Auditor Of Public Accounts
Audit of Corrections’ $12 million contract with ARAMARK finds areas of noncompliance
State Auditor Crit Luallen released an audit of the Kentucky Department of Corrections’ $12 million food service contract with ARAMARK Correctional Services, finding inadequate oversight by the department and significant deviations between the contract language and operational practices.
Auditors ultimately were unable to determine how ARAMARK’s performance at each prison was considered and evaluated by the department due to a lack of documentation, and formalized policies and procedures.
Auditors could not verify that ARAMARK consistently followed approved recipes, used the proper quantity of ingredients and met food safety standards regarding food temperatures or use of leftovers because of the vendor’s poor documentation.
Auditors found deviations or “noncompliances” in areas of the contract that pertain to contract monitoring, the documentation of quality and quantity of food, inmate-grown food and billing.
Auditors reviewed monthly records and identified more than $36,000 in overpayments made by corrections to ARAMARK due to billing errors and other contract violations – which could total more than $130,000 annually. The audit found that in most cases billing errors and food production problems favored ARAMARK rather than the department.
“When the state contracts out a critical service, we have to be sure taxpayers are getting their money’s worth,” Luallen said. “We can privatize services but we can’t contract out responsibility. Our recommendations will ensure the vendor is held accountable.”
The audit makes numerous findings and offers 30 recommendations to the Department of Corrections for strengthening its oversight of the ARAMARK contract. Luallen’s office was unable to review food costs, personnel costs, bonuses to vendor institution managers and other critical data because ARAMARK declined a request for direct cost information.
Luallen is asking corrections and the Finance and Administration Cabinet to review contractual provisions to determine whether ARAMARK is in breach of contract for its failure to submit relevant financial records to auditors.
The state contract says the Auditor’s Office and other key agencies “shall have access to any books, documents, papers, records or other evidence, which are directly pertinent to the contract for the purpose of financial audit or program review.”
The Auditor’s Office received a request to audit the ARAMARK food service contract in February by lawmakers after public interest in prison food services escalated due to reports and testimony presented to lawmakers related to the August 2009 riot at Northpoint Training Center located near Danville.
The audit was not to determine the cause of the riot but to examine the contract for food service operations. Auditors understood that ongoing investigations related to the riot were underway by the Kentucky State Police and corrections at the time of their review.
In preparing for the audit, auditors did review corrections’ report on the riot to gain an understanding of specific allegations and concerns related to food services. Auditors noted that the report identified four primary causes of the riot based on interviews with staff and inmates, with the third and fourth items relating to food and canteen prices.
During the audit, auditors conducted on-site visits and observations, collected and reviewed an extensive amount of documentation regarding payments, monitoring reports, food services production reports, grievances, external reports and inspections. Auditors also gathered information to address concerns brought to their attention.
Dozens of individuals were interviewed – inmates, corrections officers, corrections’ central office management, wardens, deputy wardens, fiscal officers, and ARAMARK management, including institution food service managers.
Kentucky began privatizing its prison food service in January 2005. The contract with ARAMARK, headquartered in Philadelphia, is based on providing three meals a day with an average caloric intake of 2,800 calories per day.
In 2005, ARAMARK charged an initial daily rate of $2.34 per inmate per day based on the daily morning inmate census at each institution. Due to contract price adjustments during the contract period, the contractual rate increased to $2.63 per inmate per day in 2010. The contract does not stipulate a price-per-meal rate, meaning the daily rate per inmate is paid regardless of whether the inmate actually eats.
In the area of billing, auditors found discrepancies between the daily prison census and the amount ARAMARK invoiced the state for inmate meals.
When auditors tested payments made to the vendor by the state for a three-year period (2007-2009), they found a disparity between the amount billed by ARAMARK and the daily prison census.
In one instance, in August 2008, ARAMARK billed corrections a per diem for 370,570 inmates but the official department census showed the total number of inmates to be 367,211 for the month, resulting in a difference of 3,359 inmates. This difference equates to an overbilling of $8,575.53.
Based on the errors noted in the auditors’ sample for testing, the amount overbilled by ARAMARK to the state annually could be as much as $84,000 to $102,000.
Auditors also found additional billing errors related to estimates that the department provides to ARAMARK regarding the Kentucky Correctional Psychiatric Center’s use of Luther Luckett Correctional Complex for meal services. Based on the errors, the department could be overpaying ARAMARK as much as $20,000 per year.
In another area of noncompliance, auditors found that ARAMARK received almost $148,000 in inmate-grown food for little or no cost, which is inconsistent with the contract requirements.
The documentation of food quality and quantity was another area of noncompliance auditors found during their review.
Auditors found that ARAMARK could be estimating the number of meal participants too conservatively, causing food shortages. The audit notes that the department is not penalizing ARAMARK when food shortages occur, even though the contract allows for penalties. These food shortages create meal service delays and other scheduling disruptions.
Documentation of delays in inmate food lines is not consistent between ARAMARK and the department’s records. Auditors found meal service line delays and note that corrections’ records indicated 18 line stoppages ranging from 5 to 43 minutes during a three-month period at two institutions.
Auditors note that certain provisions in the contract relating to the “Master Menu” are not consistently followed. Auditors found ARAMARK made substitutions to the menu that were not approved in advance as required by the contract.
Auditors found instances when margarine and other condiments were used to meet the daily caloric requirements of the contract. The provisions of the contract call for 2,800 calories per day per inmate.
The Master Menu builds in up to 300 calories per day in margarine and other condiments. The department approved the Master Menu; therefore, it acknowledges the inclusion of these items to meet the daily caloric requirements, according to the audit.
During their review, auditors received allegations indicating that certain items on the menu were watered down or items were routinely missing or cut out of recipes. Auditors reviewed ARAMARK production and inventory records and found the vendor may not follow approved recipes or use proper quantities of ingredients.
Auditors found inconsistent and insufficient documentation related to food temperatures for meals served, noting 358 instances of the 534 meals reviewed in which the food temperature documentation was either not completed, temperatures were recorded without a corresponding time noted or instances in which temperatures were outside the required temperature limits.
Auditors reviewed health department reports and identified one related to a possible food illness outbreak, which indicated that food items were not maintained at the appropriate temperature. Auditors found, however, that ARAMARK production records for that meal did not note a temperature that is required by guidelines – drawing into question the accuracy of those meal production records.
The health department report also indicated food service workers were found to have cuts and other wounds and that ARAMARK failed to inspect part-time food service workers for illnesses.
• Concerning leftovers, the contract does not contain specific requirements regarding the use of leftovers and documentation indicating the source and use of leftovers is inadequate. Auditors also witnessed leftovers in food storage areas that were past acceptable health timeframes.
• Auditors found that quarterly contract review meetings between corrections and ARAMARK required by the contract were not held.
• Weekly sanitation reports showed deficiencies that were not always addressed by ARAMARK or corrections.
• Auditors did not find evidence of institutional bias favoring ARAMARK when awarding canteen operations contracts.
• The audit notes that the Kentucky Centralized Inmate Commissary, Inc., which was established by corrections to administer canteen commission funds to inmates, has not adopted the model procurement code and does not adhere to open records and open meeting statutes. The audit also found that it is not administering itself as a public board even though all board members are state employees who conduct KCIC business on state time and serve by virtue of their state position.
For a complete list of findings and agency response, please view the audit at www.auditor.ky.gov.