Verbatim: Department of Public Safety mismanagement makes Hawaii’s prison solutions elusive

The following is the State Auditor’s “Management Audit of the Department of Public Safety’s Contracting for Prison Beds and Services.”

“Quick and dirty” numbers

In December 1995, in an effort to address persistent prison overcrowding, the Department of Public Safety (PSD) began transferring inmates to out-of-state facilities. The transfer was viewed as a stop-gap measure that would give prison officials time to increase in-state capacity. Today, about 2,000 male inmates, approximately one-third of Hawai‘i’s inmate population, are held at facilities in Arizona.

Department officials have testified that sending inmates off-island is a temporary measure. However, we found that management does not understand the necessity of providing detailed and accurate financial information to policymakers and the public, a key component in solving this crisis. For instance, PSD reports that it spends about twice as much to maintain an inmate in-state. However, we found that these cost estimates are based on a flawed methodology designed around what is easiest for the department to report, or, as one PSD offi cial characterized, “quick and dirty” numbers. The department ignores a major component for calculating these costs—capacity versus use.

In addition, PSD underutilizes the capabilities of its inmate tracking management system, which can collect and compute inmate days and other information that would assist managers. Moreover, this inmate tracking system is often used incorrectly. In one analysis, we found errors in 28.4 percent of the tracking system’s reports. The interim director contends that PSD provided a simple cost estimate because it could not articulate the complexity of calculating the myriad expenses incurred by individual inmates at differing facilities on a specific day. The department misses the point. The Offendertrak management system, if used accurately and to its capabilities, would enable prison managers and policymakers to make decisions with reliable information.

Circumventing the law

In 2006, the past department director signed an inter-governmental agreement (IGA) with the City of Eloy, Arizona, to consolidate housing for Hawaii inmates to three prisons owned and operated by Corrections Corporation of America (CCA), a for-profit provider of correctional facilities. At the time, the corporation was building a $95 million prison in Saguaro, Arizona, specifically for Hawaii inmates. As the name indicates, IGAs are agreements that involve government-to-government transactions. These agreements are exempt from competitive procurement methods that State agencies must generally employ when soliciting proposals, a requirement of the Hawaii Public Procurement Code.

However, in the department’s IGA with Eloy, the department actually conducts all transactions directly with CCA. We found no evidence that Eloy sub-contracted inmate services to CCA, nor is the city compensated for its role in the agreement. In the State chief procurement officer’s opinion, such a contract inappropriately used the IGA exemption and is circumventing the law. Through this misuse of the exemption, the department was able to secure CCA as its preferred provider. In addition, we found that the IGA does not contain safeguards that protect the State’s interests in the event of a dispute or if funds are not appropriated or available to pay CCA, so the State is exposed to a liability risk.

We found that the department has no written policies or procedures for contract administration, and the administrator and staff readily accepted CCA’s representations and conclusions of its performance without verifying statements against documented evidence. At the time of our fieldwork, the department had no plans for contracting for private prison beds beyond June 30, 2011, when its contract with Eloy and CCA will expire. The interim director reports that the department is working with the City of Eloy and CCA to establish a separate agreement that will specify and document the working relationship between the two parties. However, the fundamentally fl awed agreement should not be revisited.

Instead, the department would be better served by guidance and training from the State Procurement Office. Doing so would better address the need for private prison beds beyond 2011 by helping to ensure that procurment occurs properly in the first place.

Summary of Findings

1. Long term solutions for prison overcrowding cannot be addressed since true incarceration costs are unknown.

2. In “partnership” with its vendor, the department circumvented the procurement process and ignored oversight responsibility for out-ofstate contracting.

Conclusion

The Legislature must hold the Department of Public Safety accountable for its inadequate cost reporting. Without clarified guidance by policymakers, the department has no incentive to perform better and will continue to evade accountability by providing unreliable and inaccurate reporting of incarceration costs.

Moreover, the Legislature will continue to receive this insufficient cost information and be unable to address the larger problem of prison overcrowding. To address these issues, the department must first improve the methodology employed to calculate comparable inmate per day costs for the department’s use in decision making and reporting to the Legislature.

In addition, management should be more diligent and improve the compilation of its incarceration costs data by utilizing available tools such as Offendertrak. In addition, the department has misused its procurement authority to circumvent the process designed with safeguards to protect the State’s interests. By focusing efforts on quarterly site visits, the department effectively ignored oversight for all other provisions of contracts for out-of-state prison beds.

The department cannot ensure it has been fiscally responsible in obtaining the best value for housing Hawaii’s male inmate population out-of-state. The department must comply with the governing procurement practices and procedures if it intends to continue its “partnership” with the Corrections Corporation of America to purchase out-of-state prison beds and housing services to address prison overcrowding.

Because the department failed to comply with the procurement process, we recommend that the State’s chief procurement officer assume a more active role specific to procuring prison beds and services for the State. Moreover, the department needs to strengthen oversight of its contracts to ensure that the private vendor is adequately meeting the contract requirements.

Recommendations

1. To improve the compilation of its incarceration cost data, the Department of Public Safety should:

a. Consider developing a useful calculation to be applied at regular intervals to more easily use cost accounting for cost savings or accounting for performance;

b. Utilize a more systematic process for cost comparisons, taking into consideration a need for a cost-accounting methodology.

c. Rather than provide data simply because it is requested, communicate with the Legislature to gain an understanding as to why information is requested in order to provide pertinent information in return;

d. Compile useful, reliable, and complete data, utilizing available tools such as Offendertrak, for both the Legislature and its own use.

2. To improve its processes for monitoring the operations of private prisons, the department should:

a. Enhance processes used to test compliance with contract requirements to include what to test and how to validate compliance. This should include developing standardized tools that can be used by staff to measure compliance with all areas of the contract on a regular basis;

b. Develop a quality review program to ensure that the monitoring records and reports accurately and
thoroughly document inspection results;

c. Establish policies and procedures related to documenting contract compliance issues and the retention of monitoring records; and

d. Update its operating policies and procedures for fiscal monitoring and the approval and processing of invoices to ensure that the State is receiving the programs and services that it contracted for.

3. To improve contracting for private prison beds in out-of-state facilities, the State chief procurement officer should:

a. Suspend procurement authority delegated to the department for out-of-state prison contracts with private vendors until:

1) The department’s practices are reviewed and policies and procedures are in place to ensure compliance with Chapter 103F, HRS;

2) The Mainland/FDC Branch administrator and key staff have completed procurement training workshops related to contract administration and procurement of health and human services under Chapter 103F, HRS.

b. Provide guidance and oversee the procurement process, including final approval over the next contract to replace the contract for housing the male prison population at Red Rock Correctional Center and Saguaro Correctional Center that expires on June 30, 2011.