Office of the City Auditor
CITY OF DALLAS

Audit Report
Dallas City Council

Mayor
Tom Leppert

Mayor Pro Tem
Dr. Elba Garcia
Deputy Mayor Pro Tem
Dwaine Caraway
Council Members
Jerry Allen
Tennell Atkins
Carolyn Davis
Angela Hunt
Vonciel Jones Hill
Sheffield Kadane
Linda Koop
Pauline Medrano
Ron Natinsky
Dave Neumann
Mitchell Rasansky
Steve Salazar

AUDIT OF CITY OF DALLAS
AND COUNTY OF DALLAS CRIMINAL JUSTICE
CENTER MEMORANDUM OF AGREEMENT
(Report No. A09-008)

April 3, 2009

City Auditor
Craig D. Kinton

An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Table of Contents
Page
Executive Summary

1

Audit Results
The Agreement Has Not Been Reviewed and Updated Since
1997

4

Current Jail Cost Calculation Methodology Is Not Based on
Actual Jail Operating Expenditures or Accurate Prisoner Count
Projections

5

Appendices
Appendix I – Background, Objectives, Scope and Methodology

10

Appendix II – Impact of Miscalculated Prisoner Counts on City
Payments in FY 2007 – FY 2008

13

Appendix III – Flowchart for Determination of Future Annual
Payment and Forward

14

Appendix IV – Major Contributors to This Report

15

Appendix V – Management’s Response

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Executive Summary
The City of Dallas and County of Dallas
Criminal Justice Center Memorandum of
Agreement (Agreement) has not been
revised for over 11 years. The fourth and
last addendum, made in 1997, requires
the City of Dallas (City) and the County of
Dallas (County) to review the jail cost
calculation methodology every three
years; however, there is no indication a
review had been conducted before this
audit.
Updating the Agreement will
improve financial accountability and
management oversight and benefit both
the City and the County.
The current methodology does not reflect
either actual jail operating expenditures or
actual City prisoner numbers. A more
accurate determination of actual jail cost
would require changing the current
methodology from using a combination of
jail
operating
preliminary
budget
expenditures and projected prisoner
numbers to using a combination of actual
expenditures
and
actual
prisoner
numbers.

Background Summary
The Criminal Justice Center Memorandum of
Agreement (Agreement) was entered into by the
City of Dallas (City) and the County of Dallas
(County) in 1978. The Agreement granted the City
a leasehold estate in the County jail for processing
and maintaining City prisoners.
The fourth and last addendum to the Agreement
was made in 1997 to establish the calculation
methodology for jail cost shared by the City.
Court and Detention Services (CTS) administers
the Agreement execution. CTS is also responsible
for reviewing and verifying the shared jail cost
calculated by the County and making the annual
payment to the County.
CTS management questioned the accuracy of the
County’s cost calculation due to substantial
increase in the annual payment even though the
City prisoner numbers decreased each year.
Fiscal Year
2006
2007
2008
2009

City Payment
$ 6,547,988
$ 7,076,096
$ 6,823,985
$ 6,838,945

City Prisoner Counts
85,298
62,116
60,723
Not Available

Adoption of this new methodology would have saved the City $2.2 million from Fiscal
Year (FY) 2006 through 2008; however, this projected saving is only based on historical
data of jail cost categories outlined in the current Agreement. The City’s future
payments may increase or decrease as a result of changes in the City prisoner numbers
and / or different jail costs to be specified when the current Agreement is revised.

Summary of Recommendation
We recommend the Assistant City Manager over Public Safety consult with the City
Attorney’s Office and coordinate with the City departments, such as Dallas Police
Department, Court and Detention Services, and Dallas County, to review and update
the County Jail Agreement. An Agreement revision is needed to outline the new jail
cost calculation methodology, address jail operation issues, and clearly define level of
service.
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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Summary of Management’s Response
Management agrees with the recommendation and will address the issues through
short and long-term goals. For the complete management response, see Appendix V.

Summary of Objectives, Scope and Methodology
Our audit objectives were to validate the accuracy of the jail cost calculation and
evaluate the adequacy of the jail cost calculation methodology. The audit covered the
period October 1, 2005 through September 30, 2008. The audit was requested by
Court and Detention Services management because of the substantial increase in the
annual jail Agreement payment.
To achieve the audit objectives, we reviewed the Agreement and amendments,
interviewed County and City personnel, observed County jail operations, reviewed the
County budget information, analyzed jail cost calculation data, researched industry best
practices, and evaluated the jail cost calculation methodology.

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Audit Results

3

An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Overall Conclusion
The City of Dallas and County of Dallas Criminal Justice Center Memorandum of
Agreement (Agreement) has not been revised for over 11 years. The fourth and last
addendum, made in 1997, requires the City of Dallas (City) and the County of Dallas
(County) to review the jail cost calculation methodology every three years; however,
there is no indication the review had been conducted before this audit.
Both City and County management agree that the Agreement needs revision. Such
action will improve financial accountability in Agreement execution and enhance
management oversight over the jail operation.
The current methodology does not reflect actual jail operating expenditures. Adoption
of a proposed new jail cost calculation methodology would have saved the City
$2,161,787 from Fiscal Year (FY) 2006 through FY 2008; however, this projected
saving is only based on historical data of jail cost categories outlined in the current
Agreement. The City’s future payments may increase or decrease as a result of
changes in the City prisoner numbers and / or different jail costs to be specified when
the current Agreement is revised.

The Agreement Has Not Been Reviewed and Updated Since 1997
The City and the County entered into the Agreement in 1978 and had not reviewed or
updated the Agreement since 1997 when the fourth and last addendum was made.
During the last 11 years, the County jail operation has experienced many changes. As
a result, some Agreement provisions no longer support the current jail operations.
Further, some current Agreement language is vague and the level of service is not
clearly defined.
Dallas Police Department (DPD) and Court and Detention Services (CTS) management
also have some concerns regarding the Agreement. Examples include the definition of
“City Prisoner” which is subject to wide interpretations, the City does not have access to
the County jail’s prisoner data information system, and there is no clear determination of
responsibility for prisoners sent to the hospital, and for handling prisoner’s personal
property.
In 2008, the Dallas County Criminal Justice Advisory Board (CJAB) was formed with a
principle mission to identify opportunities for improvement in the criminal justice system
of Dallas County. CJAB general membership includes representatives from agencies in
the Dallas County community, such as the City of Dallas and the County of Dallas.
CJAB will meet regularly to review, evaluate, and make policy recommendations on vital
criminal justice system issues throughout Dallas County. The CJAB may serve as a

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

communication vehicle to address future jail Agreement issues to ensure the
effectiveness of the public safety programs and services.

Current Jail Cost Calculation Methodology Is Not Based on Actual Jail
Operating Expenditures or Accurate Prisoner Count Projections
The Agreement Addendum Number 4 requires the City and County to review the jail
cost calculation methodology every three years; however, there is no indication the
review had been conducted before this audit.
According to the Agreement, the City’s payment to the County is the pro-rata share of
the jail operating costs attributable to City prisoners. The jail operating cost is
comprised of the following:
•

Apportioned Costs: 10 percent of certain Sheriff’s Office operations

•

Direct Costs: Expenditures directly incurred by the operations of Central Intake
(Intake), Intake / Release (Release), and Housing

•

Indirect Costs: County-wide central service departments’ expenditures (excluding
the Sheriff’s Office operations)

The following is a simplified formula for the cost calculation:
City’s Share of Jail Cost = Number of City Prisoners x
(Total Jail Operating Costs ÷ Total Prisoner Counts) + Apportioned Costs

There are two key elements in the cost calculation methodology: (a) jail operating cost
and (b) number of City prisoners 1. However, under the current methodology outlined
in Amendment Number 4, both elements are based on estimates instead of actual
costs: jail operating cost is based on a preliminary budget and the prisoner number is
based on projection derived from historical data. The City’s shared cost is determined
based on these estimates before the fiscal year begins. Amendment Number 4 does
not allow the City to adjust its payment for modifications to the County’s adopted budget
or if the actual expenditures and actual prisoner counts are different from the estimates.

1

Throughout the audit, our calculations were based on the historical monthly prisoner numbers provided
by the County. We did not have access to the County’s prisoner information system to validate the
prisoner data.

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

(a) Jail Operating Cost
The County currently uses a “preliminary budget” as the basis for calculating the jail
operating cost for the upcoming fiscal year. During FY 2006 to FY 2008, the
County’s preliminary budgets have underestimated the actual fiscal year
expenditures. The City’s payments were not adjusted for the difference between the
preliminary budgets and actual expenditures. Assuming prisoner counts remain the
same as the numbers used in County’s original calculations, the City would have
paid an additional $1,138,960 2 if the jail costs were based on actual
expenditures instead of preliminary budget.

(b) Number of City Prisoners
The County currently uses a historical 24-month average to project the City’s
upcoming fiscal year prisoner counts; however, this methodology does not provide
an accurate projection. For example, the projected City Intake numbers for FY
2007 and FY 2008 using the historical 24-month average were 19,669 more than
the City prisoners actually processed by the County jail. The City’s payments were
not adjusted for the difference between the projected numbers and actual prisoner
counts. As a result, the City’s cost share would have been overstated.
Further analysis shows that for projection purposes, a historical 12-month average
would provide a smaller difference when compared to the prisoner numbers actually
processed in the upcoming fiscal year. Therefore, the shared cost based on a
historical 12-month average is closer to the actual cost. Assuming total jail operating
costs remain the same as the preliminary budget figures used in the County’s
original calculations, in FY 2007 and FY 2008, the City savings would have been
$681,813 by using a historical 12-month average, or $1,851,761 by using actual
prisoner counts (see Table I on next page).

2

This analysis is only based on historical data of jail cost categories outlined in the current Agreement.
The City’s future payments may increase or decrease as a result of changes in the City prisoner numbers
and / or different jail costs to be specified when the current Agreement is revised.

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement
Table I

Comparison of Prisoner Count Methodologies* FY 2007 – FY 2008
Fiscal
Year
2007
2008
Totals

Payment Calculated
Using Historical
24-Month Average
$ 6,838,985
6,416,139
$ 13,255,124

Using Historical 12-Month
Average

Using Actual
Prisoner Counts

Payment

City
Savings

Payment

$ 6,576,490
5,996,821
$ 12,573,311

$ 262,495
419,318
$ 681,813

$ 5,536,019
5,867,344
$ 11,403,363

City Savings
$ 1,302,966
548,795
$ 1,851,761

Note: *Assumes total jail operating costs remain the same as the preliminary budget figures used in the
County’s original calculations
Source: City Auditor’s Office analysis of jail cost calculation data

In addition, under the current methodology, it is difficult for both the City and the
County to review and validate the accuracy of the jail cost calculation. At the
beginning of each fiscal year, the County uses the historical 24-month average to
project the number of prisoners. However, the historical prisoner data used in the
projection was not always timely updated.
•

For FY 2007 and FY 2008, the City overpaid $645,063 3 to the County
because the County miscalculated the projection of number of City prisoners.
The overpayment includes $441,247 for Intake, $74,802 for Release and
$129,014 for Housing. For more details, see Appendix II – Impact of
Miscalculated Prisoner Counts on City’s Payment in FY 2007 – FY 2008.
The Agreement provides that the City shall review and verify the County’s
proposed jail costs by no later than 45 days of receipt. Further, the final
amounts of FY 2007 and FY 2008 payments were determined in August of
2006 and 2007. The Agreement does not provide for any refund of the
overpayments.

•

In May 2008, the County presented to the City a draft cost calculation
worksheet for the FY 2009 preliminary payment amount.
The CTS
management identified that prisoner counts were not being timely updated to
reflect the most recent historical 24-month data. As a result, the draft
worksheet overstated the City’s prisoner Intake counts by 11,301. In August
2008, the County revised the final calculation accordingly and saved the City
$948,144 in FY 2009 payment compared to the preliminary amount.

3

The impact on the City’s payment was determined assuming total jail operating costs remain the same
as the preliminary budget figures used in the County’s original calculations

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

(c) Proposed New Methodology
Based on our review and analysis, a new methodology is needed to more accurately
reflect the actual jail operating costs shared by the City. This new methodology is
based on both actual jail operating costs and actual prisoner counts. If the new
proposed methodology had been used, the City would have saved $2,161,787 for
FY 2006 through FY 2008 (see Table II).
Table II

City Payments under Current Methodology and Proposed Methodology
FY 2006 – FY 2008
Fiscal Year
2006
2007
2008
Totals

Current Methodology*
$

6,547,988
7,076,096
6,823,985
$ 20,448,069

Proposed
Methodology**
$ 5,951,007
5,864,933
6,470,342
$ 18,286,282

City’s Projected Savings
$

$

596,981
1,211,163
353,643
2,161,787

* Current Methodology uses a combination of preliminary budget and a projection of prisoner counts
based on historical 24-month average.
** Proposed Methodology uses a combination of actual jail operating expenditures and actual prisoner
counts.
Source: City Auditor’s Office analysis of jail cost calculation data.

However, the City’s projected saving shown in the analysis is only based on
historical data of FY 2006 through FY 2008 and the jail cost categories outlined in
the current Agreement. The proposed methodology may have different results in
future years’ payments. For example, the current trend of City prisoner numbers is
decreasing, but any changes in the trend of City prisoner numbers in the future may
increase or decrease the City’s payment. Further, if the new Agreement revision
outlines different jail cost categories compared to the current Agreement, this will
also affect the calculation of the City’s future payment. Nonetheless, the intent of
the proposed new methodology is to promote fairness and bring benefit to both the
County and the City. The proposed new methodology’s purpose is to more
accurately reflect the actual jail operating expenditure.
Further, adopting a new jail cost calculation methodology will not cause problems to
the City’s annual budget preparation. Currently, the County provides the City by
May 15 of each year an estimate of the shared jail cost for the upcoming fiscal year.
Under the proposed methodology, for the most recently closed fiscal year, an
adjustment would be made between actual cost and estimate for both jail costs and
prisoner numbers and this adjustment would be reflected in the City’s annual
payment for the subsequent fiscal year. For an illustration of comparison of the
City’s current budget process and the proposed budget process, see Appendix III –
Flowchart for Determination of Future Annual Payment and Forward.

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Recommendation
We recommend the Assistant City Manager over Public Safety consult with the City
Attorney’s Office and coordinate the City departments, such as Dallas Police
Department, Court and Detention Services, and Dallas County, to review and update
the County jail Agreement. An Agreement revision is needed to outline the new jail cost
calculation methodology, address jail operation issues, and clearly define level of
service.

Management’s Response
Agree. Staff from both the Dallas Police Department (DPD) and Court and Detention
Services (CTS) have reviewed the audit report and concur with the recommendation.
Both DPD and CTS will address the issues through short and long-term goals.
Issues that will be addressed in the short-term will include clarification of the definitions,
jail operation issues, and clearly defined level of service. Long-term, both DPD and
CTS will have discussions with the County to review the jail cost components of the cost
methodology and, together, will determine and ultimately recommend if any policy
and/or contractual changes are necessary.
Implementation Date: September 2009 (short-term); April 2010 (long-term)
Responsible Managers: Gloria Lopez-Carter, Director of Court and Detention
Services; Chief David M. Kunkle, Dallas Police Department

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Appendix I
Background, Objectives, Scope, and Methodology
Background
In 1978, the City of Dallas (City) and the County of Dallas (County) entered into a
Criminal Justice Center Memorandum of Agreement (Agreement) for City / County jail
consolidation. The Agreement granted the City a leasehold estate in the Lew Sterrett
Criminal Justice Center (County jail) for processing and maintaining City jail prisoners.
Since its inception, the Agreement has received four addendums. In 1997, the City
Council authorized Amendment Number 4 to establish a methodology to calculate the
City’s equitable share of the annual cost of processing and maintaining City prisoners
on a per-prisoner basis. The Addendum also requires the City and the County to review
the jail cost calculation methodology every three years and modify the methodology if
necessary.
The following chart shows a ten-year history of the City’s annual payment to the County
from FY 2000 to FY 2009.

Chart - City's Annual Payment to the County
FY 2000 - FY 2009
$7,500,000

$7,076,096

$7,000,000

$6,838,945
$6,547,988

$6,500,000

$6,363,081

$6,353,010
$6,272,636

$6,000,000

$5,500,000

$6,823,985

$6,286,437

$5,905,747
$5,556,905

$5,000,000

FY 00

FY 01

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07

FY 08

FY 09

Source: City Council Resolutions

The City’s Court and Detention Services Department (CTS) administers the Agreement
execution and the annual payment made to the County. CTS management questioned
the accuracy of the cost calculation due to substantial increase in the annual payment
even though the City prisoner numbers decreased each year.

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

The Dallas Police Department Detention Services Unit is responsible for the prisoner
processing operations at the County jail and functions as liaison between DPD and the
Dallas County Sheriff’s Office, which oversees the County jail.
City’s usage of the County jail can be grouped into three categories according to the jail
operation: Central Intake, Intake / Release, and Housing. In FY 2008, the percentages
of County’s total prisoner population counted as City’s usage are 36 percent, 11
percent, and 0.6 percent respectively. Table III shows the number of City prisoners
actually processed by the County jail from FY 2006 through FY 2008.
Table III

Number of Actual City Prisoners FY 2006 – FY 2008
Fiscal Year
2006
2007
2008

Central Intake
45,359
35,398
34,854

Intake / Release
13,172
14,475
13,459

Housing*
26,767
12,243
12,410

Total
85,298
62,116
60,723

*Housing counts are calculated as “Average Daily Prisoner Numbers” times 365 days.
Source: City Auditor’s Office analysis of jail cost calculation data.

Objectives, Scope and Methodology
This audit was conducted under authority of the City Charter, Chapter IX, Section 3 and
in accordance with generally accepted government auditing standards.
Those
standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
The objectives of the audit were to validate the accuracy of the jail cost calculation and
evaluate the adequacy of the jail cost calculation methodology. The audit period
covered October 1, 2005 through September 30, 2008. We also reviewed certain
related transactions and records before and after that period. The audit was requested
by CTS management due to the substantial increase in the annual jail Agreement
payment.
To achieve the audit objectives, we performed the following procedures:
•

Reviewed the Agreement, Amendments, City Council Resolutions, and other
relevant documents and information

•

Interviewed County and City department personnel to develop an understanding
of relevant operations and procedures

•

Physically toured the County jail to gain an understanding of the general jail
process related to “Central Intake”, “Intake / Release”, and “Housing”

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

•

Reviewed County budget information on jail expenditures

•

Reviewed and analyzed County jail cost calculation and methodology

•

Researched
contracting

industry

best

practices

in

government

cost-reimbursement

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Appendix II
Impact of Miscalculated Prisoner Counts on City Payments 4
In FY 2007 – FY 2008
Prisoner Intake

Fiscal
Year

Number of
Prisoners City
Paid For

Number of
Prisoners City
Should Have
Paid For

Number of
Prisoners City
Overpaid For

Amount City
Overpaid

2007
2008
Totals

48,893
46,131
95,024

47,683
42,238
89,921

1,210
3,893
5,103

$ 117,293
323,954
$ 441,247

Number of
Prisoners City
Overpaid For

Amount City
Overpaid

Prisoner Release

Fiscal
Year

Number of
Prisoners City
Paid For

Number of
Prisoners City
Should Have
Paid For

2007
2008
Totals

14,640
13,901
28,541

12,491
13,649
26,140

2,149
252
2,401

$ 59,796
15,006
$ 74,802

Prisoner Housing 5

Fiscal
Year

Number of
Prisoners City
Paid For

Number of
Prisoners City
Should Have
Paid For

Number of
Prisoners City
Overpaid For

Amount City
Overpaid

2007
2008
Totals

24,532
22,037
46,569

22,113
20,288
42,401

2,419
1,749
4,168

$ 59,990
69,024
$ 129,014

Source: City Auditor’s Office analysis of jail cost calculation data.

4

The impact on the City’s payment was determined assuming total jail operating costs remain the same
as the preliminary budget figures used in the County’s original calculations.

5

Housing counts are calculated as “Average Daily Prisoner Numbers” times 365 days.

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City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Appendix III
Flowchart for Determination of Future Annual Payment and Forward
Current Budget Process

Step 1: May 15, 2009

Proposed Budget Process
County provides FY 2010
estimates using
proposed methodology**.

County provides FY 2010
estimates using
current methodology*.

Step 2: June 30, 2009

City reviews, verifies,
questions, or objects
estimate.

July 25, 2009
Annual payment mutually
determined.

August 2009
Annual payment mutually
determined.

Step 3:

Step 6: May 15, 2010

Step 4: September 2009

City Council approves
annual payment.

Step 5: October 15, 2009

First monthly payment
made.

Repeat Step 1.

County provides FY 2011 estimates
adjusted by the difference between
FY 2009 estimates and actual cost
calculated by proposed
methodology**.

Repeat the cycle for years forward.

Repeat the cycle for years forward.

* Current methodology uses a combination of preliminary budget and a projection of prisoner
counts based on historical 24-month average.
**Proposed methodology
• Step 1 uses a combination of preliminary budget and a projection of prisoner counts
based on historical 12-month average.
• Step 6 uses a combination of actual jail operating expenditures and actual prisoner
counts.

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City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Appendix IV
Major Contributors to This Report
Gary E. Lewis, CPA, CIA, CFE, CFF, Assistant City Auditor
Rowena X. Zhang, CPA, CIA, CFE, CFF, Project Manager
Theresa Hampden, CPA, Quality Control Manager

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An Audit Report on –
City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

Appendix V
Management’s Response

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City of Dallas and County of Dallas Criminal Justice Center Memorandum of Agreement

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