Audit: Prisoner Labor Program Earned $32 Million by Overcharging

HARRISBURG, Pa. – The Pennsylvania Department of Corrections prisoner work program overcharged its customers, generating an additional $32 million in revenue for the program, according to an audit performed by Auditor General Jack Wagner.

State agencies were overcharged for products and services to create the stockpile, according to the audit. The money, which has not yet been spent by Pennsylvania Correctional Industries, should be returned to the state if the prison work group does not need it, Wagner says. However, state law prohibits PCI from giving money directly to the state treasury.

The audit also found that PCI gave a $2.3 million rebate to the DOC to help eliminate a budget shortfall. The rebate was listed as office expenses, which is not a regular accounting practice.

Using a sample of six other prisoner work programs, the audit found that the PCI almost always had a higher charge for services. The increased charge allowed the organization to report a profit, despite that fact that 14 of the 23 plants that were open during the audit period lost money.

Pennsylvania DOC Secretary Jeffrey Beard says the audit is incorrect in assuming the $32 million is entirely surplus money.

“While there is a surplus of money available in the Correctional Industries account, the audit report fails to mention that 70 percent of those funds are already designated to upgrade Correctional Industries’ equipment so that we can continue to keep inmates working,” Beard says. “Most of the remaining funds are designated to improve other equipment that will prepare offenders for jobs once they are released.”

He says recommendations made by the audit will be taken into consideration. “This agency is always reviewing and evaluating its operations in an effort to improve and enhance them, and we will use the auditor general's recommendations to help us,” Beard says. “While the audit fairly pointed out problems within our PCI program, we believe there could have been more balance in some areas of the report.”

The Pennsylvania DOC created PCI in 1984 to provide job training for prisoners, while saving taxpayers money by creating inexpensive goods for state agencies. During the audit period from July 2000 to Feb. 18, 2005, the organization employed 213 staff members and more than 1,600 inmates. In fiscal year 2004 PCI's expenses were $32.1 million and it brought in $1.4 million in profits, despite a 25 percent drop in sales during the audit period.