GAO PERFORMED AUDITS OF THE MANAGEMENT OF PROCUREMENT, PROPERTY, FINANCIAL, AND PERSONNEL ACTIVITIES AT 5 OF THE BUREAU OF PRISON'S 49 INSTITUTIONS IN 3 OF ITS 5 ADMINISTRATIVE REGIONS. THREE TYPES OF INSTITUTIONS WERE VISITED: TWO PENITENTIARIES, TWO CORRECTIONAL INSTITUTIONS, AND ONE METROPOLITAN CORRECTIONAL CENTER. SOME OF THE DOCUMENTS EXAMINED BY GAO INCLUDED PURCHASE REQUESTS, VOUCHERS, CONTRACT FILES, BUDGET FORMS, ALLOTMENT STATUS REPORTS, MATERIAL AND PRICE LISTS, AUTHORIZATIONS FOR MAINTENANCE, BUDGET COMMITTEE MEETING MINUTES, GENERAL LEDGER ACCOUNTS, TRIAL BALANCES, AND INTERNAL AUDIT REPORTS. STAFF AND OFFICIALS AT THE INSTITUTIONS WERE ALSO INTERVIEWED. ALTHOUGH THE BUREAU OF PRISONS HAS SATISFACTORY POLICIES FOR MANAGING ITS BUSINESS ACTIVITIES, MANY OF ITS POLICIES WERE NOT ADEQUATELY IMPLEMENTED. ALTHOUGH THE BUREAU HAS AN ACCOUNTING SYSTEM WHICH MEETS GAO'S STANDARDS FOR INTERNAL MANAGEMENT CONTROL, ITS PLANS WERE NOT ADEQUATE FOR ALLOCATING AND CONTROLLING RESOURCES. FURTHERMORE, EXPENDITURES WERE NOT CONTROLLED, PROPERTY WERE NOT ADEQUATELY SAFEGUARDED, AND AUDIT PROGRAMS DID NOT RESULT IN ADEQUATE REVIEWS OR CORRECTIVE ACTION. THE REPORT RECOMMENDS THAT THE ATTORNEY GENERAL DIRECT THE DEPARTMENT OF JUSTICE INTERNAL AUDIT STAFF TO ASSESS THE BUREAU OF PRISON'S PROGRESS IN IMPLEMENTING ITS POLICIES FOR PLANNING AND CONTROLLING THE ACQUISITION AND USE OF PERSONNEL AND PROPERTY. FINDINGS SHOULD BE REPORTED TO THE ATTORNEY GENERAL. ADDITIONAL RECOMMENDATIONS ARE MADE FOR MODIFYING BUREAU POLICIES, TO IMPROVE ITS INTERNAL MANAGEMENT CONTROLS. THREE APPENDIXES PROVIDE RELATED DOCUMENTS. (AUTHOR ABSTRACT MODIFIED--MFE)