Thomas P. DiNapoli
COMPTROLLER

OFFICE OF THE
NEW YORK STATE COMPTROLLER
DIVISION OF STATE
GOVERNMENT ACCOUNTABILITY

Audit Objective............................... 2
Audit Results - Summary............... 2

DEPARTMENT OF
CORRECTIONAL SERVICES

Background..................................... 2
Audit Findings and
Recommendations....................... 3
Reasons for Late Payments .............. 3
Recommendations............................. 5

ARTHUR KILL
CORRECTIONAL FACILITY

Audit Scope and Methodology....... 6
Authority ......................................... 6

LATE VENDOR PAYMENTS

Reporting Requirements................ 6
Contributors to the Report ............ 7
Appendix A - Auditee Response .... 8

Report 2007-S-141

AUDIT OBJECTIVE
Our objective was to determine the reasons
for late vendor payments by the Arthur Kill
Correctional Facility and to determine
whether the late payments were avoidable.
AUDIT RESULTS - SUMMARY
If a State agency does not pay a vendor within
a certain 30-day timeframe, the agency is
required by law to pay the vendor interest on
the late payment. From April 1, 2005 to
October 16, 2007, Arthur Kill Correctional
Facility (Arthur Kill) paid its vendors late and
as a result, had to pay an additional $58,553
in interest to the vendors. For example, in
fiscal year 2005-06, 77 percent were paid late
and in fiscal year 2006-07 vendors were paid
late 34 percent of the time.
We reviewed a sample of Arthur Kill’s late
payments and identified a number of reasons
for the delays in payment. Most significantly,
Arthur Kill officials told us that staff turnover
in their business office was a major factor
causing payments to be made late. At times
there were either not enough staff to handle
administrative functions and make payments
timely, or inexperienced personnel (new or
borrowed from other units) were working on
the payment function. We recommend Arthur
Kill officials develop an action plan to
improve the timeliness of payments, and
reallocate staff as needed to ensure that
payments are made on time. If staffing
problems persist, Arthur Kill officials should
consult with DOCS central office.
Our report contains eight recommendations
for improving the timeliness of vendor
payments. DOCS officials agreed with our
recommendations and indicate they will be
implemented.

Report 2007-S-141

This report, dated April 23, 2009, is available
on our website at: http://www.osc.state.ny.us.
Add or update your mailing list address by
contacting us at: (518) 474-3271 or
Office of the State Comptroller
Division of State Government Accountability
110 State Street, 11th Floor
Albany, NY 12236
BACKGROUND
The Department of Correctional Services
(DOCS) is responsible for the confinement
and habilitation of sentenced inmates held at
69 correctional facilities and the 902-bed
Willard Drug Treatment Campus.
Arthur Kill, which is located in Staten Island,
in Richmond County, is a medium security
correctional facility for males. Arthur Kill had
a total population of 968 inmates and its nonpersonal services budget was $9.27 million.
Article XI-A of the New York State Finance
Law states that those entities doing business
with the State expect and deserve to be paid in
a prompt and timely manner. The law sets
out the expectation that State agencies pay
vendors within 30 calendar days (excluding
legal holidays) after the receipt of a proper
invoice at the agency’s designated payment
office or the date the goods, property, or
services are actually received, whichever is
later. This date is referred to as the
“Merchandise Invoice Received Date” (MIR
date). If a payment is not made within this 30day timeframe, the agency is required by the
law to pay interest to the vendor if the amount
of interest would equal $10 or more.
For the 2005-06 and 2006-07 fiscal years,
DOCS paid $241,033 and $111,420,
respectively, in interest on late payments to
vendors.
Among DOCS’ correctional
facilities, Arthur Kill had the highest interest
payments in 2005-06 ($37,777) and the

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second-highest in 2006-07 ($13,368). In
2005-06, its vendor payments were late 77
percent of the time, and in 2006-07, the
payments were late 34 percent of the time.
Arthur Kill’s Business Office is responsible
for processing its vendor payments. DOCS
facilities use the agency’s financial
management system (known as KFMS) to
prepare vouchers for payment. Arthur Kill’s
vouchers for individual payments under
$15,000 are electronically transmitted by
KFMS to the Office of the State Comptroller
for payment. For larger payments, the hard
copy of the voucher must be submitted for
processing.
AUDIT FINDINGS AND
RECOMMENDATIONS

Reasons for Late Payments
For fiscal years 2005-06, 2006-07, and 200708 (through October 16, 2007), Arthur Kill
often failed to process its vendor payments
within the required timeframe. As a result,
during this period, it had to pay an additional
$58,553 in interest to vendors. Such late
payments affect Arthur Kill’s business
relationship with its vendors, and the interest
payments divert funds that were intended to
be available for the purchase of goods and
services.
Arthur Kill made a total of 2,384 late
payments to vendors. These payments totaled
$7.49 million. We selected for review a
judgmental sample of 678 vouchers relating
to $3.96 million of these payments.
We then asked Arthur Kill officials why the
678 vouchers were paid late. According to
the officials, the most common reasons for the
late payments were as follows:
 staffing issues,

Report 2007-S-141

 available funds were lacking,
 paperwork at the facility
delayed or missing, and

was

 when there were competing
priorities to send payments to
vendors, payments to some vendors
were delayed.
The officials identified several other less
common reasons, as well. However, we
focused our review on the four most common
reasons. As part of this review, we examined
documentation supporting the sampled
vouchers. (The officials provided us with 661
of the 678 vouchers in our sample, saying
they could not find the remaining 17
vouchers, totaling $16,747.)
Staffing Issues
According to Arthur Kill officials, 452 of the
vouchers (totaling $3,121,103) were paid late
because there was not enough staff, or the
staff was new and inexperienced in Arthur
Kill’s Business Office to process the vouchers
within the required 30-day timeframe. For
273 of the 452 vouchers, the lack of staff was
the only reason for the delay; for the other
179 vouchers, the staffing was one of two or
more reasons for the delay.
Arthur Kill officials noted that many staff
members were either new or taken from other
departments, such as the commissary or the
storehouse and were still in a period of
training. One of the reasons why several
vouchers were late was due to the wrong MIR
date recorded on the voucher by
inexperienced staff when the voucher was
actually paid on time. This occurred 29 times
(totaling $74,719) during the 2005-06 and
2006-07 fiscal years. When the other
departments need their staff back, the

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vouchering and purchasing department was
left even more understaffed.
We acknowledge these difficulties and note
that the current fiscal climate may not allow
them to be resolved in a timely manner.
Therefore, Arthur Kill officials need to focus
on improved controls and procedures to
reduce late payments. We note that Arthur
Kill officials have not developed an action
plan for improved controls and procedures to
reduce their delays in paying vendors, and as
a result, the delays have become chronic. We
recommend Arthur Kill formally assess its
vendor payment process, identify and
document the reasons for processing delays,
and develop specific action steps for controls
and procedures to remedy the delays. We
also recommend that Arthur Kill reallocate
staff as necessary and practical to ensure that
vendor payments are made on time. If the
staffing problem persists, consult with DOCS
central office.
Lack of Available Funds
According to Arthur Kill officials, 268 of the
vouchers (totaling $1,560,632) were paid late
because funds were not available to pay the
vendors on time. For 152 of the 268 vouchers,
the lack of funds was the only reason for the
delay; for the other 116 vouchers, the lack of
funds was one of two or more reasons for the
delay.
For example, facility officials indicated that
the commissary operates with a revolving
account. The facility orders items to maintain
inventory stock levels, with payments being
made from the revolving account. As items
are sold, the proceeds are deposited in the
revolving account, allowing the facility to
order additional items. Facility personnel
indicated they have ordered more inventory
than could be supported by the revolving
account.

Report 2007-S-141

At the closing conference, DOCS provided a
letter from its Chief Financial Officer
regarding the commissary revolving fund.
The letter indicates that there was a shortage
in Arthur Kill’s commissary account, and
attributed the problem to administrative
issues, such as failure to increase commissary
prices to cover costs. DOCS is reviewing the
commissary account further to determine if
state funds will be needed to replenish the
revolving fund.
We met with DOCS officials in Albany
regarding other instances where lack of
funding was the reason given for payment
delays. They could not agree with the
assertion by Arthur Kill. Instead, they
indicated that facility clerical errors had
resulted in holds on funds not being released
in a timely manner, so while it did not appear
that funds were available, they actually were.
We recommend that the Arthur Kill Business
Office contact DOCS’ central office when
KFMS indicates funds are not available to
make payments and maintain a record of each
event. This information should be used to
determine whether facility personnel made an
error or central office did not release the
funds to make the payments.
Delayed or Missing Paperwork
According to Arthur Kill officials, 92 of the
vouchers (totaling $552,798) were paid late
because paperwork at the facility was either
delayed or missing. For 28 of the 92
vouchers, the delayed or missing paperwork
was the only reason for the delay; for the
other 64 vouchers, the delayed or missing
paperwork was one of two or more reasons
for the delay.
For example, our sample included 19
vouchers for pharmaceutical items totaling
$339,593. Arthur Kill officials told us that

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these vouchers were paid late due to waiting
for the necessary paperwork to be approved
and returned from the staff in the medical
unit. Some of these delays were due to staff
shortages and a high turnover rate in the
medical unit which made getting proof of
delivery difficult. In three instances the
vouchers were paid without approval of the
medical unit to avoid further delay.

held to be sent out in groups. For 3 of the 82
vouchers, the lower priority for payment was
the only reason for the delay; for the other 79
vouchers, the lower priority for payment was
one of two or more reasons for the delay.

Arthur Kill officials also told us that there
were problems with the nursing staff
following proper procedure. The nurses have
placed orders directly with the pharmacy
without a purchase request. The lack of
authorization has caused delays. The nursing
staff is not authorized to directly place these
orders. We found four such vouchers over the
2005-06 and 2006-07 fiscal years totaling
$1,355.

Recommendations

We recommend that Arthur Kill officials
develop an action plan with a goal of paying
all vendors on time.

1.

Ensure that vendor payments are made
timely in accordance with the New
York
State
Prompt
Payment
Legislation.

2.

Formally assess the facility’s vendor
payment process, identify and
document the reasons for processing
delays, and develop specific remedies
(in the form of an action plan) for the
delays.

We recommend officials establish expected
processing times for each step of the vendor
payment process, monitor the process to
determine whether the expected times are
being met, and take corrective action when
the times are not being met. In addition, the
nursing staff should be notified to submit
purchase requests to the Business Office, as
required, and not purchase directly with the
pharmacy. At the closing conference, Arthur
Kill officials indicated that they now pursue
delayed paperwork, rather than waiting for it.

(DOCS officials replied to our draft
audit report that they will maintain
documents regarding the delays.)
Auditor’s Comments:
DOCS
response does not indicate they will
develop an action plan to correct the
conditions causing the delays. The
action plan is a critical part of the
recommendation and we urge DOCS
to do so.

Prioritization of Vendor Payments
According to Arthur Kill officials, 82 of the
vouchers (totaling $873,778) were paid late
because, when given competing priorities,
payments to certain vendors have lower
priority. These vendors include those who are
not entitled to interest (mainly governmentrelated entities) as well as large vendors that
could sustain waiting for payment (for
example, not a local, small business). Lastly,
vouchers that are of small amounts may be

Report 2007-S-141

3.

Reallocate staff as necessary to ensure
that vendor payments are made on
time. If the staffing problem persists,
consult with DOCS central office.

4.

Contact DOCS’ central office when
KFMS indicates funds are not
available to make payments and
maintain a record of each event. This
information should be used to

Page 5 of 9

determine whether facility personnel
made an error or central office did not
release the funds to make the
payments.
5.

Ensure the commissary does not order
more than can be supported by sales
revenues.

6.

Complete the review of the
commissary account, and take
appropriate action to resolve the
cause(s) of the account shortage.
Report the results of the review to the
Office of the State Comptroller.

7.

Establish expected processing times
for each step of the vendor payment
process, monitor the process to
determine whether the expected times
are being met, and take corrective
action.

8.

Periodically remind the nursing staff
to submit purchase requests to the
Business Office, as required, and not
purchase directly with the pharmacy.

AUDIT SCOPE AND METHODOLOGY
We audited Arthur Kill’s vendor payment
process for the period April 1, 2005 through
October 16, 2007.
To accomplish our
objective, we interviewed officials at Arthur
Kill and DOCS central office and reviewed
documentation supporting payments made to
vendors. We selected a judgmental sample of
payments for review from vendors that had
received ten or more late payments in the
2005-06 and 2006-07 fiscal years, and
through October 16, 2007 in the 2007-08
fiscal year. In total, there were 285 such
vendors in the 2005-06 year, 215 such
vendors in the 2006-07 year, and 105 such
vendors in the first part of the 2007-08 year.

Report 2007-S-141

We conducted our performance audit 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.
In addition to being the State Auditor, the
Comptroller
performs
certain
other
constitutionally and statutorily mandated
duties as the chief fiscal officer of New York
State. These include operating the State’s
accounting system; preparing the State’s
financial statements; and approving State
contracts, refunds, and other payments. In
addition, the Comptroller appoints members
to certain boards, commissions and public
authorities, some of whom have minority
voting rights.
These duties may be
considered management functions for
purposes of evaluating organizational
independence under generally accepted
government auditing standards.
In our
opinion, these functions do not affect our
ability to conduct independent audits of
program performance.
AUTHORITY
The audit was performed pursuant to the State
Comptroller’s authority as set forth in Article
V, Section 1 of the State Constitution and
Article II, Section 8 of the State Finance Law.
REPORTING REQUIREMENTS
A draft copy of this report was provided to
DOCS officials for their review and comment.
Their comments were considered in preparing
this final report, and are included as Appendix
A.

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Within 90 days of the final release of this
report, as required by Section 170 of the
Executive Law, the Commissioner of the
Department of Correctional Services shall
report to the Governor, the State Comptroller,
and the leaders of the Legislature and fiscal
committees, advising what steps were taken to
implement the recommendations contained
herein, and where recommendations were not
implemented, the reasons why.

Report 2007-S-141

CONTRIBUTORS TO THE REPORT
Major contributors to this report include
Carmen Maldonado, Robert Mehrhoff, Erica
Zawrotniak, Joseph Smith, Richard Moriarty
and Dana Bitterman.

Page 7 of 9

APPE

orx A

AUDITEE RESPONSE

STATP.OI"NHWYORK

DEPARTMENT 011 CORRECTIONAL SEll..VICES
11IB HARRlMA..'1 STATECAMI'US _DIJILDTNQ 2

1220 WASHlNO'T'ON AVE''UB

AlBANY,N.Y, Im/i.-2050

February 5, 2009

Ms. Cannen Maldonado
Audit Director
Office ofthe State Comptroller
Division of State Government Accountability
rl
123 William Street. 21 Floor
New Yori:. NY 10028
RE: Draft Audit Report 2007-5-141:
Arthur Kill Correctional Facility·
Late Vendor Payments.
Dear Ms. MaldoDado:
In accordance with Section 170 of the Executive Law and in response to your
correspondence of January 12, 2009, attached is the Department's reply to the Draft Audit
Report (2007-8-141) Department of Correctional Services' Arthur Kill Corroctional Facility Late
Vendor Payments.

DOCS would like to acknowlodge the time and effort of all employees thal were involved
with this audit and their desire to improve the Depart:ment's operation.

Brian Fischer
Commissioner

-Attachment··

Report 2007-S-141

Page 8 of 10

STATE OF NEW YORK
DEPARTMENT OF CORRECTIONAL SERVICES

ARTHUR KILL CORRECTIONAL FACILITY
2911 ARTHUR KILL ROAD
STATEN ISLAND, NEW YORK 10309·1101

(718) 356-7333

-

BRIAN S. FISCHER

ODINIS J. BR£$UN
. ~

January 28, 2009
Cannen Maldonado
Audit Director
Office of the State Comptroller
Division of State Government Accountability
123 William Street - 21 st Floor
New York, NY 10038
Rc:

Audit Report 2007·8·J41:
Arthur Kill Correctional Facility
Late Vendor Payments

Dear Ms. Maldonado:
We have reviewed the Audit of Arthur Kill Correctional Facility Late Vendor
Payments, Report 2007·8·141, and offer the following comments on the
recommendations made during the audit.

Recommendation # I: Ensure that vendor payments are made timely in accordance with
the New York State Prompt Payment Legislation.
Response: We agree with this recommendation and have provided training for staff in
this regard.

Recommendation #2: Fonnally assess the facility's vendor payment process, identify and

document the reasons for processing delays and develop specific remedies (in the fonn of
an action plan) for the delays.
Response: We agree with this recommendation. Better documentation for delays will be
maintained by a log in the Business Office.
ReconunendatioD #3: Re-a11ocate staff as necessary to ensure that vendor payments are
made on time. If the staffing problem persists, consult with DOCS Central Office.
Response: We agree: with this recommendation and will re-allocate staff as necessary.

Report 2007-8-141

Page 9 of 10

Recommendation #4: Contact DOCS Central Office when KFMS indicates funds are not
available to make payments and maintain a record of each event. This information
should be used to detennine whether facility personnel made an error or Central Office
did not release the funds to make the payment.
Response: We agree with the recommendation. When staff believes that funds are
1.!navailable, discussions will take place with the Central Office Budget Analyst.
RecommendatiOD' #5: Ensure the Commissary does not order more than can be supported
by sales revenucs.
Response: We agree with this recommendation.
revenues are available.

Orders will only be made when

Recommendation #6: Complete the review of the Commissary account and take
appropriate action to resolve the cause(s) of the account shortage. Report the results of
the review to the Office of the State Comptroller.
Response: We agree and will comply with the recommendation.
Recommendation #7: Establish expected processing times for each step of the vendor
payment process, monitor the process to detennine whether the expected times are being
met, and take corrective action.
Response: We agree with this recommendation. A log book has been established to
track the process from the ordering through receiving of goods to payment.
Recommendation #8: Periodically remind the Nursing staff to submit purchase requests
to the Business Offices, as required, and not to purchase directly with the Phannacy.
ResP:mse: We agree. The ~urse Administr2tor will meet regularly with the Steward to
review our practices with Agency Nurses.
Sincerely,

Dennis Breslin,
Superintendent

DJBlhs

Report 2007-S-141

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