INTRODUCTION

The Department did not adequately monitor the installation process for a new, management information system intended for use Statewide by ICI. Although the ICI had spent $340,000 as of June 2000, excessive delays had been encountered, and the new system was not yet operational Statewide. Three of the ten software modules purchased were in use at the ICI Central Office and one remote location. The other seven modules had not been put in use at any of the ICI locations. (Finding 1, pages 15 – 17)

Management accepted our recommendation to ensure its computer projects and related goals are monitored effectively and implemented promptly. They said a major goal of the ICI is to successfully implement the management information and accounting system. Management stated original costs and time estimates were underestimated.

Although the Department’s strategic plan for the ICI addressed factors such as marketability, use of technology, and inmate training, it did not address several operational issues, including a requirement that key decisions be based on a cost/benefit analysis. Consequently, the ICI entered into a 10-year, $3.7 million lease of a large warehouse without documenting the soundness or strategic direction of that decision.

In calendar year 2000, the ICI entered into a ten-year lease of a 102,500 sq.ft. warehouse, at total lease cost of $3.7 million. Rental costs will range from about $3.32/sq.ft. the first year to $4.15 /sq.ft. the tenth year. Management did not analyze the costs and benefits of its leasing decision, nor did they ensure it was consistent with the ICI’s strategic plan.

ICI management said they decided to lease a large warehouse to improve customer delivery times for certain industry products. From an accounting standpoint, a good analysis should have compared projected warehouse costs against the potential for improved production and delivery performance and sales growth. Such an analysis should be an integral part of management’s strategic planning.

In addition to the new warehouse, the strategic plan did not address the following other key business decisions:

The Department’s strategic plan should include all fundamental operational goals, thereby assisting management in fulfilling the ICI’s mission. The plan should require key business decisions to be based on cost/benefit analyses, sound logic, and strategic direction. (Finding 2, pages 18 through 20)

Department management accepted our recommendation in part, stating the ICI’s resources in the last two years were channeled toward correcting past operational deficiencies. As a result, management stated, the ICI lacked resources to meet some operating goals and fine-tune its business practices.

The ICI had not followed through on certain marketing objectives, including: increasing customer awareness, standardizing certain products, and updating its product catalog, which was ten years old.

The purpose of the ICI’s marketing plan should be to help management develop and coordinate marketing efforts and maximize sales at competitive prices. A marketing plan cannot be effective unless progress is made toward achieving its goals. (Finding 3, pages 21 and 22)

Department management accepted our recommendation to review the ICI’s marketing plan, revise the goals, as needed, and take necessary steps to achieve the goals.

Since 1998, we have reported the Department did not adequately measure the benefits of the ICI program in terms of providing inmates with marketable skills and work habits. In response to this repeat finding, the ICI decided to contract with a consultant to compile data relating to ICI’s inmate marketable skills and work habits, along with recidivism. Our report presents two findings related to the recidivism contract and its work product.

The consultant’s final report included responses from 47 former inmate workers, out of a population of 300. It contained no analysis in relation to the ICI operations. The contract terms did not specify the statistics to gather, an acceptable survey response rate, or whether the statistics gathered and reports were to be presented by categories (e.g., age at exit, gender, race, type of crime) and comparable with the existing Departmental statistics. The Department, as a whole, analyzes its recidivism statistics for the entire prison population by such categories. The Department had not determined the ICI program’s relative effect on inmate recidivism, by comparing the inmate recidivism rates of the ICI with the full Department.

A lack of sufficient performance measures may result in ICI policies that are not consistent with its statutory purpose, which is to provide committed persons with marketable skills, promote habits of work and responsibility. Since 1981, statute has required job placement rates for former ICI inmate workers after their release from prison. This finding was first reported in 1996. (Finding 4, pages 23 and 24)

In addition, by not including specific details of what the final work product should contain, or what procedures the consultant should follow in gathering data, the ICI had no standards by which to hold the consultant accountable and to assure the final work would meet the ICI’s needs. (Finding 5, pages 25 and 26)

Department management accepted our recommendations to develop and implement adequate measures to monitor job placement rates for former inmate workers and to ensure all contracts adequately specify the needed services and final work product. According to the response, management will include job placement rates in its annual report in the future. However, management said the ICI will not use inmate categories in its calculations. (For previous Department responses, see Digest Footnote #1.)

The remaining findings are considered less significant and are being given attention by the Department. We will review progress towards the implementation of our recommendations in our next compliance audit.

Responses were provided by Mr. Mark B. Krell, CIA, Chief Internal Auditor for the Department.

In our last audit, we reported undocumented dealings with private tire businesses had cost the State of Illinois between $213,000 and $325,000. The ICI had provided tire-recycling services to certain private businesses without written agreements and without apparent charge. It also appeared that verbal bartering arrangements had been made to trade services for goods. The activities of the operation were referred to the Department of State Police.

In response to the issues stated in the prior finding, the ICI closed its tire recycling operations at both of its two locations – Southwestern and Logan Correctional Centers.

During the current audit period, the ICI incurred an additional $427,000 in tire disposal and clean up costs, plus an additional $108,000 in losses resulting from the related equipment disposals. So, the identifiable losses associated with this prior audit finding are at least $748,000. The Department of State Police has closed its investigation. This finding was not repeated in the current audit. (See page 34)

Our special assistant auditors for the engagement were Guthoff & Company, LTD.