The Department of Criminal Justice’s Oversight of Selected Providers That Deliver Residential Services and Substance Abuse Treatment Programs, TX SAO, 2010

• Nov. 17, 2016 • Locations: United States of America -> Texas • Topics: Misconduct/Corruption, Corrections Audits

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John Keel, CPA
State Auditor

An Audit Report on

The Department of Criminal
Justice’s Oversight of Selected
Providers That Deliver Residential
Services and Substance Abuse
Treatment Programs
March 2010
Report No. 10-025

An Audit Report on

The Department of Criminal Justice’s
Oversight of Selected Providers That
Deliver Residential Services and Substance
Abuse Treatment Programs
SAO Report No. 10-025
March 2010

Overall Conclusion
The Department of Criminal Justice
(Department) has assigned its Private Facilities
Contract Monitoring and Oversight Division
(Division) the responsibility for assessing the
contract compliance of its private facility
providers (providers) that deliver residential
services and substance abuse treatment
programs through the operation of secure
correctional facilities, halfway houses, work
release programs, and substance abuse
treatment programs. The Division has
established contract administration and
monitoring processes to ensure that:

Background Information
The Private Facilities Contract Monitoring
and Oversight Division (Division) is
responsible for monitoring the contract
compliance of private facility providers
(providers) that operate secured
correctional facilities, halfway houses,
work release programs, and substance
abuse treatment programs. The Board of
Criminal Justice approved the Division as
an independent division in May 2007.
For fiscal year 2009, the Division reported
an operating budget of approximately $3
million and a staff of 40 contract monitors
who were responsible for monitoring 68
contracts with 33 different providers. The
Department’s payments to these providers
totaled $235 million in fiscal year 2008 and
$255 million in fiscal year 2009.

The services delivered by providers comply
with contract requirements.

Criminal history checks are performed on
providers’ employees and subcontract
workers.

The Department’s payments to providers are accurately calculated and
processed in a timely manner.

As of September 1, 2009, the Department
had contracted for a total of 20,722 beds
and 6,855 treatment slots with providers.

However, the Department should address weaknesses identified in its contracts
with providers that, if corrected, would allow its contract monitors to provide
greater assurances that providers are delivering quality services and achieving
desired results. Specifically, the Department’s contracts with providers do not
consistently include the contract requirements necessary to assess the quality of
the services its providers deliver. Auditors reviewed 16 of the Department’s
contracts with providers and found:
¾

The Department did not consistently include in its contracts performance
standards to help ensure that the Department can hold its providers accountable
for unacceptable performance or contract non-compliance. Although the
Department included requirements in its contracts that define the services that

This audit was conducted in accordance with Texas Government Code, Sections 321.0132 and 321.0134.
For more information regarding this report, please contact Anita D’Souza, Chief of Staff, or Lisa Collier, Assistant State Auditor, at
(512) 936-9500.

An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025

must be delivered to ensure the health, safety, and well-being of its offenders,
it did not consistently define the performance standards that would be used to
evaluate the quality of the services delivered by providers.
¾

The Department did not consistently include financial reporting requirements in
its contracts. Although the Department included financial reporting
requirements in seven contracts with providers that operated substance abuse
treatment programs, it did not include financial reporting requirements in seven
contracts with providers that operated secured correctional facilities or in two
contracts with providers that operate halfway houses.

In addition, the Department allowed three providers that operated a certain type
of substance abuse treatment program to conduct their own criminal history
checks of employees and subcontract workers, even though the Division conducts
criminal history checks for employees and subcontract workers of all other
providers.

Key Points
The Department’s contracts did not consistently include provisions that are
necessary to ensure that providers are accountable for the delivery of quality
services and substance abuse treatment programs, as well as provisions essential to
protecting the State’s interest.
Auditors reviewed 16 (24 percent) of the Department’s 68 contracts with providers
(7 secured correctional facilities, 7 substance abuse treatment programs, and 2
halfway houses). In those 16 contracts, auditors determined that:
¾

The Department did not consistently include performance standards in its
contracts with providers. Performance standards help the Department to hold
its providers accountable for unacceptable performance or noncompliance with
contract requirements. Auditors determined that the Department included
performance standards for certain requirements in its provider contracts;
however, these performance standards were not consistently included in all
provider contracts.

The Department did not include in its contracts with providers that operate
transitional treatment centers, which are a type of facility that operates
substance abuse treatment programs, performance standards that would be used
to evaluate the quality of the treatment programs. However, it did include
performance standards in its contracts with providers that operate substance
abuse felony punishment/in-prison therapeutic program, which is another type
of substance abuse treatment program.

Seven contracts with providers that operate secured correctional facilities and
two contracts with providers that operate halfway houses did not have financial
reporting requirements. As a result, the Division has limited information
regarding these providers’ internal controls over financial processes. However,

An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025

the Department included financial reporting requirements in seven contracts
with providers that operate substance abuse treatment programs.
The Department did not clearly define the roles and responsibilities of its three
divisions that oversee providers that operate substance abuse treatment programs.
Although the Division is recognized by the Department as the contract monitoring
entity over substance abuse treatment program providers, the Division’s role is
limited to monitoring a provider’s compliance to certain contract requirements.
The Rehabilitation Programs Division and the Parole Division are responsible for
monitoring the quality of the substance abuse treatment programs. However, the
monitoring relationships among the divisions are not defined and documented to
ensure that the monitoring activities are efficiently coordinated and
communicated among the divisions.
The Department did not maintain documentation to justify its decision to renew
provider contracts.
The Department did not have documentation to demonstrate that it considered
providers’ contract compliance or performance history in its contract renewal
decisions. The Department’s supporting documentation for its contract renewal
decisions showed that the appropriate management reviewed and approved
requests for contract renewal; however, the supporting documentation did not
include any information that described the performance or compliance history of
the providers.
The Department allowed certain types of substance abuse treatment program
providers to perform their own criminal history checks.
The Department allowed providers that operate substance abuse felony
punishment/in-prison therapeutic programs to process their own criminal history
checks with the Department of Public Safety, instead of requiring the criminal
history checks to be processed through the Division as other providers are required
to do. (See Appendix 3 for more information about substance abuse felony
punishment/in-prison therapeutic programs.) Although the Department reported
that these providers were still required to obtain approval from the Rehabilitation
Programs Division to hire any employees or subcontract workers that had a criminal
history, the Rehabilitation Programs Division did not ensure that these providers
were performing criminal history checks on all employees and subcontract workers.
Thirty-one (78 percent) of 40 contract monitors documented the qualifications
necessary to monitor providers in their job applications.
Based on auditors’ review of the Department’s contract monitors’ job applications,
31 of 40 contract monitors met the minimum qualifications and experiences
necessary to adequately monitor a provider’s contract compliance. These
minimum requirements include: (1) a bachelor’s degree from an accredited 4-year
university and (2) 4 to 7 years of relevant work experience in criminal justice,

iii

An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025

which may include prior work experience in Department-secured correctional
facilities. In addition, contract monitors that monitor financial activities and
substance abuse treatment programs documented in their job applications that
they had the necessary prior work experience, which included auditing, evaluating,
and reviewing contract compliance, monitoring financial activities, and/or working
in substance abuse/therapeutic programs. Auditors could not determine whether
the remaining nine contract monitors met the minimum qualifications because the
Department reported that seven of the contract monitors were transferred or
reassigned from prior positions and did not have to complete an application for the
contract monitoring position, and that it destroyed the applications for two
employees in accordance with the Department’s record retention schedule.

Summary of Management’s Response
The Department agrees with the findings and recommendations in this report. The
management responses to the specific recommendations in this report are
presented immediately following each set of recommendations in the Detailed
Results section of this report.

Summary of Information Technology Review
Auditors examined the Department’s Strength application, which tracks the
receipt, departure, and transfer of each offender in Texas prisons. Although the
Strength application had controls that provided assurances that the daily starting
and ending counts of offenders entered into the Strength application were
accurate, auditors identified weaknesses in certain access controls over the
Strength application that increase the risk that other data may be inaccurate.
Auditors also examined the Department’s Authorization Management System,
which is the automated billing system the Department uses to process payments
for substance abuse treatment program providers. The Authorization Management
System had the necessary controls in place to ensure the accuracy of billing
information submitted through the system. However, the Department had not
developed necessary security administration processes over the system.
In addition, auditors examined the Department’s financial accounting system. The
Department had the necessary controls in place to ensure that the system’s
financial transactions are complete, accurate, timely, and authorized.
To minimize the risks associated with public disclosure, auditors communicated in
writing details about confidential and sensitive information technology issues
directly to the Department’s management.

An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025

Summary of Objective, Scope, and Methodology
The objective of this audit was to determine whether the activities of the Division
at the Department provide reasonable assurance that contractors operating private
facilities comply with contractual terms governing operations and financial
matters.
The scope of this audit included reviewing the accuracy and completeness of the
Division’s contract administration, monitoring, and renewal activities during fiscal
years 2008 and 2009.
The audit methodology included reviewing judgmentally selected provider
monitoring reports, collecting information and documentation, performing
selective tests and other procedures, analyzing and evaluating the results of tests,
and interviewing Department management and staff. Auditors also accompanied
contract monitors during on-site monitoring visits to eight provider facilities: the
Bridgeport Pre-Parole Transfer Facility (Corrections Corporation of America); the
Dawson State Jail (Corrections Corporations of America); the El Paso Halfway
House and Transitional Treatment Center (Southern Corrections); the Dallas
Transitional Treatment Center (Gateway Foundation); the South Texas
Intermediate Sanction Facility (The GEO Group); the Beaumont Transitional
Treatment Center (Spindletop MHMR Services); the Travis County Jail (Turning
Point); and the Dallas Transitional Treatment Center (The Salvation Army).

Other Information
An immediate family member of the State Auditor is registered with the State
Ethics Commission as a government relations employee of a firm that conducts
lobbying efforts on behalf of a contractor included in the scope of this audit. This
condition could be seen as potentially affecting our independence in reporting
results related to this contractor. This condition did not affect our audit
conclusions. This condition is discussed further in Appendix 1 of this report.

Contents
Detailed Results
Chapter 1

The Department Should Strengthen Its Security Controls
over Certain Information Systems ................................. 20

Appendices
Appendix 1

Objective, Scope, and Methodology ............................... 27
Appendix 2

Overview of the Department of Criminal Justice’s
Contract Monitoring of Private Facility Providers that
Operate Substance Abuse Treatment Programs ................. 30
Appendix 3

Types of Facilities and Programs the Department’s
Private Facility Providers Operate ................................. 31
Appendix 4

Compliance and Performance Standards Defined in
Contracts Between the Department of Criminal Justice
and Certain Types of Private Facility Providers ................. 34

Appendix 5

Map of Private Facility Providers That Operate Secured
Correctional Facilities and Offender Population Totals as
of May 31, 2009 ....................................................... 38
Appendix 6

Map of Private Facility Providers of Work Release
Programs, Halfway Houses, and Substance Abuse
Treatment Programs as of March 31, 2009 ....................... 41
Appendix 7

The Department’s Private Facility Providers for Fiscal
Years 2008 and 2009 ................................................. 45
Appendix 8

Overview of the Contract Monitoring Activities
Performed by the Private Facilities Contract Monitoring
and Oversight Division ............................................... 48
Appendix 9

State of Texas Contract Management Guide Essential
Contract Provisions ................................................... 50

Detailed Results
Chapter 1

The Department Has Processes to Monitor Private Facility Providers;
However, It Should Strengthen Certain Contract Monitoring
Weaknesses to Ensure That Providers Comply with Contract
Requirements
The Department of Criminal Justice’s (Department) Private Facilities Contract
Monitoring and Oversight Division (Division) has administrative processes to
determine whether (1) payments to private facility providers
Private Facility Contracts
(providers) are calculated accurately and processed in a timely
The Private Facilities Contract Monitoring and
manner, (2) criminal history checks are performed on providers’
Oversight Division (Division) monitors the
employees and subcontract workers, and (3) providers are
contract compliance of providers that deliver
the following types of residential services and
delivering services in compliance with contract requirements (see
substance abuse treatment programs:
text box for information on the types of provider contracts).
Private correctional centers.
However, weaknesses exist in certain areas of the Department’s
Private state jail facilities.
contract monitoring processes. The Department should address
Pre-parole transfer facilities.
these weaknesses to provide greater assurance that its providers
Lockhart Work Program.
are complying with contract requirements and delivering quality
Intermediate sanction facilities.
services. Specifically:
Contract transfer facilities (which provide
temporary capacity beds).

Halfway houses.
County Jail Work Release Program.
Substance abuse felony punishment

facilities and In-prison therapeutic
community.

Transitional treatment centers.
State Jail Substance Abuse Program.
Driving While Intoxicated.

Auditors reviewed 16 of the Department’s 68 contracts with
providers. In those 16 contracts, the Department did not
consistently include performance standards for assessing a
provider’s compliance with certain contract requirements.

The Department also did not require periodic financial
reports or independent audits in its contracts with providers
that operate secured correctional facilities or halfway houses;
See Appendix 3 for detailed information about
each type of private facility provider.
however, the Department included such requirements in its
contracts with providers that operate substance abuse
treatment facilities.

While the Department has processes to monitor providers’ performance
and contract compliance for selected activities, it has not clearly defined
the contract monitoring responsibilities of the three divisions charged with
oversight responsibilities: the Division, the Rehabilitation Programs
Division, and the Parole Division. In addition, the Department did not
consistently maintain adequate documentation of its justifications for
renewing contracts or of monitoring visits to halfway houses and
substance abuse treatment programs. The Department also lacks
guidelines to ensure that noncompliance issues are corrected before it
closes the monitoring reports.

An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 1

Chapter 1-A

The Department Has Established Processes for Processing Provider
Payments and Conducting Criminal History Checks
The Division’s processes for paying its providers and conducting criminal
history checks help to ensure that the Division:

Processed provider invoices in a manner that ensured payments were
calculated accurately and were processed in a timely manner. This
process included assessing financial penalties for noncompliance issues
identified during monitoring reviews. Examples of noncompliance issues
included the failure to perform criminal history checks on staff and
subcontract workers, not having adequate insurance coverage, and not
hiring and retaining an adequate number of qualified staff. (See Appendix
4 for a complete listing of Department’s compliance standards and
performance measures it used to assess providers’ contract compliance.)

Performed pre-employment and annual criminal history checks on most of
its providers’ employees and subcontract workers. However, the
Department allowed certain providers to perform their own criminal
history checks (see Chapter 2-A for more information about providers’
criminal history checks).

Although the Department has processes to monitor providers’ compliance
with contract requirements, it has not documented its policies and procedures
related to these monitoring activities (see Chapter 1-C for more information
regarding the Department’s lack of documented policies and procedures).

Chapter 1-B

The Department’s Contracts Did Not Consistently Include
Provisions Necessary to Ensure That Providers Are Accountable for
the Delivery of Quality Services and Substance Abuse Treatment
Programs or Provisions Essential to Protecting the State’s Interest

The 16 contracts reviewed did not consistently include certain performance
standards that would help the Department to evaluate its providers’
performance and compliance with contract requirements intended to ensure
the health, safety, and welfare of offenders (see text box for more information
about the provider contracts that auditors reviewed). In addition, the
Private Facility Provider Contracts
Department did not consistently include (1) performance standards
Auditors reviewed 16 of the Department’s
for evaluating the quality of treatment services delivered by
contracts with providers that operate
providers that operate substance abuse treatment facilities or (2)
secured correctional facilities, halfway
houses, and substance abuse treatment
financial reporting requirements in its contracts with providers.
programs. Specifically, auditors
reviewed:

Four transitional treatment center
contracts.

Three substance abuse felony

The Department did not consistently include performance standards
necessary to evaluate its providers’ compliance with certain contract
requirements.

punishment/in-prison therapeutic
program contracts.

In the 16 contracts reviewed, the Department did not consistently
include performance standards for assessing a provider’s compliance
Two state jail contracts.
with certain contract requirements. These standards are necessary to
Two correctional center contracts.
help the Department effectively evaluate and measure a provider’s
Two intermediate sanction facility
performance and compliance with contract requirements. Texas
contracts.
Government Code, Section 495.008 (b) (2), requires the Department
One pre-parole transfer facility
to ensure that its contracts include minimum acceptable performance
contract.
standards that include provisions regarding the health, safety, and
See Appendix 3 for more information
about the facilities and programs
welfare of offenders. The Department’s contracts with providers that
operated by providers.
operate different types of facilities and substance abuse treatment
programs all included requirements related to various areas of care that
offenders should receive, including those in food services, health services,
education, and other components of daily life. However, the Department did
not always include in its contracts related performance standards (which the
Department refers to as either compliance standards or performance
measures1) necessary to evaluate and measure its providers’ compliance with
these requirements. (See Appendix 4 for more information on the compliance
standards and performance measures that the Department included in provider
contracts.)

Two halfway house contracts.

For example, the Department’s contracts with providers that operate secured
correctional facilities contained requirements and compliance standards
related to a provider’s timely review and reporting of altercations and

The Department refers to the compliance standards in its contracts with providers that operate substance abuse felony
punishment/in-prison therapeutic facilities as “performance measures.”
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 3

incidents involving offenders to the Department. While the Department’s
contracts with providers that operate substance abuse treatment programs
contain requirements related to the timely reporting of grievances and
disciplinary actions involving offenders, those contracts did not contain any
performance standards for determining acceptable or unacceptable compliance
with those requirements.
In addition, the Department did not consistently include performance
standards that could be used to evaluate the providers’ performance or
compliance for all contract requirements. For example, auditors reviewed
four contracts with providers that operate transitional treatment centers that
required these providers to ensure that their buildings are secure
Transitional Treatment Centers
and that they have the security equipment necessary to maintain
Transitional treatment centers are
control over the offenders in their care (see text box for more
privately owned and operated
community-based facilities that provide
information about transitional treatment centers). However, the
substance abuse aftercare treatment to
Department
did not include performance standards in its contracts
offenders on parole, mandatory
supervision, or community supervision
that it could use to determine acceptable compliance with this
(probation).
requirement. It should be noted, however, that the Department
does use a contract monitoring tool to annually assess risk-based
selected providers for compliance to the security-related requirements
discussed above, including conducting an examination to determine that (1)
specific aspects of a provider’s security system exist (such as cameras, alarms,
and motion detectors); (2) the doors are secure; (3) the staff is available; (4)
the facility lighting is adequate; and (5) access to the facility is sufficiently
controlled.
By not consistently including in its contracts performance standards that
would be used to determine the provider’s compliance with
contract requirements, the Department places itself at risk of
Substance Abuse Felony
being unable to hold a provider accountable for unacceptable
Punishment/In-Prison Therapeutic
Program Facilities
performance or contract noncompliance.
A substance abuse felony punishment
facility is an intensive substance abuse
treatment program for offenders who are
sentenced to complete the program by a
judge or as a modification of the offender’s
community supervision (probation).
Additionally, offenders on parole or
mandatory supervision who are in need of
intensive substance abuse treatment may be
placed in this type of program.
An in-prison therapeutic community is an
intensive substance abuse treatment program
for eligible offenders who are within six
months of release and who are identified as
needing substance abuse treatment. The
Board of Pardons and Paroles must vote to
place qualified offenders in this type of
program, and successful graduates are
released on parole or mandatory supervision.

The Department did not consistently include performance
standards for assessing the quality of substance abuse treatment
programs in its contracts with certain providers.

The Department did not include performance standards for
assessing the quality of substance abuse treatment programs in
its contracts with providers that operate transitional treatment
centers. However, the Department included performance
standards for assessing the quality of substance abuse treatment
programs in its contracts with providers that operate substance
abuse felony punishment/in-prison therapeutic program facilities
(see text box for more information on substance abuse felony
punishment/in-prison therapeutic program facilities). The
Department’s contracts with providers that operate transitional
treatment centers includes only compliance standards that were

designed to ensure compliance with certain requirements related to the hiring
of staff and maintaining adequate insurance coverage.
The Department did not require providers to submit periodic financial reports
or independent audits in all of its contracts.

Auditors reviewed 16 provider contracts and determined that 7 contracts with
providers that operate secured correctional facilities and 2 contracts with
providers that operate halfway houses did not include financial reporting
requirements, which is inconsistent with the 7 contracts with providers of
substance abuse treatment programs. The Department’s contracts require all
substance abuse treatment program providers to have an annual financial
audit. In addition, the contracts for providers that operate a transitional
treatment center, which is a type of substance abuse treatment program,
require either an annual independent audit or the submission of financial
statements prepared by the provider’s chief financial officer. Transitional
treatment center providers also are required to submit reports on program
revenues, expenditures, and internal controls, and they are required to submit
management letters and a status report on prior audit findings that resulted
from an independent annual audit. The American Correctional Association,
which provides accreditation to correctional services related facilities, requires
that secured correctional facilities, including community-based residential
services such as halfway houses, have ongoing internal monitoring, as well as
periodic financial audits at each facility.2 The periodic submission of
financial reports and performance of independent audits provides the
Department with greater assurances that a provider is managing funds in
accordance with the requirements of the contract.
The Department’s contracts with providers did not include all essential contract
provisions required by the State of Texas Contract Management Guide.

While the 16 contracts reviewed included most of the essential contract
provisions required by the State of Texas Contract Management Guide,
auditors identified three essential provisions that were not included.
Specifically, each contract lacked:

A right to data, documents, and computer software (state ownership)
clause.

A technology access clause.

An intellectual property indemnification clause.

Standards for Adult Correctional Institutions, American Correctional Association, 4th Edition, January 2003; and Performancebased Standards for Adult Community Residential Services, American Correctional Association, 4th Edition, January 2001.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 5

Texas Government Code, Sections 2262.051 (d) and 2262.052 (a), establish
requirements to be included in all state agency contracts to protect the
interests of the State. (See Appendix 9 for a complete list of essential contract
provisions.)
Recommendations

The Department should

Develop and include in its contracts with providers performance standards
for all requirements related to ensuring the health, safety, and well-being
of offenders.

Develop and include performance standards in all contracts with providers
that operate substance abuse treatment programs.

Include all essential contract provisions required by the State of Texas
Contract Management Guide in all its contracts with providers.

Management’s Response
The Department should:

Develop and include in its contracts with providers performance
standards for all requirements related to ensuring the health, safety, and
well-being of offenders.
Agree. Compliance standards are typically included in the contracts for
the operation of secure correctional facilities (correctional centers, state
jails, pre-parole transfer facilities, intermediate sanction facilities and the
new treatment facilities). Our contracts for community based residential
facilities (halfway house and transitional treatment centers) contain
requirements for the health, safety and welfare of the offenders and
include some compliance standards, but will be reviewed to add
additional compliance standards to enhance our ability to hold the
contractors accountable. The new standards will be incorporated in future
contracts and the current contracts will be amended when deemed
appropriate (i.e., upon exercising an option period.

Develop and include performance standards in all contracts with
providers that operate substance abuse treatment programs.
Agree. The PFCMOD will coordinate with the RPD to determine what
performance based standards are appropriate jor the different types of
substance abuse contracts.

Develop and include in its contracts with providers that operate secured
correctional facilities and halfway houses requirements for the submission
of periodic financial reports that should include, but should not be limited
to, independent financial audits and Department-designed financial
summary reports.
Agree. The PFCMOD has taken steps to ensure appropriate financial
statement language for each type of contract involved is in all future
contracts. These steps include reviewing the contracts utilizing risk based
criteria. In the past few years, we have reviewed the need for this type of
language in our smaller substance abuse contracts. We found that the
requirement for audited financial statements was cost prohibitive for these
lower dollar contracts. Therefore, the language was eliminated. However,
we will review these contracts to determine if the requirement to submit
financial statements that are prepared by the provider would be
appropriate.
At this time, our intent is to modify all secure correctional facility contacts
and the larger community based residential contracts to include the
requirement to submit periodic financial audits. Currently, there are only
two correctional facilities that do not have the requirement. However,
these contracts are in the solicitation process and we have added the
requirement. All state jails, pre-parole transfer facilities and two
intermediate sanction facility contracts will expire in fiscal year 2011 and
the new requirement will be included in the replacement contracts.

Include all essential contract provisions required by the State of Texas
Contract Management Guide in all its contracts with providers.
Agree. The PFCMOD will ensure that all future contracts will include the
essential language required by the State of Texas Contract Management
Guide, as applicable.

Chapter 1-C

The Department Lacks Certain Processes to Ensure Coordination,
Communication, and Retention of Information Related to
Providers’ Performance History
Although the Department conducts site visits to monitor the performance and
contract compliance of selected activities of its providers and collects certain
financial and performance information from providers, auditors identified
areas of its contract monitoring process that the Department should strengthen
to improve coordination, communication, and retention of providers’
performance history. Those areas are discussed below.
The Department lacks clearly defined contract monitoring responsibilities for
the three divisions that have oversight responsibilities over substance abuse
treatment program providers.

The Department reported that it delegated monitoring responsibilities for
substance abuse treatment program providers to three divisions: the Division,
the Rehabilitation Programs Division, and the Parole Division. (see Appendix
2 for more information about each division’s monitoring role). Although the
Department made efforts to coordinate the monitoring activities performed by
these divisions through informal discussions between the divisions’
management and staffs, the Department had not documented policies and
procedures governing the monitoring responsibilities and relationships among
each of these divisions.
A July 2005 internal audit of the Department’s monitoring processes over
substance abuse treatment programs identified concerns about the
organizational structure and lack of coordination between the multiple
divisions with monitoring responsibilities. The review concluded that the
Department’s monitoring activities over providers were not effective and that,
in some instances, there was a duplication of efforts among the divisions. The
lack of policies and procedures increases the risk that these divisions may
duplicate monitoring efforts or fail to communicate performance and contract
management issues to one another that are relevant for assessing a provider’s
contract compliance. The lack of communication and coordination also
increases the risk that these divisions may not be consistent in their efforts to
address known or reoccurring noncompliance issues.
The Division lacks processes to ensure that it receives all financial information
that providers are required to submit.

Although the Department included financial reporting requirements in its
contracts with certain types of substance abuse treatment program providers
and reported receiving and reviewing financial reports from certain types of
providers, the Division had not documented a formal process to ensure that its
financial contract monitors obtain and document the results of their reviews of
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 8

financial reports from those providers. Obtaining and reviewing these
financial reports is an important step in identifying any concerns or potential
risks that may affect the services delivered by those providers.
The Department did not consistently maintain documentation to justify its
decisions to renew provider contracts.

The Department did not have supporting documentation showing that it
considered a provider’s contract compliance or performance history during its
contract renewal decisions. For the contract renewals for 16 providers that
auditors reviewed, the supporting documentation showed that the Department
based its contract renewal decisions on management’s review and approval of
the requests to renew a contract, and it did not include specific information or
factors related to a provider’s contract compliance or performance history.
The State of Texas Contract Management Guide recommends that
management’s approval to renew a contract be based on (1) documentation
showing that a contractor has been in substantial compliance with all
requirements of a contract and (2) a recommendation for contract renewal by
the appropriate oversight entity.3
The lack of established performance-based criteria in the Department’s
contract renewal process increases the risk that the Department may renew a
contract with a provider that is operating facilities or programs with a history
of poor performance.
The Division did not consistently document its monitoring visits of halfway
houses and substance abuse treatment programs.
On-site Reviews
The Division performs several types of on-site
reviews to monitor providers’ contract
compliance throughout the year. These
include:

Unannounced visit- A review of select

functional areas during non-working hours
(including weekends and holidays) without
prior notification to the provider.

Unscheduled visit- A review conducted
during working hours without prior
notification to the provider.

Auditors reviewed the Division’s monitoring records for
unannounced, unscheduled, and compliance review visits (see
text box for more information about the types of on-site reviews
performed) conducted from September 2007 through May 2009
for two providers that operate halfway houses and four providers
that operate substance abuse treatment programs. The Division
was inconsistent in documenting the monitoring visits.
Specifically:

Fifty-three (46 percent) of 114 compliance reviews that
should have been conducted were not documented.

Twenty-one (17 percent) of 126 monthly unscheduled visits
that should have been conducted were not documented.

Compliance review- A scheduled review

that may include assessments of compliance
in certain functional areas or a
comprehensive review of all functional areas
by a team of Division staff.

Financial review- A scheduled review that
occurs on a periodic basis. These reviews
involve assessments of select financial
activities such as commissary operations,
offenders’ savings/trust accounts, and
medical co-payments.
3

Appendix 14, State of Texas Contract Management Guide, Version 1.6, February 9, 2009.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 9

Fourteen (11 percent) of 126 monthly unannounced visits that should have
been conducted were not documented.

For two unscheduled reviews and two unannounced visits that were lacking
documentation, the Division provided auditors a single-page document that
stated the site visit occurred but that it did not document the visit.
The Department lacks guidelines to ensure that noncompliance issues are
corrected before the issues are closed.

Auditors reviewed the report status logs that the Division used to track the
monitoring reviews of providers conducted in fiscal years 2008 and 2009
(through June 2009). Although the Division closed the status of 770 (97
percent) of 792 monitoring reviews tested, it closed 22 monitoring reviews
without verifying whether the reported findings were corrected. The report
status logs contained minimal information about why these monitoring
reviews were closed. However, in interviews with auditors, the Department
reported the following reasons for closing those 22 reviews:

Thirteen reviews were closed because the Department determined that the
contract monitors lacked sufficient documentation to support the findings.

Seven reviews were closed because the provider’s contract expired before
findings could be corrected.

One review was closed because the Department reported the finding again
in a subsequent review.

One review was closed because the Department determined that the
provider was not at fault for noncompliance because the Department had
not clearly described the contract requirements to the provider.

Although the Department’s management exercised reasonable judgment in
closing some reviews, such as when a contract expired before the findings
were corrected, the Department should establish guidelines to ensure that its
management decisions to close a review are documented and appropriate.
The Department did not have an effective records management system to track
providers’ performance and compliance history.

The Department maintained a report log managed by the Division that tracked
select information related to the on-site reviews performed by the Division.
Specifically, the report log includes:

The type of review performed.

The dates on which findings were reported to the providers.

The dates on which providers responded to reported findings.

The dates on which contract monitors conducted a follow-up review.

The dates on which providers submitted responses to reported findings.

The number of noncompliance issues identified.

Although the report log tracks important dates and number of findings
reported, the report log did not maintain detailed information describing (1)
the noncompliance issue identified or (2) the corrective action that was taken
to correct the findings. In addition, the report log did not contain information
on the findings identified by other divisions with monitoring responsibilities,
such as the Rehabilitation Programs Division and the Parole Division, which
assist in monitoring certain types of substance abuse treatment programs. The
State of Texas Contract Management Guide recommends that state agencies
have a defined process in place to track a contractor’s contract compliance.4
The Department did not have documented policies and procedures for
processing provider payments.

Auditors reviewed 60 payments to 16 providers that were processed in fiscal
years 2008 and 2009 and that totaled approximately $30 million. Of those 60
payments, 55 (92 percent) were accurately calculated, included appropriate
supporting documentation, and were properly reviewed and approved.
However, the Department lacks documented policies and procedures that (1)
define the requirements for reviewing and approving provider payments and
(2) define documentation requirements for adjustments made to provider
payments. A lack of documented policies and procedures contributed to the
discrepancies identified in five payments. Specifically:

The same person prepared and approved two payments totaling $630,179.
To minimize the potential for fraud, a person other than the individual
who prepared a payment should approve it.

One payment for $225,697 was processed using an approval signature that
was typed instead of hand written.

Two payments for $423,474 did not include supporting documentation for
adjustments made to the payment amounts.

The lack of documented policies and procedures increases the risk that
provider payments could be inappropriately approved or processed without
sufficient documentation.

Appendix 15, The State of Texas Contract Management Guide, Version. 1.6, February 9, 2009.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 11

Recommendations

The Department should develop, document, and implement policies and
procedures that:

Ensure that its financial contract monitors obtain and review providers’
financial reports.

Require the review and retention of documentation during the contract
renewal process that includes (1) a provider’s performance and contract
compliance history and (2) a recommendation for renewal by the
appropriate monitoring division.

Ensure that contract monitoring staff document the results of all
unannounced and unscheduled site visits of providers.

Establish guidelines and documentation requirements for closing
monitoring reviews for which the Division has not verified that reported
findings have been corrected.

Establish processes for tracking a provider’s performance and contract
compliance history.

Document the requirements for reviewing and approving provider
payments.

Define the documentation requirements for adjustments made to provider
payments.

Management’s Response

The Department should develop, document, and implement policies and
procedures that:

Define the role, responsibilities, and relationships among the Private
Facilities Contract Monitoring and Oversight Division, the Rehabilitation
Programs Division, and the Parole Division related to the monitoring of
substance abuse treatment program providers.
Agree. When the PFCMOD was established in 2007, the primary goal was
to provide a centralized Division for the Agency that would provide

coordination for all contract monitoring efforts, eliminate duplication, and
provide consistency in the contracts. For example, through coordination
efforts the RPD and the PFCMOD, we have each revised our audit tools
to prevent duplication of efforts and we coordinate our reviews based on a
rotated schedule. We will document these processes to ensure each
division's role is adequately defined.

Ensure that its financial contract monitors obtain and review providers'
financial reports.
Agree. The PFCMOD will work with the Contracts & Procurement
department to ensure procedures are in place for the contract
administrator to obtain and review financial reports as needed. The
financial contract monitors will have access to these reports when
financial reviews are performed.

Require the review and retention of documentation during the contract
renewal process that includes (1) a provider's performance and contract
compliance history and (2) a recommendation for renewal by the
appropriate monitoring division.
Agree. The PFCMOD has initiated a documented renewal process to
include a formal recommendation and justification that considers the
provider's performance and contract compliance at the time of the
renewal.

Ensure that contract monitoring staff document the results of all
unannounced and unscheduled site visits of providers.
Agree. The PFCMOD will reinforce the procedure to document every visit
regardless of the type of review or visit conducted.

Establish guidelines and documentation requirements for closing
monitoring reviews for which the Division has not verified that reported
findings have been corrected.
Agree. A new process has been implemented that requires written
justification and management approval to close a review. The PFCMOD
will prepare a formal policy to handle the administrative closures of
reviews.

Establish processes for tracking a provider's performance and contract
compliance history.
Agree. Currently, the PFCMOD maintains copies of all the reports that
are issued by the various Divisions. Each compliance review performed by
PFCMOD is documented in a database and detailed by the number of
items reviewed and tracked by the number of noncompliance items. The

PFCMOD will enhance the database by adding similar subject matter
reviews performed by other Divisions. We will assess the level of detail
needed to provide the best representation of a vendor's performance and
compliance history.

Document the requirements for reviewing and approving provider
payments.
Agree. In August 2009, the PFCMOD reorganized to create the Business
Operations section for the Division. One of the goals is to prepare
business policies and procedures for the Division, which will include
procedures for payment processing.

Define the documentation requirements for adjustments made to provider
payments.
Agree. Business policies and procedures will be prepared to document
payment adjustments.

Chapter 2

The Department Did Not Consistently Perform Criminal History
Checks on All Providers’ Employees and Subcontract Workers or Verify
That Its Contract Monitoring Staff Met the Minimum Qualifications
for Their Positions
The Department established processes for performing criminal history checks
on providers’ employees and subcontract workers; however, the Department
did not ensure that (1) all contracts with providers required criminal history
checks to be performed by the Division or (2) the Division performed a preemployment criminal history check on all providers’ employees and
subcontract workers.
In addition, the Division has 40 contract monitors responsible for monitoring
the contract compliance of 68 contracts between the Department
and providers that operate secured correctional facilities, halfway
Criminal History Checks
houses, substance abuse treatment programs, and work release
The Division performs pre-employment
programs.
Auditors determined that 31 (78 percent) of the 40
and annual background checks on
providers’ employees and subcontract
contract monitors documented in their job applications that they
workers.
had the qualifications that are necessary to assess the contract
Pre-employment checks include namecompliance of providers. However, the Department lacked
based searches and finger-print based
searches conducted through the
information on nine contract monitors needed to determine
Department of Public Safety’s database
whether the monitors had the qualifications necessary to evaluate
and the Federal Bureau of Investigation’s
criminal history database.
the contract compliance of providers (see Chapter 2-B for more
Annual criminal history checks consist of
information).
only name-based searches conducted
through the Department of Public Safety’s
database.
The Division deducts from a provider’s
monthly payment a per-person fee of $34
for each pre-employment check and $10
for each annual check conducted. The
Division reported that these fees fund its
operations for conducting checks and pay
the processing fees that the Department
of Public Safety charges for a criminal
history check.
The Division stores all criminal history
results received from the Department of
Public Safety in a database, and it sends
copies of the results to the provider and
the provider’s assigned contract monitor.
Contract monitors determine whether the
reported criminal history is sufficient to
make an employee ineligible for a position
according to the Department’s policy.
Source: Department of Criminal Justice.

Chapter 2-A

The Department Did Not Consistently Ensure That
Criminal History Checks Were Conducted on All
Providers’ Employees and Subcontract Workers
The Department’s providers are required by their contracts to
ensure that the providers’ employees and subcontract workers
receive criminal history checks prior to employment and on an
annual basis.5 (See text box for more information about the
criminal history checks performed by the Division.) The
Department assigned to the Division the responsibility to conduct
these criminal history checks. Although the Division established
processes for performing criminal history checks, the Department
did not ensure that (1) all contracts with providers required the
performance of criminal history checks by the Division or (2) the

The Department also has processes in place for performing criminal history checks on volunteers for providers. However,
auditors did not review those processes because the division that is responsible for performing those criminal history checks
was outside the scope of this audit.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 15

Division performed a pre-employment criminal history check on all providers’
employees and subcontract workers.
The Department did not require all providers to have their criminal history
checks processed by the Division.

The Division has existing processes for obtaining criminal history information
on providers’ employees and subcontract workers. However, the Department
agreed in its contracts with 3 providers that operate 11 substance abuse felony
punishment/in-prison therapeutic programs that the providers would perform
their own criminal history checks on employees and subcontract workers. The
Department’s other providers were required to submit requests for criminal
history checks to the Division. According to the Department, the providers
that performed their own criminal history checks were still required to obtain
approval to hire any employees or subcontract workers that had a criminal
history. However, the Department had limited assurances that these providers
performed criminal history checks on all their employees and subcontract
workers because it reported that it did not begin monitoring compliance with
criminal history check requirements through the Division until March 2008.
Prior to this date, the Department reported that it only monitored the quality of
the substance abuse treatment programs operated by these providers through
its Rehabilitation Programs Division and, therefore, the Department relied on
providers to self-report any employees or subcontract workers who had
criminal histories. The Department did not have any documentation that
provided an explanation for the use of different procedures for processing
criminal history checks for these providers.
The Division lacks sufficient controls to ensure that pre-employment criminal
history checks are performed on providers’ employees as required.

The Division did not perform pre-employment criminal history checks for 12
(11 percent) of 105 provider employees reviewed for fiscal years 2008 and
2009. However, the Division did perform annual criminal history checks on
all 105 provider employees, including the 12 employees for which a preemployment check had not been conducted, and did not identify any criminal
history results that would have prevented the employees from continuing in
their positions. The Department’s contracts with its providers, with the
exception of providers that operate substance abuse felony punishment/inprison therapeutic programs,6 require that a pre-employment criminal history
check be performed on all employees and subcontract workers within 30 days
prior to being assigned duties within a provider’s facility. In addition, preemployment criminal history checks are more comprehensive reviews because

The Department’s contracts with providers that operate substance abuse felony punishment/in-prison therapeutic programs
require that criminal history checks be performed prior to hiring an employee; however, the contracts do not specify that the
Division must conduct the criminal history checks.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 16

those types of checks include both name-based searches and fingerprint-based
searches. Annual checks consist of only name-based searches.
Recommendations

The Department should

Develop processes that ensure the Division conducts pre-employment
criminal history checks on all employees and subcontract workers of all
providers.

Management’s Response
The Department should

Ensure that the Division conducts a criminal history check on the
employees and subcontract workers of all providers, including those that
operate substance abuse felony punishment/in-prison therapeutic
programs.
Agree. The audit included the SAFPIIPTC contracts that expired in
August 2009, which included the requirement for the vendor rather than
the PFCMOD to conduct criminal history checks. Although, as noted in
the audit, the PFCMOD implemented a monitoring process in March 2008
to verify that the vendor had performed the required criminal history
checks, all contracts now contain language stating that the PFCMOD will
conduct all criminal history checks.

Develop processes that ensure the Division conducts pre-employment
criminal history checks on all employees and subcontract workers of all
providers.
Agree. As of September 1, 2009, the contracts for the SAFPIIPTC
program now require Department conducted criminal history checks.
Additionally, documentation of criminal history checks are required as
part of monthly staffing compliance standard verification. Contract
monitors also physically review the personnel files of program staff.

Chapter 2-B

The Qualifications That Most of the Department’s Contract
Monitors Documented in Their Job Applications Met the Minimum
Qualifications for Their Positions
Auditors reviewed the job applications of the Division’s 40 contract monitors
to determine whether each contract monitor reported qualifications and
experiences that met the minimum qualifications for their
Contract Monitor
positions (see text box for more information on contract monitors’
The roles and responsibilities of the Division’s
roles and responsibilities). These minimum qualifications, as set
contract monitors include:
out in the Departments job descriptions, include:
Performing and documenting periodic onsite reviews of providers’ facilities and
operations to determine whether the
providers are complying with applicable
contract requirements.

A bachelor’s degree from an accredited four-year university.
Experience in excess of five years can be substituted for a
bachelor’s degree. (For assistant contract monitor positions,
experience in excess of four year can be substituted for a
bachelor’s degree.)

Four to seven years (depending on the position) of work
experience in criminal justice.

Reviewing grievances the Department

receives against providers that operate
halfway houses and substance abuse
treatment programs. Grievances against
providers that operate secured correctional
facilities are processed by providers’ staff
according to the same Department policies
that are followed by state-operated secured
correctional facilities.

Ensuring that provider employees or

subcontract workers found to have criminal
histories are disqualified from working for
providers in certain, pre-specified positions.

See Appendix 8 for more information related to
the contract monitoring activities of the
contract monitor.

For contract monitor positions that monitor financial activities or
substance abuse treatment programs, the Division lists preferred
work experience in auditing, conducting evaluations, reviewing
contract compliance, conducting financial activities, and/or
working in substance abuse/therapeutic programs.

The state applications for employment for 31 (78 percent) of 40 contract
monitoring staff reviewed listed education and employment histories that met
the minimum qualification required for the applicable positions, which
included regional supervisor, contract monitor, financial contract monitor, and
assistant monitor. However, the Department did not provide documentation to
support that it verified the qualifications reported on the applications.
In addition, auditors could not determine whether 9 (22 percent) of the 40 staff
members met the minimum qualifications. For those nine employees, the
Department reported that seven existing employees were transferred or
reassigned from prior positions to their current contract monitoring positions,
and therefore, the employees did not have to complete an application for their
current positions. The Department stated it had destroyed the applications for
the other two staff members in accordance with the Department’s record
retention schedule.

Recommendation

The Department should ensure that it retains documentation of its verification
of applicants’ qualifications and experience.
Management’s Response

Agree. The current records retention schedule requires the employee's initial,
but not subsequent, application be retained. The Departments records
retention schedule will be modified to either retain all applications or the
application for the current position.

Chapter 3

The Department Should Strengthen Its Security Controls over Certain
Information Systems
The Department should correct weaknesses in certain information systems to
improve the security over its automated systems and data. The weaknesses
that auditors identified increase the risk of inadvertent or deliberate alteration
or deletion of data, which could affect the Department’s ability to ensure the
integrity of its data. Auditors examined three information systems that
support the Department’s payment processes for providers:

The Strength application, which is the information system that the
Department uses to track the receipt, departure, and transfer of each
offender in Texas prisons.

The Authorization Management System, which is the Department’s
automated billing system that substance abuse treatment program
providers use to bill the Department for services they deliver.

The Lonestars system, which is the Department’s financial accounting
system.

To minimize security risks associated with the weaknesses identified, auditors
communicated details about certain weaknesses directly to Department
management in writing.
Chapter 3-A

The Department Should Address Weaknesses in Its Strength
Application, Which Tracks the Receipt, Departure, and Transfer of
Each Offender in Texas Prisons
The Department’s application controls over its Strength application provide
assurances that the daily starting and ending count of offenders manually
The Strength Application
or automatically entered into the system is accurate (see text box for
The Strength application is a
more information about the Strength application). In addition, the
mainframe system that the
Department established controls that ensure that the Information
Department uses to track the
receipt, departure, and transfer
Technology Division (1) gives access only to the appropriate employees
of offenders in both Departmentand (2) approves changes made to the data. In addition, the Department
operated and provider-operated
state prisons. Approximately 320
ensured that, although multiple employees share computer terminals at a
users have access to the
prison facility, each user must have his or her own security access to
application, which include 210
Department employees and 110
activate the Strength application. However, auditors identified
provider employees.
weaknesses in other areas of the Department’s access controls over the
Strength application. These weaknesses are discussed below.

The Department lacked automated controls to ensure that changes made to
data through an alternative access entry are tracked and properly authorized.

The Department acknowledged that its Information Technology Division staff
used an alternative access entry into the Strength application. The
Information Technology Division reported that its staff used the alternative
access entry to make changes to the data after the close of the processing day.
Auditors determined that the Information Technology Division shared access
to this alternative access entry with another division. However, the other
division reported that it was not aware of the alternative access entry or that it
could be used to change data. In addition, because there is no automated audit
log that tracks changes made to the data through the alternative access point,
the Department cannot ensure that all changes made to the data through the
alternative access entry are identified and authorized.
The Department lacked a process to identify former provider employees or
ensure the timely removal of former provider employees’ access to the
Strength application.

The Information Technology Division does not regularly verify that active
provider users are current provider employees. The Information Technology
Division was not able to provide auditors with a complete listing of current
and former provider employees who had been given access to the Strength
application. As a result, auditors were unable to determine whether the
Department (1) removed access rights to the application for former provider
employees or (2) removed access rights in a timely manner.
Recommendations

The Department should:

Implement automated audit trails or develop an alternate process to track
all changes made to Strength application data using the alternative access
entry.

Develop, document, and implement a process to periodically verify that
active provider users are current employees of providers.

Management’s Response

The Department should:

Implement automated audit trails or develop an alternate process to track
all changes made to Strength application data using the alternative access
entry.

Agree. The Information Technology Division (ITD) is in the early analysis
stages of developing a new Strength application which will include full
audit functionality. In the interim an automated audit log will be
developed to track all data changes presently occurring through the
alternative access entry.

Develop, document, and implement a process to periodically verify that
active provider users are current employees of providers.
Agree. All TDCJ employees who have access to the Strength system are
identifiable. Their access rights are actively monitored and revoked
appropriately in a timely manner. Access for contract employees is
managed by the PFCMOD. Periodic rosters of contract employees will be
provided to PFCMOD to verify system access and revoke access where
appropriate.

Chapter 3-B

The Department Should Address Weaknesses in the Controls over
the Authorization Management System It Uses to Process Payments
for Substance Abuse Treatment Program Providers
The Department’s Authorization Management System has reasonable
password controls over user access into the system (see text box for more
information about the Authorization Management System). However,
the Department did not have necessary security administration
Authorization Management System
processes over the system to ensure that the appropriate level of
The Department’s automated billing
system (which the Department refers to
security access is assigned to active provider users.
as the Authorization Management System,
or AMS) is used by providers to bill the
Department for substance abuse
treatment programs. This automated
billing system is a Windows-based Web
application and has approximately 483
users, of which 373 are provider
employees.

The Department did not properly segregate the duties for managing the
security and administrative access to the automated billing system.

Auditors determined that the Department did not properly segregate the
duties for managing the security and administrative access to the
Authorization Management System. Specifically:

The Department inappropriately designated the Private Facilities Contract
Monitoring and Oversight Division instead of the Information Technology
Division as being primarily responsible for managing security and user
access to the Authorization Management System. The employee
responsible for managing user access to the system also manages the
processing of provider payments. The security administrator for an
information system should not have user access rights to that same system.

The Department had an excessive number of users with the highest level
of security administrator access. As of May 2009, 28 (6 percent) of 483
active users had the highest level of security administrator access, which is

usually reserved for system administrators. In addition, 15 of the users
identified with the highest level of security access were provider
employees. The level of security administrator access given to these users
allows them to change data in the automated billing system and reset
passwords for all other users.

One programmer had system administrator access to the billing system,
which allowed this programmer to modify both the live production data, as
well as the system’s code. Properly implemented segregation of duties
should not allow programmers to have access to update live production
systems or data.

Not properly segregating the duties for managing the security and
administrative access to the automated billing system increases the risk that
unauthorized changes could be made to the system’s data and that these
changes may not be detected by Department management. Title 1, Texas
Administrative Code, Chapter 202, recommends that state agencies ensure the
separation of duties for tasks that are susceptible to fraudulent or other
unauthorized activity. Auditors did not identify any instances of fraud or
other unauthorized activity.
The Department did not require the retention of requests for user access or
that users sign security agreements.

Although the Department requires a documented request for access to the
system, the primary security administrator disposes of the request after setting
up a user’s access to the system. The primary security administrator also does
not maintain any log of the requests received or the dates that the requests
were submitted. As a result, the Department lacked documentation showing
that access rights given to users were appropriate and properly authorized.
In addition, the Department does not require users who have access to the
billing system to sign a security agreement. A security agreement provides
assurance that users understand their responsibility for accessing and using the
system in an appropriate manner.
Recommendations

The Department should

Review users with the highest level of security administrator access and
ensure that the users’ job responsibilities require this level of access.

Establish document retention requirements for user access requests.

Develop a security agreement that all users are required to sign before
receiving access.

Management’s Response
The Department should

Manage security and user access to its automated billing system in
compliance with the recommended security standards in Title 1, Texas
Administrative Code, Chapter 202. This would include removing security
administrator rights from programmers.
Agree. PFCMOD has met with the ITD to discuss the procedures
necessary to successfully manage the user access. Staff have been
reassigned to ensure segregation of duties. PFCMOD is revising the
Authorization Management System user access request form to remove
confidential information that is not necessary and add a security
agreement to the bottom of the form .

Review users with the highest level of security administrator access and
ensure that the users' job responsibilities require this level of access.
Agree. PFCMOD is working with the ITD to obtain information on the
access that is currently in place. PFCMOD staff has interviewed all TDCJ
staff with access to determine their job responsibilities. PFCMOD and
ITD will be creating new levels of access to accommodate the various
levels of responsibility and ensure proper segregation of access. All
providers with inappropriate access have been changed.

Establish document retention requirements for user access requests.
Agree. Previously, the information requested to create a user in
Authorization Management System included a portion of the users Social
Security Number, the maiden name of the users Mother, etc. Historically
these forms were disposed of as soon as the user was created to prevent
this information from being misused. The new form will removes
confidential information from the request form, and the Department will
be able to file them alphabetically for retention.

Develop a security agreement that all users are required to sign before
receiving access.
Agree. The request form will now have a security agreement at the bottom
for the user to sign. The Department is working to address security levels
and will be requiring all current users to complete the revised form for the

Department to have on file. Access will be revoked for any user who does
not respond in the timeframe provided.
ITD will establish controls to prevent the security administrator from
having access rights to the system. Standards will be determined and
justifications will be required for security administrator access; all
current users with this access will be reviewed. A security agreement will
be developed and implemented. A procedure will be implemented to
enforce document retention requirements for user access requests.

Chapter 3-C

The Department’s Financial Accounting System Has Sufficient
Controls to Ensure That It Accurately Processes Provider Payments
in a Timely Manner; However, the Department Should Address
Weaknesses in the System’s Security Administration
The Department’s financial accounting system contains sufficient controls,
including reasonable password controls, to ensure that the Department
accurately enters and processes expenditure information in a timely manner.
However, the Department does not have controls to ensure that its
programmers make modifications to the correct version of program code. The
Department has two programmers with access rights to copy and change
program code. The Department does not have controls in place that track each
version of program code created from programming changes. The
Department tracks only the requests for and approvals of changes to be made
to the program code. As a result, the Department is at risk of having a
programmer modify the wrong version of program code, which could lead to
the system not working properly.
Recommendation

The Department should consider developing and implementing a process for
the financial accounting system that will assist in tracking and comparing
program code changes.
Management’s Response

The Department should consider developing and implementing a process
for the financial accounting system that will assist in tracking and
comparing program code changes.
Agree. ITD agrees we should implement a process for tracking and
comparing program changes in the financial tracking system. ITD will
implement the use of Visual Safe Source (VSS) to manage our Cobol

source libraries. VSS is a file-level version control system designed to
handle the tracking and portability issues involved in maintaining one
source control base. ITD is currently using this tool for Java code version
control.

Appendices
Appendix 1

Objective, Scope, and Methodology
Objective
The objective of this audit was to determine whether the activities of the
Private Facilities Contract Monitoring and Oversight Division (Division) at
the Department of Criminal Justice (Department) provide reasonable
assurance that contractors operating private facilities comply with contractual
terms governing operations and financial matters.
Scope
The scope of this audit included reviewing the accuracy and completeness of
the Division’s contract administration and monitoring and renewal activities
during fiscal years 2008 and 2009.
This performance audit was conducted in compliance 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. Those
standards also require independence in both fact and appearance. An
immediate family member of the State Auditor is registered with the State
Ethics Commission as a government relations employee of a firm that
conducts lobby efforts on behalf of a contractor included in the scope of this
audit. This condition could be seen as potentially affecting our independence
in reporting results related to this contractor. However, we proceeded with
this audit as required by the Annual State Audit Plan, operated under the
Legislative Audit Committee. The State Auditor recused himself from this
audit, and the audit has been supervised, reviewed, and approved by Assistant
State Auditor Lisa Collier. This condition did not affect our audit
conclusions7.
Methodology
The audit methodology included reviewing judgmentally selected provider
monitoring reports, collecting information and documentation, performing

Lara Laneri Keel is registered with the Texas Ethics Commission as a lobbyist. Her list of clients is a matter of public record
and may be obtained from the Texas Ethics Commission.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 27

selective tests and other procedures, analyzing and evaluating the results of
tests, and interviewing Department management and staff. Auditors also
accompanied contract monitors on eight on-site monitoring visits to provider
facilities: Bridgeport Pre-Parole Transfer Facility (Corrections Corporation of
America); the Dawson State Jail (Corrections Corporations of America); the
El Paso Halfway House and Transitional Treatment Center (Southern
Corrections); the Dallas Transitional Treatment Center (Gateway Foundation);
the South Texas Intermediate Sanction Facility (The GEO Group); the
Beaumont Transitional Treatment Center (Spindletop MHMR Services); the
Travis County Jail (Turning Point); and the Dallas Transitional Treatment
Center (The Salvation Army).
Information collected and reviewed included the following:

Information from interviews with Division management and staff.

Department organizational charts.

Contracts between the Department and providers.

Department policies and procedures for managing and monitoring
provider contracts.

The Department’s functional job descriptions.

Department personnel files for Division management and staff.

Department monitoring records, interoffice memoranda, and accounting
records.

The Department’s prior internal audit reports.

Prior State Auditor’s Office reports.

Procedures and tests conducted included the following:

Review of the Division’s management and staff qualifications and
experience.

Limited review of contract monitoring documents.

Limited review of select contracts and amendments.

Limited review of contract administration and monitoring policies and
procedures.

Criteria used included the following:

Texas Government Code, Chapters 493 and 495 (Authority to Contract).

Texas Government Code, Chapters 2155, 2261, and 2262 (Contract
Management).

Contracts between the Department and providers.

State of Texas Contract Management Guide, Texas Comptroller of Public
Accounts, Version 1.6.

The Department’s policies and procedures.

Project Information
Audit fieldwork was conducted from May 2009 through October 2009. We
conducted this 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.
The following members of the State Auditor’s staff performed the audit:

Willie J. Hicks, MBA (Project Manager)

Isaac Barajas (Assistant Project Manager)

Nick Ballard, MBA, CIDA

Darrell Edgar, CFE

Cindy Haley, CPA

Cain Kohutek

Michael Sanford

Alyassia Taylor, MBA, CGAP

Marlen Randy Kraemer, MBA, CISA, CGAP (Information Systems Audit
Team)

Rachelle Wood, MBA, CISA (Information Systems Audit Team)

Leslie Ashton, CPA (Quality Control Reviewer)

Michael C. Apperley, CPA (Assistant State Auditor)

Anita D’Souza, JD, CFE (Audit Manager)

Appendix 2

Overview of the Department of Criminal Justice’s Contract Monitoring
of Private Facility Providers that Operate Substance Abuse
Treatment Programs
Three divisions within the Department of Criminal Justice (Department) have
roles in monitoring private facility providers that operate substance abuse
treatment programs. (See Appendix 3 for more information about the different
types of substance abuse treatment programs).
Private Facilities Contract Monitoring and Oversight Division

This division is responsible for monitoring the contract compliance of
providers that operate the following types of substance abuse treatment
programs:

Substance abuse felony punishment facilities/in-prison therapeutic
community programs.

Transitional treatment centers.

State Jail Substance Abuse Program.

Driving While Intoxicated programs.

Substance abuse counseling programs (monitoring is limited only to
programs offered by transitional treatment centers).

Rehabilitation Programs Division

This division is responsible for assessing the quality of substance abuse
treatment programs operated by the following type of providers:

Substance abuse felony punishment facilities and in-prison therapeutic
community programs.

Transitional treatment centers.

Parole Division

The Parole Division is responsible for monitoring the compliance and quality
of outpatient substance abuse counseling programs. However, if a program is
delivered by a provider that operates a transitional treatment center, then the
Private Facilities Contract Monitoring and Oversight Division is responsible
for monitoring the program.

Appendix 3

Types of Facilities and Programs the Department’s Private Facility
Providers Operate
As of August 2009, the Department of Criminal Justice (Department) reported
it had contracts with the following types of private facility providers:

There are seven privately operated correctional
centers (which includes the Lockhart Work Program discussed below) that
house minimum custody offenders. These offenders may remain in these
facilities as long as the offenders maintain minimum custody status.

Private State Jail Facility:

Pre-parole Transfer Facility:

Lockhart Work Program: The Lockhart Work Program is a special unit
operating a Private Sector/Prison Industry Enhancement Certification
Program commonly referred to as a “PIE program.” This program is
exempt from federal restrictions placed on sales of offender-made goods
for interstate commerce and to the federal government. Offenders
participating in the PIE program agree to pay a percentage of their earned
income for room and board, supervision costs, restitution, compensation to
crime victims, savings, and dependent care. Offenders also have the
opportunity to participate in educational programs, such as adult basic
education, General Educational Development (GED) tests, and life skills
courses. In addition, vocational programs are offered to enhance the
opportunities for the offender to gain meaningful employment upon
release to supervision.

Intermediate Sanction Facility:

Contract Transfer Facility (Temporary Capacity Beds):

Private Correctional Center:

There are five privately operated state jails that
house felons, as well as transfer offenders. Felons are incarcerated for a
two-year period or less.
There are two privately operated pre-parole
transfer facilities that provide secure housing for offenders and offer life
skills programming, substance abuse education, and vocational training to
offenders who are within one year of their presumptive parole or
mandatory supervision release date.

There were five privately operated
intermediate sanctions facilities, which are short-term detention facilities
for offenders who are on parole or mandatory supervision and who have
violated the terms of their release agreement.
The Department entered
into Offender Housing Payment Agreement contracts with four Texas
counties (Bowie, Jefferson, Limestone, and Newton counties) for the
counties to provide housing, care, meals, and medical services for transfer
facility offenders who have been processed through the Department. The

detention services the counties provide are subject to Commission on Jail
Standards rules.

Halfway House:

County Jail Work Release Program:

Substance Abuse Felony Punishment Facility Program/In-prison Therapeutic
Community Program: Four contractors provide Substance Abuse Felony

There are seven privately operated halfway house facilities
where offenders on parole or mandatory supervision are placed either
immediately upon release or, in specific circumstances, upon referral from
field parole staff.

The Private Facility Contract Oversight
Division monitors two county jail work release program contracts.
Offenders on parole or mandatory supervision who lack family or
community resources, or who may require closer supervision, may be
released to a county jail work release program facility either immediately
upon release from the Department or upon referral from field parole staff.
These facilities monitor the offenders’ activities daily.

Punishment Facility/In-prison Therapeutic Community treatment
programs for 12 secure facilities.

A Substance Abuse Felony Punishment Facility is an intensive
substance abuse treatment program for an offender who is sentenced to
complete the program by a judge or as a modification of the offender’s
community supervision (probation). Additionally, offenders on parole
or mandatory supervision who are in need of intensive substance abuse
treatment may be placed in this program.

The In-prison Therapeutic Community is an intensive substance abuse
treatment program for eligible offenders who are within six months of
release and who are identified as needing substance abuse treatment.
The Board of Pardons and Paroles must vote to place qualified
offenders in the program, and successful graduates are released on
parole or mandatory supervision.

Upon completion of a Substance Abuse Felony Punishment Facility
program or an In-prison Therapeutic Community program, offenders are
placed in a Transitional Treatment Center (see below) for up to 90 days,
followed by outpatient counseling.

Transitional Treatment Centers:

State Jail Substance Abuse Treatment Program:

Transitional Treatment Centers are privately
owned and operated community-based facilities that provide substance
abuse aftercare treatment to offenders on parole, mandatory supervision,
or community supervision (probation).
One contractor provides a
substance abuse resource program that offers a total of 1,200 treatment

beds among six state-operated state jails. Offenders who have been
sentenced to a state jail and meet the Department’s eligibility criteria are
eligible to participate. The program consists of a curriculum that
addresses the needs of offenders in various stages of recovery.

In-prison Driving While Intoxicated Treatment Program:

This six-month
Correctional DWI Recovery Program contracts with the Department to
offer 500 treatment beds and a variety of evidence-based educational
modules and treatment activities.

Appendix 4

Compliance and Performance Standards Defined in Contracts Between
the Department of Criminal Justice and Certain Types of Private
Facility Providers
The Department of Criminal Justice (Department) has defined certain
compliance standards and performance measures in its contract with private
facility providers. Table 1 lists the compliance standards described in certain
types of provider contractors reviewed by auditors.
Table 1

Compliance and Performance Standards Defined in Contracts
Between the Department and Certain Types of Private Facility Providers
Type of Provider
Transitional

Treatment Centers

Halfway Houses
Intermediate

Sanction Facilities

Pre-parole Transfer
Facilities

State Jails
Correctional Centers

Compliance Standard
A criminal background check was
completed by the Department within 30
days.

Transitional Treatment Centers - A

criminal background check shall be
completed by the Department within
30 days prior to being assigned to the
Department Program, and it is
maintained in the employee's
personnel file.

Halfway Houses/Intermediate Sanction
Facilities/Pre-Parole Transfer
Facilities/State Jail/Correctional
Centers - A criminal background check
shall be completed by the Department
within 30 days prior to an employee
having direct contact with offenders.

Transitional

Treatment Centers

Acceptable Performance

Unacceptable Performance

Transitional Treatment Centers - A

Transitional Treatment Centers -

criminal background check was
completed within 30 days prior to
assignment to the Department
program.

Halfway Houses/Intermediate

Sanction Facilities/Pre-parole
Transfer Facilities/State
Jail/Correctional Centers - A
criminal background check was
completed by the Department
within 30 days prior to an
employee having direct contact
with offenders for 100 percent of
employees.

aA criminal background check
was completed after assignment
to the Department program, was
never completed, or was
completed prior to 30 days of
being hired.

Halfway Houses/Intermediate

Sanction Facilities/Pre-Parole
Transfer Facilities/State
Jail/Correctional Centers - A
criminal background check was
completed for less than 100
percent of employees.

Contractor shall maintain valid current
insurance policies.

Contractor maintains valid current
insurance policies.

Contractor has lapsed policy or a
policy not meeting contract
requirements.

Contractor shall obtain from the
Department and maintain a copy in
employee files prior written approval to
hire all upper-level management staff.

Transitional Treatment Centers-

Halfway Houses
Intermediate

Sanction Facilities

Pre-parole Transfer
Facilities

State Jails
Correctional Centers
Transitional

Treatment Centers

Halfway Houses
Intermediate

Sanction Facilities

Pre-parole Transfer
Facilities

State Jails
Correctional Centers

Contractor obtained written
approval prior to hire date.

Halfway Houses/Intermediate

Sanction Facilities/Pre-Parole
Transfer Facilities/State
Jail/Correctional CentersContractor obtained written
approval prior to hire date for 100
percent of upper-level
management staff hires.

Contractor obtained approval
subsequent to hire date or never
obtained approval.

Halfway Houses/Intermediate

Sanction Facilities/Pre-Parole
Transfer Facilities/State
Jail/Correctional CentersContractor obtained approval
prior to hire for less than 100
percent of upper-level
management staff.

Compliance and Performance Standards Defined in Contracts
Between the Department and Certain Types of Private Facility Providers
Type of Provider
Halfway Houses
Intermediate

Sanction Facilities

Pre-parole Transfer

Compliance Standard
Contractor shall staff all positions with
fully qualified employees, including
special certification and licenses where
applicable.

Halfway Houses- Positions

Intermediate Sanction

Contractor shall provide transportation
for each offender in accordance with
scheduling determined by the
Department.

Offender transportation provided per
scheduled transport in two hours or
less of the Department-scheduled
time or prior to 5:00 p.m. on the
scheduled date if no time has been
designated.

Offender transportation provided
per scheduled transport in more
than two hours of the Departmentscheduled time or after 5:00 p.m.
on the scheduled date if no time has
been designated.

Halfway Houses
Intermediate

Contractor shall accurately and
completely report all uses of force in
accordance with the Department’s Use of
Force Plan.

Five or fewer errors or omissions on a
single use of force packet submitted
to the Department.

More than five errors or omissions on
a single use of force packet
submitted to the Department.

Contractors shall submit all
Administrative Review of Incident Reports
to the appropriate Regional Director
within 10 working days of incident
occurrence in accordance with the
Department’s policy.

Reports submitted in 10 or fewer
working days.

Reports submitted after 10 working
days.

Contractor shall process offender
disciplinary cases in accordance with the
Department’s disciplinary policy.

One percent or less of offender
disciplinary cases lapsed on a monthly
basis.

More than one percent of offender
disciplinary cases lapsed on a
monthly basis.

Contractor shall maintain accreditation
from the National Commission on
Correctional Health Care or the American
Correctional Association Performance
Based Correctional Health Care Program
throughout the contract.

Accreditation continuously
maintained throughout the contract.

Accreditation not maintained
throughout the contract.

within fewer than 60 calendar
days.

Facilities/Pre-Parole Transfer
Facilities/State Jail/Correctional
Centers - Non-uniformed/security
supervisor/administrator positions
staffed in 60 calendar days or less.
Correctional officer positions
staffed in 90 calendar days or
fewer.

State Jails
Correctional Centers

Treatment Centers

Unacceptable Performance

Halfway Houses - Positions staffed

Facilities

Transitional

Acceptable Performance

Sanction Facilities

staffed took longer than 60
calendar days.

Facilities/Pre-Parole Transfer
Facilities/State Jail/Correctional
Centers - Non-uniformed/security
supervisor/administrator
positions staffed after 60
calendar days. Correctional
officer positions staffed after 90
calendar days.

Pre-parole Transfer
Facilities

Intermediate

Sanction Facilities

Pre-Parole Transfer
Facilities

State Jails
Correctional Centers
Intermediate

Sanction Facilities

Pre-parole Transfer
Facilities

State Jails
Correctional Centers
Intermediate

Sanction Facilities

Pre-Parole Transfer
Facilities

State Jails
Correctional Centers
Intermediate

Sanction Facilities

Pre-parole Transfer
Facilities

State Jails8
Correctional Centers

State jails are required only to maintain accreditation from the American Correctional Association throughout the contract.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 35

Compliance and Performance Standards Defined in Contracts
Between the Department and Certain Types of Private Facility Providers
Type of Provider

Compliance Standard

Acceptable Performance

Unacceptable Performance

In the absence of a teacher, educational
services must continue to be provided by
qualified staff.

Qualified substitutes provided
coverage for educational programs.

Classes were either canceled or
conducted by unqualified staff.

Transitional Treatment
Centers

The employee’s background check
reflects eligibility per Personnel Directive
- 75. Employees with criminal
convictions/pending charges are
approved by the Department prior to
being assigned to the Department
program.

The Department approved
employment prior to the employee
being assigned to the Department
program.

The Department approved
employment after the employee was
assigned to the Department program
or was never approved by the
Department.

Transitional Treatment
Centers

Contractor shall staff all upper-level
management staff and qualified,
credentialed counselor positions with
fully qualified employees, including
special certification and licenses where
applicable.

Positions staffed within fewer than 60
calendar days.

Positions staffed after 60 calendar
days.

Transitional Treatment
Centers

Contractor shall notify the Department in
writing by 9:00 a.m. on each day of the
number of offenders currently residing in
the residential facility.

Five or fewer errors or omissions in
one calendar month.

More than five errors or omissions in
one calendar month.

Halfway Houses

Contractor shall take disciplinary action
for:

Contractor meets these requirements
100 percent of the time.

Contractor meets these
requirements less than 100 percent
of the time.

Pre-parole Transfer
Facilities

State Jails
Correctional Centers

All unemployed offenders not
completing five appointments or
interviews with prospective
employers per week
and

All part-time employed (more than
20 but less than 40 hours/week)
offenders not completing three
appointments or interviews per
week.

Contractor shall maintain documentation
in the offender files.

Table 2 lists the performance measures identified in contracts with providers
that operate Substance Abuse Felony Punishment Facility Programs/In-prison
Therapeutic Community Programs.
Table 2

Performance Measures in Contracts with Substance Abuse Felony Punishment Facility Program/
In-prison Therapeutic Community Program Providers
Performance Measure

Acceptable
Performance

Unacceptable Performance

Offenders will demonstrate an acceptable
level of mastery of therapeutic community
concepts, 10 working days prior to the inprison phase of the program, as determined
by the Department in conjunction with the
contractor.

95-100 percent of
offenders demonstrate
an acceptable level of
mastery.

Less than 95 percent of offenders
demonstrate an acceptable level of
mastery.

Offenders will be provided, within 10 working
days from the offenders’ date of entry, with
an individualized treatment plan that
addresses their specific needs.

100 percent of offenders
are provided an
individualized treatment
plan within 10 working
days.

Less than 100 percent of offenders are
provided an individualized treatment plan
within 10 working days.

Offenders will have clinical progress notes
documented weekly.

90-100 percent of
offenders have clinical
progress notes
documented weekly.

Less than 90 percent of offenders have
clinical progress notes documented
weekly.

Offenders will complete the prison phase of
the program

90-100 percent of
offenders complete the
prison phase of the
program.

Less than 90 percent of offenders
complete the prison phase of the
program.

Compliance with caseload requirement for
maintaining a ratio of 20 or fewer offenders
per counselor.

100 percent compliance
with caseload
requirement.

Less than 100 percent compliance with
caseload requirement.

Treatment staff will receive a minimum of 30
hours of continuing education annually.

100 percent of staff
receive a minimum of 30
hours of continuing
education training
annually.

Less than 100 percent of staff receive a
minimum of 30 hours of continuing
education training annually.

Offenders will be provided with a continuum
of care plan 30 days prior to completion of the
prison phase of the program.

95-100 percent of
offenders receive a
continuum of care plan
30 days prior to
completion of the prison
phase of the program.

Less than 95 percent of offenders receive
a continuum of care plan 30 days prior to
completion of the prison phase of the
program.

Appendix 5

Map of Private Facility Providers That Operate Secured Correctional
Facilities and Offender Population Totals as of May 31, 2009
Figure 1

Map of Private Facility Providers That Operate Secured Correctional Facilities

Dallam

Sherman

Hansford

Hartley

Moore

Hutchinson

Roberts

Hemphill

Oldham

Potter

Carson

Gray

Wheeler

Armstrong

Donley

Collingsworth

Deaf Smith

Parmer

Randall

Swisher

Castro

Ochiltree Lipscomb

Hall

Briscoe

Region III

Childress
Hardeman

Cochran Hockley

Region I

Yoakum

Lubbock

Terry

Gaines

Crosby

Lynn

Dawson

Motley

Floyd

Hale

King

Dickens

Garza

Borden

Foard

Knox

Stonewall

Kent

Scurry

Wilbarger

Baylor

Haskell

Lamar

Throckmorton

Clay

Montague

Andrews
El Paso

Loving
Culberson

Ward

Hudspeth

Ector

Winkler

Crane

Reeves

Martin

Midland Glasscock

Upton

Reagan

Mitchell

Eastland

Callahan

Taylor

Nolan
Coke

Sterling

Irion

Crockett

Runnels

Tom
Green

Sutton

Brown

Coleman

Comanche

Walker

Real

Kendall

Uvalde

Austin

Zavala

Fayette

Gonzales

Frio

Atascosa

La Salle

McMullen

De Witt

Karnes

Live
Oak

Hardin

Liberty

Orange

Harris

Waller

Chambers

Fort Bend
Galveston

Wharton
Jackson

Brazoria

Matagorda

Victoria
Goliad

Dimmit

San
Jacinto

Lavaca

Medina

Jasper

Jefferson

Colorado

Guadalupe

Wilson
Maverick

Newton
Tyler

Bastrop
Caldwell

Comal

IIII

Montgomery

Washington

Bandera
Bexar

Kinney

Lee

Hays

Kerr

Madison

Grimes

Burleson

Presidio

San
Angelina AugustineSabine

Houston

Brazos

Williamson
Travis

Shelby

Polk

Kimble
Blanco

Panola

Nacogdoches

Milam

Llano

Rusk

Trinity

Robertson

Bell

Gillespie

Val Verde

Smith

Freestone
Limestone

San Saba Lampasas

Mason

Harrison

Cherokee
Anderson

Leon

Burnet

Upshur
Gregg

Falls

McCulloch

Cass
Marion

Van
Zandt
Henderson

Coryell

Menard

Camp

Wood

Navarro

McLennan

Mills

Titus

Rains

Bosque

Concho

Edwards

Hunt

Ellis

Hamilton

Terrell

Brewster

Johnson

Somervell

Erath

Hill

Schleicher

Pecos

Jeff Davis

Howard

Hopkins

Collin

RockIDallas wall

Tarrant

Bowie

Delta

Kaufman

Hood

Red River

Fannin

IIII
II
IIII
Denton

Parker

Palo Pinto

Grayson

Cooke

Wise

Jack

Young

Shackelford Stephens

Jones

Fisher

Wichita
Archer

Morris

Lamb

Franklin

Bailey

Cottle

Bee

Calhoun
Refugio
Aransas

Region II

San Patricio
Webb

Duval

Jim
Wells

Nueces
Kleberg

Zapata

Jim Hogg

Brooks
Kenedy

Starr
Hidalgo

Willacy
Cameron

Correctional Centers
State Jails
Intermediate Sanction Facility
Pre-Parole Transfers
Temporary Capacity
Multiple Program Treatment Facility
Source: Department of Criminal Justice.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 38

Region I
Correctional Center

Number of
Contract
Beds

Provider

City

Kyle Correctional Center

MTC

Kyle

520

Lockhart Work Program

GEO

Lockhart

500

498

State Jail

Provider

City

Number of
Contract
Beds

Population

Bartlett State Jail

CCA

Bartlett

1,049

Willacy County State Jail

CCA

Raymondville

1,069

1,068

Intermediate Sanction Facility
West Texas

Contract Transfer Facility
Limestone County Detention Center

Provider

City

MTC

Brownfield

Provider

City

CEC

Groesbeck

Region II
Correctional Center

Provider

City

Number of
Contract
Beds
275
Number of
Contract
Beds
336

Number of
Contract
Beds

Population
272

Population
327

Population

BM Moore Correctional Center

MTC

Overton

500

499

Cleveland Correctional Center

GEO

Cleveland

520

Diboll Correctional Center

MTC

Diboll

518

State Jail
Bradshaw State Jail

Intermediate Sanction Facility

Provider
CCA

Provider

City
Henderson

City

Number of
Contract
Beds
1,980
Number of
Contract
Beds

Population
1,971

Population

East Texas Treatment Facility

MTC

Henderson

560

South Texas

GEO

Houston

450

446

Contract Transfer Facility

Provider

City

Number of
Contract
Beds

Population

Jefferson County Jail

GEO

Beaumont

332

Newton County Correctional Center

GEO

Newton

848

Multiple Program Treatment
Facility

Provider

East Texas Treatment Facility

MTC

City
Henderson

Number of
Contract
Beds
500

Population
485

Region III

Correctional Center

GEO

Bridgeport

Sanders Estes Unit

MTC

Venus

Provider

City

520

519

1,040

Number of
Contract
Beds
Population

Dawson State Jail

CCA

Dallas

2,216

2,201

Lindsey State Jail

CCA

Jacksboro

1,031

1,030

Intermediate Sanction Facility
North Texas

Provider
GEO

Pre-parole Transfer

Provider

City
Fort Worth

City

Bridgeport PPT

CCA

Bridgeport

Mineral Wells PPT

CCA

Mineral Wells

Contract Transfer Facility
Bowie County Jail

Correctional Centers
State Jails
Intermediate Sanction
Facility
Pre-Parole Transfers
Temporary Capacity
Treatment Facility

City

Bridgeport Correctional Center

State Jail

Facilities

Provider

Number of
Contract
Beds
Population

Provider
CEC

City
Texarkana

Vendors
CCA – Correction Corporation of America
CEC – Community Education Centers
GEO – Global Expertise in Outsourcing
MTC – Management & Training Corporation

Number of
Contract
Population
Beds
424

427

Number of
Contract
Beds
Population
200

200

2,100

2,004

Number of
Contract
Population
Beds
383

383

Appendix 6

Map of Private Facility Providers of Work Release Programs, Halfway
Houses, and Substance Abuse Treatment Programs as of March 31,
2009
Figure 2

Map of Private Facility Providers of Work Release Programs, Halfway Houses, and Substance Abuse
Treatment Programs as of March 31, 2009

V
IV
V
Substance Abuse Treatment Facility
County Work Release Program

Halfway Houses

Source: Texas Department of Criminal Justice.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 41

Substance Abuse
Treatment Facility

Region IV

City

Bay Area Recovery Center

Dickinson

Brazos Valley Council on Alcohol
Substance Abuse

Bryan

Cen-tex Alcohol Rehabilitation
Center

Temple

Zebra Inc DBA Cheyene Center

Houston

185

Cornell Companies DBA Cornell
Corrections

Houston

E.P. Horizon Management, L.L.C9

Austin

Land Manor, Inc.

Beaumont

Liberty Lodge, Inc.

Alice

Reality Ranch, LLC

League City

Spindletop MHMR Services

Beaumont

Treatment Associates

Victoria

Halfway House

26
106

123

City

109

Number of
Placements

Southern Corrections Systems, Inc.

Austin

105

Correctional Systems, Inc.

Beaumont

210

Cornell Companies DBA Cornell
Corrections

Houston

401

County Jail Work
Release Program

Number of
Placements

City

Number of
Placements

Bexar County Sheriff’s Department

San Antonio

Travis County Sheriff’s Department

Austin

The Department reported that a portion of the placements for this provider are also located in El Paso, Texas.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 42

Region V

Substance Abuse
Treatment Facility

City

Abode Treatment, Inc.

Fort Worth

180

Clover House

Odessa

108

County Rehabilitation Center, Inc.

Tyler

E.P. Horizon Management, L.L.C

El Paso

123

Gateway Foundation

Dallas

Lubbock Regional MHMR Center

Lubbock

Salvation Army

Dallas

Volunteers of America

234

Fort Worth

Halfway House

Number of
Placements

City

74
Number of
Placements

Southern Corrections Systems, Inc.

El Paso

168

Southern Corrections Systems, Inc.

El Paso

GEO Community

Fort Worth

205

The Wayback House

Dallas

190

The Department reported that a portion of the placements for this provider are located in Houston, Texas.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 43

SAFPF/IPTC and State Jail
Providers

Substance Abuse
Felony Punishment
Facilities (SAFPF) and
In-Prison Therapeutic
Community (IPTC)
Gateway Foundation

Facility

City

Number of
Placements

Estelle

Huntsville

212

Glossbrenner
Facility

San Diego, TX

597

Hackberry

Gatesville

285

Ellen Halbert
SAFP Unit

Burnet

586

Havins Unit

Brownwood

558

Jester I

Richmond

299

Kyle Unit

Kyle

502

Ney Unit

Hondo

305

Sayle Unit

Breckenridge

615

Management and Training
Corporation

East Texas
Treatment
Facility

Henderson

594

Cenikor

Henley Unit

Dayton

183

State Jail Substance
Abuse Programs
Turning Point

Facility

City

Number of
Treatment Slots

Dominguez State
Jail

San Antonio

174

Gist State Jail

Beaumont

116

Hutchins State
Jail

Dallas

232

Lychner State Jail Humble

396

Plane State Jail

Dayton

174

Travis County
State Jail

Austin

108

Appendix 7

The Department’s Private Facility Providers for Fiscal Years 2008
and 2009
The Department of Criminal Justice (Department) paid private facility
providers approximately $235 million in fiscal year 2008 and $255 million in
fiscal year 2009.11 Table 3 lists the total payments that the Department made
to providers that operate secured correctional facilities, the Lockhart work
release program, and the In-Prison Driving While Intoxicated (DWI)
Recovery program.
Table 3

Payments to the Department’s Providers That Operate Secured Correctional Facilities
September 2007 Through August 2009
Contract Service

Total Payments in
Fiscal Year 2008

Bowie County

Contract Transfer Facility

Corrections Corporation of America

Correctional Center

Provider Name

Total Payments in
Fiscal Year 2009

5,632,093

$ 5,878,169

11,554,291

5,275,403

Pre-parole Transfer

26,200,121

26,348,398

State Jail

61,150,153

62,180,479

Jefferson County

Contract Transfer Facility

4,692,482

4,806,399

Limestone County

Contract Transfer Facility

5,049,680

4,874,186

Management and Training Corporation

Correctional Center

5,244,998

17,794,238

Intermediate Sanction
Facility

7,533,772

7,603,492

In-Prison DWI Recovery
Program

4,675,076

20,180,550

Newton County Correctional Center

Contract Transfer Facility

12,325,601

12,415,557

The Geo Group, Inc.

Correctional Center

22,473,539

16,921,231

Intermediate Sanction
Facility

11,640,505

11,567,426

Lockhart Work Program

9,966,012

10,127,754

$188,138,323

$205,973,282

Totals

The Department reported that a portion of the payments shown were for services provided during fiscal year 2007.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 45

Table 4 lists the total payments that the Department made to providers that
operate county jail work release programs, halfway houses, transitional
treatment centers, substance abuse felony punishment facility/in-prison
therapeutic community and state jail substance abuse programs.
Table 4

Payments to the Department’s Providers That Operate Halfway Houses and
Substance Abuse Treatment Programs
September 2007 Through August 2009
Provider Name

Type of Operation

Total Payments in
Fiscal Year 2008

Total Payments in
Fiscal Year 2009

Abode Treatment, Inc.

Transitional Treatment
Center

$ 1,475,193

$ 2,572,610

Bay Area Recovery Center

Transitional Treatment
Center

363,308

454,874

Bexar County Sheriff’s Department

County Jail Work Release

191,430

279,735

Brazos Valley Council on Alcohol and
Substance Abuse

Transitional Treatment
Center

1,553,718

1,618,022

Cenikor Foundation, Inc.

Substance Abuse Felony
Punishment Facility/InPrison Therapeutic
Community

236,402

429,597

Cen-Tex Alcoholic Rehabilitation Center

Transitional Treatment
Center

737,444

859,322

Clover House

Transitional Treatment
Center

1,404,415

1,859,646

Correctional Services Corporation (Geo
Community)

Halfway House

2,124,717

1,909,308

Correctional Systems, Inc.

Halfway House

2,026,057

1,896,385

County Rehabilitation Center, Inc.

Transitional Treatment
Center

433,831

475,441

Gateway Foundation

Substance Abuse Felony
Punishment Facility/InPrison Therapeutic
Community

10,209,031

9,846,492

Transitional Treatment
Center

747,083

1,205,383

Land Manor, Inc.

Transitional Treatment
Center

914,840

1,047,607

Liberty Lodge, Inc.

Transitional Treatment
Center

350,858

627,097

Lubbock Regional MHMR Center

Transitional Treatment
Center

545,062

702,068

Reality Ranch, LLC

Transitional Treatment
Center

1,221,250

1,502,526

Cornell Companies DBA Cornell Corrections

Halfway House

4,561,349

3,018,453

Transitional Treatment
Center

774,979

594,089

Transitional Treatment
Center

2,795,175

2,677,156

Salvation Army

Payments to the Department’s Providers That Operate Halfway Houses and
Substance Abuse Treatment Programs
September 2007 Through August 2009
Provider Name

Type of Operation

Serenity Foundation of Texas12

Transitional Treatment
Center

Southern Corrections Systems, Inc.

Total Payments in
Fiscal Year 2008

Total Payments in
Fiscal Year 2009

408,165

62,226

Halfway House

5,318,190

4,270,649

Transitional Treatment
Center

1,127,705

1,612,397

Spindletop MHMR Services

Transitional Treatment
Center

461,068

545,804

The Turning Point, Inc.

State Jail Substance
Abuse Program

1,122,261

1,991,066

The Way Back House, Inc.

Halfway House

1,836,691

1,734,860

Travis County Sheriff's Dept

County Jail Work Release

100,980

194,940

Treatment Associates

Transitional Treatment
Center

1,209,240

1,791,426

Volunteers Of America

Transitional Treatment
Center

992,307

1,153,007

Zebra Inc DBA Cheyenne Center

Transitional Treatment
Center

1,687,514

2,474,309

$46,930,262

$49,406,491

Totals
a

Columns do not sum exactly due to rounding.

The Department reported that this contract was terminated as of August 31, 2008.
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
Page 47

Appendix 8

Overview of the Contract Monitoring Activities Performed by the
Private Facilities Contract Monitoring and Oversight Division
The Department of Criminal Justice’s (Department) Private Facilities Contract
Monitoring and Oversight Division (Division) performs several types of onsite reviews to ensure the contract compliance of providers that operate
secured correctional facilities, halfway houses, and substance abuse treatment
services. During the on-site reviews, contract monitors review selected
operations each month that include, but are not limited to, one or more of the
following areas:

Security procedures.

Security staffing and coverage.

Program services.

Food service.

Health and safety.

Americans with Disabilities Act compliance.

Training.

Offender grievances.

Disciplinary actions.

American Correctional Association accreditation.

Education services.

Health services.

Use of force.

Physical plant.

Policies and procedures.

In addition, the Division examines select financial operations of providers
according to an annual risk assessment. The financial reviews can include,
but are not limited to, the following:

On-site Financial Compliance Review. This review includes an
examination of a sample of prior month billings paid by the Department.

Closeout Financial Compliance Review. This review is performed for
contracts that are terminating or transitioning to a new provider. The
review includes the examination of all financial activities necessary to
ensure that the Department obtains all funds and property due upon the
closure of the contract or prior to a new provider’s assumption of the
facility.

Offender Medical Bill Review. This review includes an examination of
offender medical bills that a provider submitted for payment to the
Department to confirm that charges/services were provided from the
applicable facility hospital.

Commissary Expenditure Review. This review includes an examination
of commissary operations, including the observation of actual sales
operations, security procedures, and reconciliation of sales transactions.

Telephone and Vending Commission Revenue Review. This review
includes an examination of financial records relating to telephone and
vending machine (laundry, food, and beverage) commission revenue.

Appendix 9

State of Texas Contract Management Guide Essential Contract
Provisions
Table 5 lists the 21 contract provisions identified in the State of Texas
Contract Management Guide as essential provisions that must be included in
all state contracts.
Table 5

State of Texas Contract Management Guide Essential Contract Provisions
Abandonment or Default - Specifies that the contractor will be held accountable for breach of contract or
substandard performance without unfairly limiting competition in accordance with Texas Government Code,
Section 2261.101.
Affirmation - Requires the contractor to affirm that all statements and information prepared and submitted in
response to a solicitation are current, complete, and accurate.
Antitrust - Requires that the contractor represent and warrant that neither the contractor nor any firm,
corporation, partnership, or institution represented by the contractor, or anyone acting for such firm, corporation
or institution has (1) violated the antitrust laws of the State of Texas under Texas Business and Commerce Code,
Chapter 15, or the federal antitrust laws; or (2) communicated directly or indirectly the proposal to any
competitor or any other person engaged in such line of business during the procurement process for the contract.
Buy Texas - "Contractor represents and warrants that it will buy Texas products and materials for use in providing
the services authorized herein when such products and materials are available at a comparable price and in a
comparable period of time when compared to non-Texas products and materials.”
Consideration (contract price) - Describes a definite amount at a certain rate with a total maximum cost.
Contract Specifications - Describe the services to be performed, and may specify that the agency will determine
the answers to all questions that may arise as to the interpretation of the specifications, the quality or
acceptability of work performed, the rate of progress of the work, and the conditions for determining the
acceptable fulfillment of the service on the part of the contractor.
Contractor's Responsibilities - Describes details of the contractor’s responsibilities.
Dispute Resolution- Describes a dispute resolution process in accordance with Texas Government Code, Chapter
2260.
Force Majeure - An agency may grant relief from performance of the contract if the vendor is prevented from
performance by an act of war, order of legal authority, act of God, or other unavoidable cause not attributable to
the fault or negligence of the contractor. The burden of proof for the need of such relief shall rest upon the
contractor. To obtain release based on force majeure, the contractor shall file a written request with the agency.
Funding Out - Describes conditions if the contract term extends into the next biennium. For example, “This
contract is subject to cancellation, without penalty, either in whole or in part, if funds are not appropriated by
the Texas Legislature.”
Indemnification/Damage - Contractor shall defend, indemnify, and hold harmless the state of Texas, its officers,
and employees, and the agency, its officers, and employees and contractors, from and against all claims, actions,
suits, demands, proceedings, costs, damages, and liabilities, including without limitation attorneys’ fees and
court costs, arising out of, connected with, or resulting from any acts or omissions of contractor or any agent,
employee, subcontractor, or supplier of contractor in the execution or performance of this contract. Contractor
shall coordinate its defense with the Texas attorney general as requested by the agency. This paragraph is not
intended to and shall not be construed to require contractor to indemnify or hold harmless the state or the agency
for any claims or liabilities resulting from the negligent acts or omissions of the agency or its employees.
Independent Contractor - "Both parties hereto, in the performance of this contract, shall act in an individual
capacity and not as agents, employees, partners, joint ventures or associates of one another. The employees or
agents of one party shall not be deemed or construed to be the employees or agents of the other party for any
purposes whatsoever. The contractor shall be responsible for providing all necessary unemployment and workers’
compensation insurance for the contractor’s employees."
Intellectual Property Indemnification - Requires that the contractor will indemnify, defend, and hold harmless
the State of Texas and the system against any action or claim brought against the State of Texas/system that is
based on a claim that software infringes any patent rights, copyright rights, or incorporated misappropriated
An Audit Report on the Department of Criminal Justice’s Oversight of Selected Providers
That Deliver Residential Services and Substance Abuse Treatment Programs
SAO Report No. 10-025
March 2010
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State of Texas Contract Management Guide Essential Contract Provisions
trade secrets.
Introduction - Describes all parties involved in the contract that may include a contractor's complete name, any
assumed names, and all addresses for the contractors.
Payment - Describes conditions such as the frequency of payment, time frame to submit payment, invoice
specifications and compliance with the Texas Prompt Payment law, Texas Government Code, Subtitle F, Chapter
2251.
Right to Audit - Describes that the State Auditor's Office’s, the agency’s, or any successor’s right to conduct an
audit or investigation and obtain all records requested.
Rights to Data, Documents, and Computer Software (State Ownership) - Specifies that any research, reports,
studies, data, or other documents prepared by the contractor in the performance of its obligations under the
contract shall be the exclusive property of the State of Texas and all such materials shall be delivered to the
State by the contractor upon completion, termination, or cancellation of the contract. In addition, conditions may
describe instances in which the State does not wish the work products of the contractor to be made available to
any other entity, public or private, but the contractor also is not entitled to any additional profit or benefit when
payment for the said products was by public funds, unless the state agency has given its prior approval of the use
of the materials.
Scope of Work - Defines the scope of work from the solicitation document and may include the contractor's
response outlining the proposed scope of work.
Technology Access (1) Effective September 1, 2006, state agencies and institutions of higher education shall procure products which
comply with the State of Texas Accessibility Requirements for Electronic and Information Resources specified in
Title 1, Texas Administrative Code, Chapter 213, when such products are available in the commercial marketplace
or when such products are developed in response to a procurement solicitation.
(2) Vendor shall provide the Department of Information Resources with the URL to its Voluntary Product
Accessibility Template (VPAT) for reviewing compliance with the State of Texas Accessibility requirements (based
on the federal standards established under Section 508 of the U.S. Rehabilitation Act), or indicate that the
product/service accessibility information is available from the General Services Administration “Buy Accessible
Wizard” (http://www.buyaccessible.gov). Vendors not listed with the “Buy Accessible Wizard” or supplying a URL
to their VPAT must provide the Department of Information Resources with a report that addresses the same
accessibility criteria in substantively the same format.
Term of Contract - Describes the duration of the contract including the beginning date and ending date of the
contract, and may include conditions for renewal and conditions for price increases.
Terminate - Specifies that, upon full performance of all requirements contained in the contract, unless otherwise
extended or renewed as provided in accordance with the contract terms and conditions, the contract will
terminate.

Copies of this report have been distributed to the following:

Legislative Audit Committee
The Honorable David Dewhurst, Lieutenant Governor, Joint Chair
The Honorable Joe Straus III, Speaker of the House, Joint Chair
The Honorable Steve Ogden, Senate Finance Committee
The Honorable Thomas “Tommy” Williams, Member, Texas Senate
The Honorable Jim Pitts, House Appropriations Committee
The Honorable Rene Oliveira, House Ways and Means Committee

Office of the Governor
The Honorable Rick Perry, Governor

Department of Criminal Justice
Members of the Board of Criminal Justice
Mr. Oliver J. Bell, Chairman
Mr. Tom Mechler, Vice-Chairman
Mr. Leopoldo Vasquez, III, Secretary
Mr. John Eric Gambrell
Pastor Charles Lewis Jackson
Ms. Janice Harris Lord
Mr. R. Terrell McCombs
Mr. J. David Nelson
Ms. Carmen Villanueva-Hiles
Mr. Brad Livingston, Executive Director

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