An Audit Report on

OVERVIEW

Page |1

Capital Projects at the
Department of Criminal
Justice

Lisa R. Collier, CPA, CFE, CIDA



The Department of Criminal Justice (Department) had strong
processes for monitoring capital projects, including projects
completed in-house and those that contractors completed.



The Department expended capital budget appropriations as
intended.



The Department complied with reporting requirements for
planned capital expenditures.

State Auditor

The Department of Criminal Justice (Department) effectively monitored
capital projects and expended capital budget appropriations as
intended. Additionally, the Department complied with the reporting
requirements in the General Appropriations Act (87th Legislature),
which requires state agencies receiving appropriated funds to report
capital planning information for specific projects.

LOW

MEDIUM




Background |p. 3
Audit Objectives |p. 13

This audit was conducted in
accordance with Texas
Government Code Sections
321.013, 321.0131, and
321.0132.

LOW

CAPITAL PROJECT
ADMINISTRATION

CAPITAL BUDGET
EXPENDITURES

PLANNED CAPITAL
EXPENDITURES

The Department implemented
effective processes to manage
capital projects and monitor
associated contracts when
applicable. However, it should
require its contractors to include
all specifications and tests in
their quality control plans.

The Department spent all capital
expenditures tested in a manner
consistent with the applicable
appropriations’ purpose, and
each expenditure was properly
supported.

The Department accurately
reported $1.1 billion in
anticipated capital expenditures
to the Bond Review Board.
Chapter 3 | p. 10

Chapter 2 | p. 8

Chapter 1 | p. 5

For more information about this audit, contact Audit Manager
Lauren Godfrey or State Auditor Lisa Collier at 512-936-9500.

March 2023 | Report No. 23-024

OVERVIEW

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Summary of Management’s Response
Auditors made recommendations to address the issues identified during this
audit, provided at the end of each chapter in this report. The Department
agreed with the recommendations.

Ratings Definitions
Auditors used professional judgment and rated the audit findings identified in
this report. The issue ratings identified for each chapter were determined based
on the degree of risk or effect of the findings in relation to the audit
objective(s).
PRIORITY: Issues identified present risks or effects that if not addressed could critically affect the
audited entity’s ability to effectively administer the program(s)/function(s) audited. Immediate
action is required to address the noted concern(s) and reduce risks to the audited entity.

HIGH: Issues identified present risks or effects that if not addressed could substantially affect the
audited entity’s ability to effectively administer the program(s)/function(s) audited. Prompt action is
essential to address the noted concern(s) and reduce risks to the audited entity.

MEDIUM: Issues identified present risks or effects that if not addressed could moderately affect the
audited entity’s ability to effectively administer the program(s)/function(s) audited. Action is
needed to address the noted concern(s) and reduce risks to a more desirable level.

LOW: The audit identified strengths that support the audited entity’s ability to administer the
program(s)/function(s) audited or the issues identified do not present significant risks or effects that
would negatively affect the audited entity’s ability to effectively administer the
program(s)/function(s) audited.

For more on the methodology for issue ratings, see Report Ratings section in
Appendix 1.

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March 2023

BACKGROUND

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Background Information
Construction-related Capital Budget Expenditures
The Department of Criminal Justice (Department) spent $97.0 million in capital
appropriations for all construction-related capital projects between fiscal years
2020 and 2022. Figure 1 summarizes the project types in which the Department
spent these funds.
Figure 1

Total Expenditures for Construction-related Capital Projects
Fiscal Years 2020-2022 a
Project Type

Description

Total Expenditure Amount

Climate Control

Includes installation or repair of heating,
ventilation, and air conditioning systems; air
handling units; and boilers.

$22.9 million

Roof

Includes roofing repair and replacement.

$19.2 million

Surveillance

Includes installation of video surveillance
cameras.

$12.2 million

Electrical

Includes replacing generators, electrical
distribution systems, and transformers.

$9.9 million

Security

Includes replacement of locking systems,
security lighting, fencing, and pulse monitoring
detection systems.

$9.7 million

Plumbing

Includes repair, refurbishment, or replacement
of plumbing systems, waste water treatment
systems, water heaters, and water storage
units.

$9.7 million

Wells

Includes construction, repair, or replacement of
water wells.

$3.1 million

Miscellaneous

Includes repair and replacement of items such
as refrigeration, fire alarm systems, and
agricultural facilities.

$10.3 million

Total Expenditures

$97.0 million

a This table lists only the Department’s construction-related capital expenditures from its fiscal years 2020

through 2022 capital appropriations.
Source: The Department’s accounting system, LONESTARS.

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BACKGROUND

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This audit examined eight projects with budgeted costs
totaling $52.7 million.
The projects, listed in Figure 2, were selected based on specific risk factors,
such as total expenditures, and to provide coverage of the Department’s six
regions and its privately operated units.
Figure 2

Projects Audited
Project

Budget

Description

Install Video Surveillance
Systems

$16.0 million

Install video surveillance systems at nine maximum security
units.

Replace Primary Power
Distribution System

$10.8 million

Replace high voltage transformers with primary distribution
transformers and underground cabling at the Wynne Unit in
Huntsville.

Install Air Conditioning

$5.6 million

Install air conditioning at the Hodge Unit in Rusk.

Replace Floor and Plumbing
System

$3.8 million

Replace the structural floor and plumbing system in one
building at the Clemens Unit in Brazoria.

Install Air Conditioning

$4.0 million

Install air conditioning in the Pack Unit in Navasota.

Replace Roofing

$10.3 million

Replace the roofing system of multiple buildings at the
Montford Unit in Lubbock.

Replace Door Controls

$1.2 million

Replace the locking system at the Lindsey Unit, a privatelyoperated state jail in Jacksboro.

Replace Water Well

$1.0 million

Develop a new water well with 600 gallon-per-minute
capacity at the Department’s Chase Field Work Camp in
Beeville.

Total

$52.7 million

Sources: Texas Board of Criminal Justice meeting minutes and the Department.

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DETAILED RESULTS

MEDIUM

Chapter 1

Capital Project Administration

The Department of Criminal Justice (Department) implemented several
effective processes and controls to manage capital projects and monitor
contracts for capital projects. However, it should require its contractors to
include all specifications and tests in their quality control plans to decrease the
risk that capital projects will not be constructed as designed.

The Department effectively monitored capital projects.
The Department had strong process for monitoring most capital projects,
including projects completed in-house and those that contractors completed.
For example, management approved in-house projects prior to beginning
construction and conducted regular quality assurance inspections of
contractors’ work. The Department also verified each contractor’s progress by
conducting construction site walkthroughs and holding monthly progress
meetings.
In addition, the Department’s change orders that affected the total project
costs were for items that were reasonably unforeseeable when the contract
was executed and were approved in accordance with the Department’s
documented procedures. The Department also followed its project close-out
process and completed final inspections, verifying that the contractor resolved
all quality issues identified during final inspections.

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DETAILED RESULTS

Page |6

The Department should verify that contractors include
all contract specifications and required tests in their
quality control plans.
Although the Department approved all quality control plans before its
contractors began the capital projects tested, none of those plans included a
complete listing of all the tests to be performed as required by the
Department’s documented procedures. For example, one of the quality control
plans did not include the electric safety testing that is required by the U.S.
Occupational Health and Safety Administration and the National Fire Protection
Association. That testing, which the contractor ultimately performed, was listed
in the contract specifications but not in the quality control plan. Incomplete
quality control plans increase the risk that work will not be completed as
planned or in accordance with contract specifications.

Recommendation
The Department should verify that contractors’ quality control plans contain all
required elements, including contract specifications and quality and safety
testing.

Management’s Response
The agency agrees with the SAO’s recommendation to verify that
contractors’ quality control plans contain all required elements.
 Corrective Action: The agency has updated standard operating
procedures to require quality control plans to be submitted at preconstruction meetings for the design professional to review and
verify that all required elements, such as specifications and required
testing, are included. Additionally, the project manager and inspector
will review and provide an acceptance letter upon approval.

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DETAILED RESULTS

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 Position Responsible for Implementation: Facilities Division Director
 Timeline: Immediately

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DETAILED RESULTS

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LOW

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Chapter 2

) Capital Budget Expenditures
The Department expended capital budget
appropriations as intended.

The Department spent all 41 expenditures tested,
totaling $9.0 million1, in a manner consistent with the
applicable appropriations’ purpose and each expenditure
was properly supported. In addition, the Department
approved all significant expenditures tested as required
by its policies. The Department also paid contractors
consistent with each project’s progress, accurately
calculating the payment and retainage amounts when
applicable.
In addition, the Department spent $5.8 million of noncapital appropriations on capital projects, including the
projects audited. Because those projects exceeded the
State’s threshold for capital budget expenditures (see
text box), the Department should have used only capital
budget appropriations or followed the process
established in the General Appropriations Act2 to request
approval to use other appropriations.

Capital Budget Expenditures and
Appropriations
Capital budget expenditures include
expenditures for assets with a biennial
project cost or unit cost in excess of
$100,000 in certain categories, including
construction or repair of buildings and
facilities.
Capital budget appropriations are funds
specifically appropriated for capital
projects. The Department’s
appropriation allows it to spend only
these type of appropriations for capital
budget expenditures.
Source: The General Appropriations Act (87th
Legislature).

Recommendation
The Department should pay for capital budget expenditures from only capital
budget appropriations or follow the process in the General Appropriations Act
to request approval to use other appropriations.

1

The expenditures tested were from the eight projects within the audit scope. As of August
2022, the Department had spent $30.9 million in capital budget expenditures on those
projects.
2
Article IX, Section 14.03, the General Appropriations Act (87th Legislature).

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DETAILED RESULTS

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Management’s Response
The agency agrees with the SAO’s recommendation for capital budget
expenditures.
 Corrective Action: The agency will ensure capital budget expenditures
are paid from capital budget appropriations in accordance with the
General Appropriations Act and guidance from the Legislative Budget
Board and the Comptroller.
 Position Responsible for Implementation: Chief Financial Officer
 Timeline: Immediately

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DETAILED RESULTS

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LOW

P a g e | 10

Chapter 3

) Planned Capital Expenditures

The Department complied with the reporting requirements in Article IX, Section
11.03, the General Appropriations Act (87th Legislature), which requires state
agencies receiving appropriated funds to report capital planning information
for specific projects (see text box).

The Department accurately reported $1.1 billion in
anticipated capital expenditures to the Bond Review
Board.
Specifically, the Department’s report to the Bond
Review Board contained all currently proposed
projects from the Department’s database that met the
criteria for capital planning expenditures. The
Department also reported costs—which it planned to
finance with General Revenue—that were consistent
with its internal estimates. Figure 3 on the next page
shows the projects comprising the Department’s $1.1
billion in anticipated capital projects.
The Department’s estimate of capital planning
expenditures consists primarily of cost estimates from
internal major work request forms. Department staff
use those request forms to communicate to
management the need for repairs and new facilities
and to estimate the associated costs. Department
personnel obtained most required approvals for all 30
requests tested3. It did not obtain all intermediate
approvals for two of the requests that the Department
asserted were urgent.

Capital Planning Information
Agencies and higher education
institutions must report capital planning
information projects related to:
• Acquisition of land.
• Construction of buildings and
facilities.
• Renovations of buildings and other
facilities estimated to exceed $1
million in the aggregate for a single
state agency or institution of higher
education.
• Major information resources projects
estimated to exceed $1 million.
Source: Article IX, Section 11.03, General
Appropriations Act (87th Legislature).

3

The Department had a total of 1,303 work requests from September 1, 2020, through August
31, 2022.

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DETAILED RESULTS

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Deferred maintenance. While the total $1.1 billion for anticipated capital
expenditures was accurate, the Department did not distinguish how much of
this amount was for deferred maintenance. The Department reported $0 for
deferred maintenance, but it asserted that some of the reported costs were for
deferred maintenance projects.
Figure 3

The Department’s Planned Capital Expenditures a
(For Fiscal Years 2023 through 2027)
Total Estimated Cost

Planned Start
Date

Planned
End Date

Safety

$165,310,000

September 2022

August 2028

Security

$274,497,000

September 2022

August 2028

Facilities Infrastructure

$608,993,000

September 2022

August 2028

Corrections Information Technology
System

$24,855,000

September 2022

August 2027

Enterprise Banking System

$11,560,000

September 2023

August 2028

$6,572,500

September 2023

August 2028

Project Name

Enterprise Inventory System
Total

$1,091,787,500

a

The Department’s summary report contains planning information for the time period beginning September 2022
through fiscal year 2027 and beyond.
Source: The Department’s Capital Expenditure Plan Summary Report (Fiscal Years 2023-2027).

Recommendation
The Department should identify and report deferred maintenance in its future
planned capital expenditure reports.

Management’s Response

I

The agency agrees with the SAO’s recommendation to identify deferred
maintenance in future capital expenditure reports.

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DETAILED RESULTS

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 Corrective Action: The agency will ensure deferred projects are
identified in future planned capital expenditure reports.
 Position Responsible for Implementation: Chief Financial Officer
 Timeline: Immediately

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APPENDIX

Page|13

|Appendix
Objectives, Scope, and
Methodology

The following members of the State
Auditor’s staff performed the audit:
 Gregory Scott Adams, CPA,
MPA, CGFM (Project Manager)


Link Wilson (Assistant Project
Manager)

Objectives
The objectives of this audit were to determine whether
Department of Criminal Justice (Department):
•

Has processes and controls to administer and
monitor contracts for capital projects, including
any deferred maintenance.



Kirsten Adamcik, MBA, CFE



Charlotte Carpenter, CPA



Kate Reagor, MSIS



Jeremy Wong



Dana Musgrave, MBA, CFE (Quality
Control Reviewer)



Lauren Godfrey, CIA, CGAP (Audit
Manager)

•

Ensures that related expenditures are supported and spent for their
intended purpose.

•

Accurately reports capital planning information to the Bond Review
Board for the State of Texas Capital Expenditure Plan as required.

Scope
The scope of this audit covered eight selected capital construction projects
funded through fiscal years 2020-2022 capital budget appropriations, and
associated monitoring and expenditures through August 2022. The audit also
examined how the Department funded certain capital projects during the same
period.

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APPENDIX

P a g e | 14

Additionally, the audit scope included data the Department submitted to the
Bond Review Board for its planned capital expenditures for fiscal years 2023
through 2027 and beyond and a review of significant internal control
components related to capital projects.

Methodology
We conducted this performance audit from July 2022 through February 2023 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on
our audit objectives. In addition, during the audit, matters not required to be
reported in accordance with Government Auditing Standards were
communicated to Department management for consideration.
Addressing the Audit Objectives
During the audit, we performed the following:
•

Interviewed Department personnel to gain an understanding of its
processes for monitoring and administering capital contracts,
processing capital expenditures, and reporting capital projects.

•

Identified the relevant criteria:
o Article V, the General Appropriations Acts (86th and 87th
Legislatures).
o Article IX, Sections 11.03 and 14.03, the General Appropriations Acts
(86th and 87th Legislatures).
o Department policies, including its standard operating procedures,
Executive Directive 10.06 (Construction, Maintenance, Renovation,
or Alteration of Department Facilities), Quality Assurance Manual,
and Procurement Card Manual.

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APPENDIX

P a g e | 15

To evaluate the Department’s capital project monitoring and expenditures, we
performed the following:
•

Reviewed certain capital projects to determine whether the
Department funded them solely through capital appropriations.

•

Selected eight capital projects for testing based on specific risk factors,
such as total expenditures in the selected appropriations and to provide
coverage of the Department’s six regions and its privately operated
units.

•

Obtained and reviewed payment vouchers; project documentation,
including project specifications; quality control plans; and contracts.

•

Tested the eight selected projects’ close-out processes, progress
monitoring, change orders, quality control plans, and project
authorizations for compliance with Department processes, as
applicable.

•

Selected a nonstatistical, random sample of capital expenditures
stratified by the total expenditures of the selected projects. The sample
was augmented by capital expenditures selected based on risk. This
sample design was chosen to ensure that the sample included a cross
section of capital expenditures and to address specific risk factors
identified in the population, such as the expenditure amount.
Auditors tested these expenditures for compliance with Department
policies and procedures and contract terms, as applicable. The sample
items were not necessarily representative of the population; therefore,
it would not be appropriate to project the test results to the population.

To evaluate the Department’s reporting of capital planning information, we
performed the following:
•

Obtained the Department’s Capital Expenditure Plan Summary Report
(Fiscal Years 2023-2027) and determined whether it was consistent with
underlying records, including the related major work request project
data.

•

Selected a nonstatistical, random sample of major work requests
stratified by region. This sample design was chosen to ensure that the
sample included a cross section of work requests and to provide
coverage across regions. Auditors determined whether the Department
approved the work requests in accordance with its documented
procedures. The sample items were not necessarily representative of

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APPENDIX

P a g e | 16

the population; therefore, it would not be appropriate to project the
test results to the population.
Data Reliability and Completeness
Auditors determined that all data sets were sufficiently reliable for the
purposes of the audit. Specifically, to determine the reliability of:


Uniform Statewide Accounting System (USAS) expenditures and
appropriations data, auditors relied on prior State Auditor’s Office work
to determine that USAS data is reliable. Additionally, auditors tested
access controls for Department personnel to USAS.



LONESTARS accounting system expenditure data, auditors observed
Department personnel extract the data and reconciled it to USAS.



Compass Major Work Request project data, auditors compared it with
the Department’s source documentation, such as tracking
spreadsheets. In addition, auditors reviewed the Department’s
processes for ensuring that Compass data is accurate and complete.
Auditors also observed data controls over the entry of a new major
work request.

Report Ratings
In determining the ratings of audit findings, auditors considered factors such as
financial impact; potential failure to meet program/function objectives;
noncompliance with state statute(s), rules, regulations, and other requirements
or criteria; and the inadequacy of the design and/or operating effectiveness of
internal controls. In addition, evidence of potential fraud, waste, or abuse;
significant control environment issues; and little to no corrective action for
issues previously identified could increase the ratings for audit findings.
Auditors also identified and considered other factors when appropriate.

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Copies of this report have been distributed to the following:

Legislative Audit Committee
The Honorable Dan Patrick, Lieutenant Governor, Joint Chair
The Honorable Dade Phelan, Speaker of the House, Joint Chair
The Honorable Joan Huffman, Senate Finance Committee
The Honorable Robert Nichols, Member, Texas Senate
The Honorable Greg Bonnen, House Appropriations Committee
The Honorable Morgan Meyer, House Ways and Means Committee

Office of the Governor
The Honorable Greg Abbott, Governor

Department of Criminal Justice
Members of Board of Criminal Justice
Mr. Bryan Collier, Executive Director

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