Audit Contract Administration - Texas DCJ, TX SAO, 2004

• Feb. 16, 2016 • Locations: United States of America -> Texas • Topics: Corrections Audits, Cost of Prison Systems

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An Audit Report on Contract Administration at

The Department of Criminal
Justice’s Community Justice
Assistance Division
September 2004
Report No. 05-002

Lawrence F. Alwin, CPA
State Auditor

An Audit Report on Contract Administration at the

Department of Criminal Justice’s Community Justice
Assistance Division
SAO Report No. 05-002
September 2004

Overall Conclusion
The Department of Criminal Justice’s Community Justice Assistance Division (CJAD) needs
to increase the accuracy and completeness of the information it uses to allocate funds for
adult probation services and improve the monitoring
of its agreements with the community supervision
CJAD Programs Reviewed
and corrections departments (CSCDs) that provide
CJAD administers community
these services.
Inaccurate and incomplete information may limit
CJAD’s ability to appropriately allocate state funds
to CSCDs, which totaled approximately $219 million
in fiscal year 2004. Specifically:
¾ The information used to allocate direct

supervision and community corrections funds is
based on CSCDs’ self-reported data, which CJAD
does not consistently verify. We found error rates
in this data at the three CSCDs we visited that
ranged from 1.5 percent to 13 percent. Errors in
this data may result in some CSCDs’ receiving
more funds than they should have.

supervision, or adult probation, in
Texas. Offenders on community
supervision serve their sentences in the
community rather than in prison.
People often confuse probation with
parole. They are different in that
offenders are eligible for parole only
after serving a prison sentence.
We reviewed the following programs
administered by CJAD:

Basic Supervision
Community Corrections
Diversion Programs
Treatment Alternatives to
Incarceration

¾ The Community Justice Plans that CJAD uses to award grant funds for diversionary

programs are not a significant factor in ensuring that funds are awarded to the most
effective programs. CJAD is moving toward awarding grants based on program
performance, but it does not yet collect complete information on the effectiveness of
the programs it funds.

In addition, CJAD’s monitoring may not be sufficient to ensure that CSCDs and their
subcontractors spend state money as intended. CJAD performs some monitoring of CSCDs’
program and financial data; however, the number of reviews, the timing of the monitoring,
and the efficiency of the monitoring processes need improvement. Our review of the
expenditures at three CSCDs did not identify any instances where funds were spent
inappropriately.

Summary of Information Technology Review
We reviewed the integrated database that CJAD uses to track the CSCDs’ data. We found
no reportable issues related to the database. We reviewed access controls, input and
output controls, and data integrity. Much of the data in the database is self-reported by
CSCDs and manually entered by CJAD staff. Eventually, the database system will be linked
to the Community Supervision Tracking System that is part of the Department of Criminal
Justice’s ongoing re-engineering efforts. The tracking system is part of the Criminal Justice
Information System required by Chapter 60 of the Code of Criminal Procedure.

This audit was conducted in accordance with Government Code, Sections 321.0131 and 321.0132.
For more information regarding this report, please contact Nicole Guerrero, Audit Manager, at (512) 936-9500.

Detailed Results
Chapter 1

Inaccurate and Incomplete Information May Limit CJAD’s Ability to
Appropriately and Objectively Allocate Funds to CSCDs
The Department of Criminal Justice’s Community Justice Assistance Division
(CJAD) does not ensure that community supervision and corrections departments
(CSCDs) provide accurate and sufficient information regarding the number of
probationers and the services to be provided. CJAD distributes approximately 66
percent ($144 million) of appropriated funds to CSCDs using
State Funds for Community
formula funding; the remainder is distributed based on a grant
Supervision
review process (see text box). We identified the following
CJAD has three major funding streams to
issues related to CJAD’s distribution of funds:
provide funding to counties that supervise
adult offenders on probation. Two
appropriation line items—basic supervision
and community corrections—are allocated
using funding formulas set by Chapter 509
of the Government Code. In fiscal year
2004, these appropriations totaled
approximately $144 million.

One line item—diversion programs—is
distributed through a grant review process.
Payment amounts are set by an approved
grant budget. In fiscal year 2004, the
appropriation for this line item was
approximately $61 million. In addition,
CJAD was appropriated $14 million in fiscal
year 2004 for the Treatment Alternatives to
Incarceration Program (TAIP.)

The information used to allocate direct supervision and
community corrections funds are based on CSCDs’ selfreported data, which CJAD does not consistently verify.
Data from each of the three CSCDs we audited contained
errors; the CSCDs over-reported the number of probationers
on direct supervision by 1.5 percent to 13 percent. This may
have resulted in these CSCDs’ receiving more funding than
they should have. When one CSCD receives more than its
appropriate share of funds, less money is available for other
CSCDs.

CJAD’s process for awarding grants for diversion programs
may not ensure that the funds are awarded to the most
effective programs. CJAD awarded $61 million in grants for diversion programs
in fiscal year 2004. CJAD collects and reviews CSCDs’ Community Justice
Plans for diversion programs for the purpose of awarding grants. However, this
information is not heavily weighted in the grant award process. Instead, CJAD
bases its awards primarily on historical data, program need, and national
correctional research. CJAD is moving toward awarding grants based on program
performance, but it does not yet collect complete information on the effectiveness
of the programs it funds.

Similar issues were identified in an October 1996 State Auditor’s Office report, An
Audit Report on Purchasing and Contract Administration at the Texas Department
of Criminal Justice, SAO Report No. 97-006.

An Audit Report on Contract Administration at the Department of Criminal Justice’s Community Justice Assistance Division
SAO Report No. 05-002
September 2004
Page 1

Table 1: CJAD is responsible for allocating approximately $220 million in funds each year to CSCDs for adult probation services.
This includes $1.25 million for the Battering Intervention and Prevention Program (BIPP) and $14 million for the
Treatment Alternatives to Incarceration Program (TAIP).

CJAD Appropriations to CSCDs
Appropriation Line
Item

Fiscal Year
2000

Fiscal Year
2001

Fiscal Year
2002

Fiscal Year
2003

Fiscal Year
2004

Fiscal Year
2005

Basic Supervision

$99,158,435

$98,606,976

$100,355,443

$101,405,397

$101,496,630

$101,781,606

Community Corrections

$44,906,752

$42,544,637

Diversion Programs,
which includes:

$61,021,956

$65,321,956

$61,318,263

$950,000

$1,250,000

$14,000,000

$13,000,000

$14,000,000

$219,087,143

$217,535,684

$224,584,151

$225,634,105

$219,359,530

$219,644,506

BIPP

TAIP (approximate)
Total

Sources: General Appropriations Act, 76th, 77th, and 78th Legislatures, and unaudited CJAD records for the TDCJ portion of
TAIP funding
Chapter 1-A

Inaccurate Information May Limit CJAD’s Ability to Ensure that
CSCDs Receive the Appropriate Amount of Funds Through Formula
Funding
The information CJAD uses for formula funding may not ensure that CSCDs receive
the appropriate amount of funds for providing basic supervision and community
corrections services to offenders on probation. The information CJAD uses to
calculate formula funding contains errors, and this may result in an inaccurate
allocation of funds to CSCDs. In fiscal year 2004, approximately $144 million was
allocated through formula funding to these two programs. The formulas for the
allocation of funds rely on the numbers of felony and misdemeanor offenders under
direct supervision, which are self-reported by the CSCDs, and CJAD does not
consistently verify this data or correct the errors that are found.
We identified the following issues related to formula funding:

Felony offender data at all three of the CSCDs we audited contained errors.
These errors were the result of incorrectly counting felony offenders on direct
supervision status. The CSCDs we audited over-reported the number of felony
offenders on direct supervision by 1.5 percent to 13 percent for selected months
in 2002. Consequently, these CSCDs received funding for more felony offenders
than they should have. Because the total available funding is a fixed amount,
errors in the self-reported data may cause over-allocations of funds to some
CSCDs and under-allocations to others. We tested data from selected months in
calendar year 2002 because calendar year 2002 data was used to determine
CSCDs’ funding for fiscal year 2004.

CJAD auditors do not always review CSCDs’ self-reported felony offender data
to ensure its accuracy. For fiscal years 2001 to 2003, 59 percent of CJAD’s
audit visits to CSCDs included testing of probationers’ eligibility for direct
supervision funding and identification of an error rate.

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SAO Report No. 05-002
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Errors in felony offender data identified during audits are not corrected in the
integrated database, which is used to calculate future formula funding allocations.

CSCDs are not penalized for submitting inaccurate data. Consequently, there are
no apparent repercussions to CSCDs for over-reporting the number of offenders
on probation.

We first reported a similar issue in October 1996 (see An Audit Report on Purchasing
and Contract Administration at the Texas Department of Criminal Justice, SAO
Report No. 97-006). Since that time, CJAD has begun auditing self-reported data
from CSCDs, but the current error rates are similar to the 9 percent error rate
identified in 1996. This indicates that the audits performed by CJAD are not having
an effect on the accuracy of the self-reported data. This could be because CSCDs are
not penalized for over-reporting the number of felony offenders under direct
supervision. Chapter 509.012 of the Government Code gives CJAD the authority to
impose sanctions for CSCDs who do not comply with CJAD’s standards or
requirements.
Recommendations
CJAD should:

Ensure that its audits of CSCDs’ data include testing of direct supervision cases
and identification of an error rate.

Correct data in the database used to calculate formula funding when errors are
identified.

Review the processes used by CSCDs to collect and calculate reported data (also
recommended in our October 1996 report).

Consider penalties for CSCDs that over-report the number of direct supervision
cases.

Management’s Response

CJAD includes testing of eligibility for direct supervision funding in all program
specific audits. During FY01-03 a total of 254 audits of 103 CSCDs were
conducted and each of these audits included a review of direct supervision
funding eligibility. Field audits of all CSCDs will be completed on a four-year
cycle.

CJAD will require CSCDs to adjust monthly MCSCRs for errors discovered in
caseload audits if the effect on funding for the CSCDs across the state would be
financially significant.

CJAD will continue to review the process used by CSCDs to collect and calculate
reported data. A primary purpose of CJAD Eligibility and/or Case Management
Compliance Reviews is to verify the accuracy of data reported for direct
supervision funding. When a department is found to have a high error rate,

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follow-up audits are conducted to assure corrective action by the CSCD. An
example is the department cited in the report with the 13% error rate. CJAD
identified this department as having reporting problems in an audit conducted in
2002. The reporting problem was due to the new countywide automated system,
which included the CSCD case management system, and was subsequently
corrected. To ensure correction, CJAD conducted follow-up audits. Correction
of the reporting problem was confirmed by the SAO audits of 2004 data, in which
they found that the 13% error rate had dropped to 0%.

CJAD will establish a tolerable error rate for reporting which meets the criteria
of substantial non-compliance as outlined in the Government Code 509.012 and,
as appropriate, will impose sanctions.

Auditor’s Follow-up Comment
The 254 audits CJAD refers to include audits of residential programs and counts each
type of audit conducted during the same visit to a CSCD as separate audit. Some of
these audits verify the number and eligibility for placement of the offenders in these
programs, but any review of eligibility for direct supervision funding included in
these audits does not result in the identification of an error rate nor a change in the
information on which future funding is based.
We tested data from calendar year 2002, which is the basis for fiscal year 2004
funding. This means that the CSCD that over-reported the number of offenders on
direct supervision by 13 percent may have received more funding than it should have
for fiscal year 2004.
Chapter 1-B

Community Justice Plans Are Not a Significant Factor in Ensuring
that Funds Are Distributed to the Most Effective Programs
CJAD’s Community Justice Plans are not a major part of the process for awarding
diversion program and Treatment Alternatives to Incarceration Program (TAIP)
grants and may not ensure that the funds are allocated to the most effective programs.
In fiscal year 2004, CJAD awarded $60 million in diversion program funds and $14
million in TAIP grants.
CSCDs complete Community Justice Plans as applications for diversionary grant
funding, and according to CJAD staff, they spend seven months of each year
reviewing and scoring the plans. However, the plan scores are not a critical
component of the allocation process. For example, the Community Justice Plan
scores added only 1 to 4 percent in funding to the amounts allocated to CSCDs for
residential programs in fiscal year 2004. Factors that affected the funding allocations
but that are not a part of the Community Justice Plans include historical funding
levels, program need, and the results of national corrections research on the
effectiveness of various types of programs. Section 509.007(a) of the Government
Code requires that CSCDs submit Community Justice Plans in order to receive
diversion program funds.

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We found the following in our review of Community Justice Plans:

CJAD’s method for scoring the plans does not give greater consideration to
performance and program need, which appear to be the main factors for funding
tracked on the plans. These two factors do not carry greater weight in the scores
than other elements that are mostly compliance-related, such as the results of
audits by CJAD or operating at 90 percent capacity. Government Code, Section
509.007(b)(2), states that a Community Justice Plan must include a description of
methods for measuring the success of programs. CJAD expects that the results of
these measures will be reported at the end of the 2004–2005 biennium.

CJAD does not require adequate documentation in the Community Justice Plans
to support budgeted program amounts and to ensure the efficient use of state
funds. (We first reported this issue in October 1996.) CJAD’s budget section
reviews budgets for reasonableness and to determine whether proposed
expenditures are allowed by CJAD standards; however, there is no analysis on
whether the proposed amounts are necessary to carry out the program. Without
the assurance provided by an in-depth budgetary review, CSCDs could be paying
for unnecessary goods or services or expenditures could be higher than
necessary. For example, we noted the following budget requests in the
Community Justice Plans we reviewed, which indicate that CJAD reviewers are
not checking basic math or requiring detailed support for budget requests:

One CSCD requested $350,000 for urinalysis tests that cost $8.54 each,
which comes to 39,193.73 tests. There was no explanation for the partial
amount.

One CSCD requested $4,000 for equipment repair and $5,000 for equipment
replacement. There was no explanation for what equipment needed to be
repaired or replaced.

One CSCD requested $11 per hour for group therapy. There was no
explanation for whether this is $11 per person per hour or $11 per group per
hour.

Recommendations
CJAD should:

Revise the Community Justice Plan requirements and scoring procedures to
encompass and add weight to performance-related data, and either use the scores
as the primary factor in awarding diversion program funding or document the
process currently used and decrease the amount of time and resources spent
scoring the plans.

Ensure that CSCDs are bound by specific criteria against which the success of
programs can be measured. For example, the present form used to project
outputs and outcomes could be expanded to include a description of specific
factors by which the success of the programs is measured.

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Conduct an in-depth review of budget requests to ensure that CSCDs’ budgeted
amounts are properly supported and necessary.

Management’s Response

CJAD will revise the CJP requirements and scoring procedures to more strongly
weigh performance and need. Although not a part of the CJP scoring process, in
FY03 CJAD conducted an outcome study of all community corrections facilities
(accounting for approximately 60% of the DP funding line) utilizing offender
placement criteria (risk), program completion, recidivism rates determined from
Department of Public Safety arrest data, and revocation rates determined from
placements in the Texas Department of Criminal Justice – Correctional
Institutional Division. As a result, five community corrections facilities with low
scores were identified for closure effective September 1, 2003.

A Research Plan outlining the collection, reporting and use of outcome
information has been established. This plan will be reviewed to determine how
outcome measures can be integrated into the CJP process.

CJAD will evaluate the budget review process to determine if additional
supporting documentation is necessary to make funding decisions.

Chapter 2

Monitoring of CSCDs Needs Improvement
CJAD performs some monitoring of CSCDs’ program and financial data; however,
the number of CSCDs reviewed and the timing of this monitoring could be improved
to ensure that the CSCDs are providing services as intended and are spending state
funds appropriately. CJAD’s monitoring function is decentralized, which has resulted
in a lack of monitoring for some programs at some CSCDs and late reviews of
CSCDs’ financial audit reports.
CJAD does not comply with its own policies for monitoring the CSCDs’
subcontractors. The policies are designed to ensure that subcontractors are providing
the services for which they are paid.
Chapter 2-A

CJAD’s Monitoring of CSCDs’ Program and Financial Data May Not
Be Sufficient to Ensure that CSCDs Are Providing Services as
Intended
The frequency and timing of CJAD’s monitoring of CSCDs could be improved to
ensure that CSCDs provide services and spend state funds as intended. We identified
inadequacies in three of the areas that perform monitoring: the Field Services
Division, the TAIP, and the Fiscal Management Department.

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CJAD has a decentralized organizational structure: the three Field Services regions,
TAIP, and the Fiscal Management Department review different programs at CSCDs.
Their responsibilities are as follows:

The three Field Services regions perform compliance audits of non-residential
programs at CSCDs. Residential Services, which is part of the Field Services
Division, performs program compliance and program effectiveness audits of
residential programs in addition to providing technical assistance.

TAIP auditors perform compliance audits of TAIP programs and provide
technical assistance at CSCDs.

The Fiscal Management Department disperses funds to CSCDs and monitors
how CSCDs account for these funds.

All of these CJAD sections perform work at CSCDs or review reports or data from
CSCDs. We found instances where reviews of different programs at CSCDs were
conducted at different times within a one-year period. For example, El Paso County
received an audit of basic supervision in January 2002 and an audit of its TAIP
program in April 2002. If these audits were performed at the same time and by the
same staff, CJAD could increase efficiency and decrease travel costs.
We identified the following problems in the areas that perform contract monitoring:
Field Services Division. The

Field Services Division audits programs at CSCDs based
on a risk assessment process. Although it audited at least one program at 101 of the
120 CSCDs in fiscal years 2001–2003 and some CSCDs received audits of more than
one program, 23 out of 60 CSCDs (38.3 percent) considered to be high risk in fiscal
years 2002 and 2003 did not receive a compliance and eligibility audit as stated in the
risk assessment. Eleven of the 60 high-risk CSCDs did not receive any audits at all.
Also, the programs audited by the Field Services Division in fiscal years 2001
through 2003 accounted for only 23 percent of the total funding received by the
CSCDs (see Table 2). Lack of monitoring may lead to the State’s not receiving
services it is paying for or being charged for services it has not received.
Table 2: In fiscal years 2001 through 2003, the programs audited by the Field Services Division
accounted for only 22.58 percent of the total funding received by the CSCDs.

CJAD’s Audit Coverage for Fiscal Years 2001-2003
Total Funding

Dollars Audited

Percentage of
Total Funding
Audited

No. of CSCD
Programs
Audited

2001

$ 202,879,374

$ 46,720,772

23.03%

2002

$ 208,388,262

$ 67,179,968

32.24%

2003

$ 208,192,722

$ 25,982,039

12.48%

$ 619,460,358

$139,882,779

22.58%

160

Fiscal Year

Total

Source: Unaudited information provided by CJAD

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SAO Report No. 05-002
September 2004
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TAIP.

CJAD’s oversight of TAIP facilities is not sufficient to ensure that TAIPs
consistently provide quality services. CJAD performed only three compliance audits
in fiscal year 2002, none in fiscal year 2003, and two in fiscal year 2004 to date.
TAIP transferred from the Commission on Alcohol and Drug Abuse in 1995. CJAD
performed technical assistance reviews at 25 of the 31 TAIPs between 2000 and
2002. However, technical assistance reviews differ from compliance audits in that
they do not include management responses or action plans and are not provided to the
administrative judges who are in charge of the CSCD. The distinction is important
because CSCDs may not have an incentive to improve deficiencies identified through
a technical assistance review because there is no response, action plan, or
accountability required.

Fiscal Management Department.

The Fiscal Management Department’s desk review
process does not ensure that CSCDs’ financial problems are promptly identified and
corrected. The Fiscal Management Department took more than 14 months to review
CSCDs’ fiscal year 2002 independent audit reports. Each CSCD is required to obtain
an annual financial audit by an outside certified public accounting firm and to submit
the audit report to CJAD. CJAD primarily relies on its review of the CSCDs’ audit
reports to fulfill its legislatively mandated obligation to fully account for all state
funds released to funding recipients. Delayed reviews may result in problems’ being
left uncorrected for long periods. This could lead to the misuse of state funds,
although our review of the expenditures at three CSCDs did not identify any
instances where funds were spent inappropriately.
We found problems with the financial data at one of the three CSCDs we visited;
however, the lateness of CJAD’s reviews of CSCDs’ independent audit reports
makes it difficult to detect or correct errors. In addition, one CSCD was unable to
provide fiscal year 2003 expenditure detail supporting the amounts it submitted to
CJAD on its quarterly expenditure reports or used in its independent audit report.
This lack of support indicates that expenditure reports may not be accurate.
The fiscal year 2002 independent audit reports were due from the CSCDs by March
31, 2003. However, CJAD did not complete its reviews of these reports until June
2004, which is 21 months after the end of fiscal year 2002. Only 57 percent of
CSCDs submitted their fiscal year 2003 reports by the March 31, 2004, deadline. In
July 2004 there were still 11 CSCDs that had not yet submitted their fiscal year 2003
reports.
Recommendations
CJAD should:

Coordinate audit visits to CSCDs in order to perform audits of different functions
or programs at the same time.

Consider consolidating its various monitoring sections and training all its
auditors to perform all types of audits required by the Government Code.

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Review independent audit reports on a timely basis and ensure that CSCDs abide
by its guidelines for the submission of independent audit reports. CJAD should
also consider imposing sanctions on CSCDs that do not comply.

Management’s Response

CJAD will evaluate the feasibility of coordinating audits. CJAD audits are
currently scheduled separately to minimize disruption of CSCD operations.

CJAD will consider consolidating various monitoring sections.

CJAD will evaluate its process of reviewing independent audit reports to
enhance timeliness of reviews. Most CSCDs have historically complied with
guidelines for the submission of independent audit reports. In 2002 and 2003,
80% and 85% of independent audit reports were received within the two-week
grace period. The remaining either received extensions or CJAD contacted by
letter. CJAD will also consider imposing sanctions for failure to comply.

Chapter 2-B

CJAD Does Not Consistently Follow or Enforce Its Policies Relating
to the Monitoring of CSCDs’ Subcontractors
CJAD’s Contract Management Manual outlines several policies designed to ensure
that CSCDs’ subcontractors receive adequate monitoring and that the subcontracts
protect state funds. However, CJAD does not always follow these policies or ensure
that CSCDs and their subcontractors follow them. In addition, CJAD was unable to
provide a full list of outstanding subcontracts for the three CSCDs we audited, which
indicates that CJAD may not be aware of all CSCD subcontracts. For these two
reasons, it is difficult for CJAD and the CSCDs to ensure that subcontractors spend
state funds as intended.
CJAD does not review financial reports from subcontractors receiving more than
$100,000 in CJAD funds as required by its Contract Management Manual. The
manual requires CSCDs to include in each CJAD-funded subcontract an
“independent audit” clause. This clause requires any subcontractor whose total
funding from CSCDs exceeds $100,000 in a fiscal year to provide an independent
audit of the funds received. The Contract Management Manual requires that these
reports be submitted to CJAD and that CJAD review them. CJAD has not reviewed
any of these reports for fiscal years 2001 through 2003. In addition:

CJAD has not provided CSCDs with a list of vendors that have been audited by
state agencies as the manual requires.

The subcontracts we reviewed at one CSCD did not contain the required
independent audit clause. In addition, these subcontracts did not follow the
standard contract format as required by the Contract Management Manual.

CJAD requires CSCDs to submit for review subcontracts that directly affect
offenders’ services. The Contract Management Manual and the Financial
Management Manual require CSCDs to submit copies of subcontracts after they
are executed. However, the CJAD Budget Division does not consistently track or

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review CSCDs’ subcontracts or enforce the contract requirements in the Contract
Management Manual. For example:

One of the CSCDs we audited was unable to provide evidence that CJAD
had reviewed and approved its contracts and leases.

One CSCD was unable to provide evidence that competitive bidding had
been used to procure services funded with CJAD money as required by the
Contract Management Manual.

The CJAD Contract Management Manual also requires CSCDs to develop a
checklist for monitoring subcontractors and a written annual monitoring plan that
is based on a risk assessment in order to ensure that subcontracted services are
delivered as intended. CJAD is not enforcing this requirement and is not
reviewing the results of the CSCDs’ monitoring. None of the three CSCDs we
visited had a risk assessment or an annual monitoring plan for subcontracts.
Recommendations
CJAD should:

Ensure that it follows the requirements in its Contract and Financial Management
Manuals.

Track and review all CSCDs’ subcontracts to ensure that they conform to the
requirements in the Contract Management Manual.

Require that CSCDs submit documentation of how the CSCDs intend to monitor
their CJAD-funded subcontracts each funding cycle.

Management’s Response

CJAD will review the requirements in the Contract and Financial Management
Manuals to determine if modifications are appropriate and will ensure
compliance.

CJAD will evaluate the criteria for the submission of contracts. Those that are
required to be submitted will be evaluated for compliance with the Contract
Management Manual.

In the recent instructions for the independent CPA audit report sent out in July,
CJAD requested that the CSCDs provide the most recent vendor monitoring
report. This was intended to assist CJAD in ensuring that CSCDs have a
monitoring plan and are monitoring their contract vendors. Based on any
revisions made to the Contract or Financial Management Manuals, CJAD will
modify the requirements.

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Other Information
Appendix 1

Objectives, Scope, and Methodology
Objectives
Our audit objectives were to determine whether:

Procurement processes are sufficient to ensure that the best contractors are fairly
and objectively selected.

Contract provisions are sufficient to hold contractors accountable for delivery of
quality services and prevent the inappropriate or inefficient use of public funds.

The methods that are used to establish contractor reimbursement are sufficient to
ensure that the State pays a fair and reasonable price for services.

Contractor oversight is sufficient to ensure that contractors consistently provide
quality services and that public funds are spent effectively and efficiently.

Scope
We tested data at Bexar, Travis, and Williamson Counties’ community supervision
and corrections departments (CSCD). For formula funding and Community
Supervision Officer qualifications, we reviewed data for a selected month in calendar
year 2002 because calendar year 2002 is the basis for the funding allocated for fiscal
year 2004. For CSCD diversionary funding, subcontracts, and expenditures, we
reviewed data for fiscal year 2003.
We did not perform work related to our procurement objective for formula funding
and diversion funding because, by statute, the Criminal Justice Assistance Division
(CJAD) can allocate funds only to CSCDs.

Methodology
We conducted interviews of staff at CJAD and at the CSCDs we visited. We
reviewed and/or analyzed the following:

The Field Services Division, the Residential Services Division, and the
Treatment Alternatives to Incarceration Program (TAIP); specifically, risk
assessment processes for the Field Services Division and TAIP, audit reports,
audit methodologies, and audit coverage for all programs for fiscal years 2000 to
present

CJAD’s Contract Management Manual

CJAD’s Financial Management Manual

Budget Department monitoring processes

An Audit Report on Contract Administration in the Department of Criminal Justice’s Community Justice Assistance Division
SAO Report No. 05-002
September 2004
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Fiscal Management Department monitoring processes

Integrated database used to track CSCD information

Scoring process for Community Justice Plans

Funding processes for formula and grant funds (including TAIP funds but not
Battering Intervention and Prevention Program [BIPP] funds)

Applicable statutes and rules

Contracts and expenditures for Bexar, Travis, and Williamson Counties’ CSCDs

Project Information
We conducted this audit in accordance with generally accepted government auditing
standards. Fieldwork was conducted from April 2004 to June 2004. The following
members of the State Auditor’s Office’s staff conducted this audit:

Sandra Donoho, MPA, CIA, CISA (Project Manager)

Ileana Barboza, MBA

Laura Mansfield, MPA

Joseph Mungai

Patricia Perme, CPA

Leslie Ashton, CPA (Quality Control Reviewer)

Nicole Guerrero, MBA (Audit Manager)

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September 2004
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Appendix 2

Status of Prior Audit Recommendations
Table 3

Status of the CJAD Recommendations from the October 1996 Audit Report (An Audit Report on Purchasing
and Contract Administration at the Texas Department of Criminal Justice, SAO Report No. 97-006)
Recommendations — Selection/Rate-Setting

Current Status

Grant funds should be distributed based on criteria such as a CSCD’s
past performance or demonstrated need for the service within the
geographic area, not on historical distributions. Proposed costs should
be analyzed for reasonableness and should be compared to other
CSCDs’ costs for providing similar services.

CJAD bases its grant awards primarily on historical
data, national correctional research, and program
need. CJAD is moving toward awarding grants based
on program performance, but it is not doing so yet.
Proposed costs are reviewed for reasonableness but
are not compared with other CSCDs’ costs for
providing similar services.

Data for funding formulas should be verified. In its monitoring, CJAD
should review the processes used by CSCDs to collect and calculate
reported data. Once CSCDs have good processes in place, CJAD’s
review should be limited to testing data to ensure its continued
accuracy.

CJAD verifies data for formula funding during audits;
59 percent of the fiscal year 2001–2003 audits
included testing probationers’ eligibility for direct
supervision funds. We found errors of up to 13
percent in the data we tested.

Minimum program standards for residential requirements should be
developed to aid in the analysis of costs and to ensure that similar
programs provide a minimum level of services to all clients.

CJAD performs audits of residential programs and
includes the results of audits as a factor in the
Community Justice Plan scoring. Minimum program
standards for residential requirements have been
established.

CJAD should consider developing ceiling rates for different purchased
services. Rates should be based on reasonable and necessary costs of
providing services and should consider any geographical differences in
salaries, utility costs, or other expenses. The methodology for
developing such rates should be developed in conjunction with CSCDs,
well documented, and periodically updated.

CJAD does not have standard ceiling rates for
purchased services based on reasonable and
necessary costs.

CJAD should provide CSCDs assistance in developing good
methodologies for analyzing the reasonableness of providers’ proposed
costs.

The CJAD Contract Management Manual and Fiscal
Management Manual address this issue.

Recommendations — Contracts

Current Status

CJAD should strengthen its agreements with CSCDs. Plans (or other
documents intended to define services to be delivered and the results
of those services) should clearly define the services the CSCDs are to
provide and should also clearly define the outcomes of those services.
Proposed outcomes should be compared to actual results and
assistance should be given to help those CSCDs that do not meet their
goals to improve.

CJAD is moving in the direction of tracking
performance of programs and services provided at
CSCDs, but it is not yet collecting complete
information on the effectiveness of the programs it
funds.

CJAD should develop standard contracts for CSCDs to use when
subcontracting. CSCDs should be allowed to tailor these contracts to fit
their needs and the specifics of the contracted services.

CJAD’s Contract Management Manual includes
instructions and standard contract clauses for CSCDs
to use when subcontracting. However, CJAD does not
track or monitor CSCDs’ subcontracts.

CJAD should develop a process to review CSCD subcontracts to ensure
they include the necessary (and mandated) clauses. Such a review
should be designed to ensure that CJAD’s review does not interfere
with CSCDs’ time frames for awarding the contracts. On the other
hand, CSCDs must submit contracts to CJAD to allow sufficient time for
review prior to contract award. Standard contracts would shorten the
timeframes (and perhaps eventually necessity) of this review.

CJAD’s Contract Management Manual requires that
CSCDs submit copies of subcontracts totaling $50,000
per year or more to CJAD after they are executed.
However, CJAD does not consistently review or track
these subcontracts. CJAD does provide CSCDs with
standard contract clauses via the manual. All
contracts that relate to community corrections
facilities must be approved before funds are
expended.

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Current Status

Field Services staff should use a risk-based approach for selecting
CSCDs for review and to determine procedures to conduct during visits.
Possible areas of review should include:
•

The CSCD’s process for accumulating and reporting statistical
information to CJAD, such as the number of probationers on
direct supervision and performance measures dates

•

The resolution of internal control weaknesses identified in
independent audits or past CJAD reviews

•

How the CSCD selects and negotiates rates with
subcontractors

•

How well the CSCD ensures quality services from
subcontractors

•

How the CSCD determines its success in delivering quality
services

Risk factors to consider in selecting CSCDs for review can include:
•

Program success rates (according to program performance
measures included In the community justice plan and
according to residential/non-residential discharge data)

•

Level of state funds carried over from prior years

•

Level of collections from community supervision payments

•

Dollar amount and type of contracted services or professional
fees

•

Percentage of funds spent on facilities/utilities/equipment
or supplies

•

State dollars per felon or probationer

•

Percentage of revenue from “other revenue”

•

Results of previous CJAD and independent auditor reviews

•

Length of time since last CJAD review

•

How long programs have been in operation

Field Services staff should conduct field audits and document both
their analysis and results so that deficiencies can be tracked and
corrective action monitored.
Recommendations — TAIP

The Field Services Division uses a risk assessment
process to determine which CSCDs and programs to
audit. However, although it audited at least one
program at 101 of the 120 CSCDs in fiscal years 20012003, 23 out of 60 CSCDs (38.3 percent) considered
to be high risk in fiscal years 2002 and 2003 did not
receive a compliance and eligibility audit as stated
in the risk assessment. Eleven of the 60 high-risk
CSCDs did not receive any audits at all. Also, the
programs audited by the Field Services Division in
fiscal years 2001 through 2003 accounted for only 23
percent of the total funding received by the CSCDs.

The Field Services Division documents the analysis
and results of its audits.
Current Status

To improve its contract management of TAIP, CJAD should:
•

Refine its RFP process by:
• Developing a point system for evaluating proposals to ensure that
the best programs and contractors are selected. The points
should be distributed so that the most relevant sections of the
proposal receive the most weight or points.
• Developing clear review criteria for the rating process conducted
by staff reviewers so that they know what an effective program
should consist of. The criteria developed should ensure
consistency in the review process by the various reviewers.
• Having the RFP reviewed by legal counsel prior to solicitation to
ensure that all needed information is included.

The TAIP funding process primarily utilizes historical
data to allocate funds to CSCDs for TAIP programs.
TAIP staff report that they use five criteria to decide
if they should increase or decrease funding
compared to last year and by how much. These
criteria are the Community Justice Plan score,
utilization history, ending fund balance,
deobligations and reobligations, and programmatic
need. Only 3 of 31 CSCD TAIPs received a different
funding amount in 2004 than they did in 2003.

• Requiring the CSCDs to either conduct a cost analysis of
providers’ rates or submit detailed cost information to CJAD in
order to determine the reasonableness of proposed unit rates.

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Establish a rate-setting methodology based on the reasonable cost
of providing services. As part of this methodology, CJAD should
develop guidelines to aid budget analysts in making budget cuts
for TAIP. In addition, budget analysts should receive training and
information on TAIP prior to making budget cuts. An analysis
should be conducted to determine the reasonable allocation
percentages for TAIP funding of screening/assessment and
treatment costs.

The TAIP funding process primarily utilizes historical
data to allocate funds to CSCDs. Only 3 of 31 CSCD
TAIPs received a different funding amount in 2004
than they did in 2003.

Develop contracts or other mechanisms to ensure that CJAD can
hold CSCDs programmatically and fiscally accountable for their
use of TAIP funds.

The TAIP program has a standard contract that is
included in the Contract Management Manual. In
addition, TAIP programs are part of the Community
Justice Plan process and are subject to the
requirements of the Contract Management Manual,
the Financial Services Manual, TAIP guidelines, and
special grant conditions.

•

Revise the standard TAIP contract to include sufficient provisions
(such as close-out, annual audits, etc.) to ensure the protection of
state funds.

•

Give providers a list or manual that defines and outlines, in detail,
reasonable and allowable expenditures such as those provided in
CJAD’s Financial Management Manual.

CSCDs and TAIP providers are provided with the
Contract Management Manual, which defines
allowable and unallowable expenditures.

•

Develop monitoring processes that look at program and financial
records and information of the CSCDs and the providers.

CJAD monitors TAIP providers by conducting
technical assistance reviews and compliance audits
of TAIP programs. CJAD does not review the financial
records of the TAIP providers.

Require outcome measures for TAIP in addition to the output
measures to aid not only in monitoring, but future funding.

The Contract Management Manual (not specific to
TAIP) requires CSCDs to instruct vendors to include
performance measures in their operational plans or
to negotiate three to five performance measures
with each vendor. Performance measures are
required for all contracts over $25,000.

•

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Distribution Information
Legislative Audit Committee
The Honorable David Dewhurst, Lieutenant Governor, Joint Chair
The Honorable Tom Craddick, Speaker of the House, Joint Chair
The Honorable Steve Ogden, Senate Finance Committee
The Honorable Thomas “Tommy” Williams, Member, Texas Senate
The Honorable Talmadge Heflin, House Appropriations Committee
The Honorable Brian McCall, House Ways and Means Committee

Office of the Governor
The Honorable Rick Perry, Governor

Texas Board of Criminal Justice
Ms. Christina Melton Crain, Chairman
Mr. Don Jones, Vice Chair
Mr. William “Hank” Moody, Secretary
Mr. Adrian A. Arriaga, Member
The Honorable Mary Bacon, Member
Mr. Oliver J. Bell, Member
Mr. Gregory S. Coleman, Member
Ms. Patricia A. Day, Member
Mr. Pierce Miller, Member

Department of Criminal Justice
Mr. Gary L. Johnson, Executive Director, Texas Department of Criminal Justice

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