval signatures.

In addition, we noted minor discrepancies between the actual inventory found at two commissaries and the inventory reported on the IFCOM system.  Specifically, during our inventory count at the AMKC and EMTC commissaries, we found that 4,173 (1.3 percent) of the 328,515 items listed in IFCOM as on hand could not be accounted for.  The 4,173 unaccounted-for items had a total value of $4,619, representing 2.6 percent of the total value of the inventory listed in IFCOM for the two facilities, which was $178,983.  We also found that 3,192 items were present at the two facilities, but not recorded in IFCOM, which increases the risk of undetected waste and/or theft of items purchased for the commissary.  The 3,192 items had a total value of $3,778 representing 2.1 percent of the $178,983 total value of the reported inventory.

 Audit Recommendations

The audit resulted in five recommendations, specifically, that DOC ensure that:

• The full $109,701 in duplicate payments is recouped from the vendors that received them.
• The original invoices and packing slips with the required “merchandise certification” stamps and signatures are submitted to Financial Services within 24 hours of the receipt of commissary merchandise, as prescribed by DOC’s existing directive.
• Payments are made only after the original invoices and packaging slips with the required “merchandise certification” stamps signed by the correction officers responsible for receiving the merchandise are received.
• All discrepancies in the inventory are properly investigated. The findings of the investigation must be documented in writing and reported to the appropriate management-level official(s).
• Bar code scanners are used when the commissary staff processes inmate sales, enters received goods, and conducts physical inventory counts to minimize data entry errors and to provide a more accurate accounting of sales and inventory.

 Agency Response

In its response, DOC agreed with four recommendations, either expressly or by describing steps it has taken or will take to implement them, and in effect rejected the fifth recommendation—to use its bar code scanners to track commissary inventory—by stating that it planned to outsource commissary operations in the future and thereby eliminate its need to manage the inventory of commissary merchandise.