Report 2010-118 Summary - May 2011

California Prison Industry Authority: It Can More Effectively Meet Its Goals of Maximizing Inmate Employment, Reducing Recidivism, and Remaining Self-Sufficient


Our review of the California Prison Industry Authority (CALPIA) revealed the following:


The California Prison Industry Authority (CALPIA) operates under the policy direction of an 11-member Prison Industry Board (board) and exists to reduce the operating costs of the California Department of Corrections and Rehabilitation (Corrections) and to offer inmates the opportunity to develop effective work habits and occupational skills. Designed as a self-supporting agency, CALPIA is to generate sufficient revenue from the sale of products and services to pay its expenses. In fiscal year 2009-10, it recorded $181.8 million in revenue, almost all of which resulted from purchases of CALPIA goods and services by state agencies. This level of revenue constituted 103 percent of CALPIA's cost of operations in fiscal year 2009-10, which amounted to $176.8 million.

Although one of its primary responsibilities is to offer inmates the opportunity to develop effective work habits and occupational skills, CALPIA cannot determine the impact it makes on post-release inmate employability because it lacks reliable data. Both CALPIA and a consultant it hired were unable to match the social security numbers of parolees from Corrections' Offender Based Information System (OBIS) to employment data from the Employment Development Department. We also attempted to measure this critical aspect of CALPIA's mission. We obtained employment data from the CalParole Tracking System (CalParole) used by Corrections' Division of Adult Parole and we attempted to determine the employment success of parolees who worked at a CALPIA enterprise. However, we found at least 33,000 instances of erroneous parolee employer information in CalParole. For example, instead of seeing valid employer names in the database's field for specifying a parolee's employer, we found more than 13,000 instances of the designations TBD and TBA in the employer field. As a result, CALPIA cannot use CalParole to determine whether a paroled or released inmate who worked at one of its enterprises is more employable than one who did not. Additionally, because Corrections will be moving CalParole data into its new computer system—the Strategic Offender Management System (SOMS)—Corrections needs to address the data errors in CalParole before the data are transferred.

Our audit revealed other issues that CALPIA could address to fulfill its responsibilities more effectively. Specifically, although CALPIA created a set of comprehensive performance indicators for the entire organization, its opportunity to track its performance formally in fiscal year 2010-11 is limited because CALPIA only recently finalized a tracking matrix in March 2011. Further, several of these indicators are either vague or not measurable. For example, one indicator stipulates that CALPIA "establish real-world' performance and participation expectations for CALPIA staff and inmates." However, this indicator offers no guidance about how to measure performance for this goal. Without proper tracking of clear and measurable performance indicators, CALPIA runs the risk of spending resources that do not provide intended outcomes.

Another issue that CALPIA could improve is the accuracy of its reporting. In its annual report to the Legislature for fiscal year 2008-09, CALPIA claimed that the lower recidivism among parolees who worked for CALPIA enterprises saved taxpayers $9 million annually. Although our calculation produced recidivism rates that were generally higher than the rates that CALPIA presented in its report, we did find that the recidivism rates for CALPIA parolees were consistently lower than the rates for Corrections' general-population inmates. However, CALPIA's recidivism rate calculation indicates that CALPIA overstated the savings by $546,000. This overstatement was due primarily to errors that might have been detected had CALPIA subjected the savings calculation to a more thorough review. Moreover, CALPIA did not acknowledge other factors, such as some CALPIA inmates' higher education levels or lack of drug abuse history, which may have contributed to the lower recidivism rates among parolees who had worked for CALPIA. In its annual report to the Legislature for fiscal year 2009-10, CALPIA did not include a similar savings calculation. The general manager of CALPIA explained that he decided not to include a more complete savings estimate because of the difficulty of the calculation and because CALPIA is not required statutorily to include that calculation.

CALPIA could also expand opportunities for inmates to participate in its work programs. Since 2004 it has introduced only a modest number of new revenue-generating enterprises: It has established two new enterprises and reactivated or expanded four other existing enterprises. However, during the same period, it closed, deactivated, or reduced the capacity of six existing enterprises at 10 locations throughout the State, leading to a net loss of 441 inmate positions. Because CALPIA closed more enterprise locations than it opened, there are fewer opportunities for inmates to participate in CALPIA's enterprises. CALPIA notes that economic concerns, particularly the budget reductions of its state agency customers, have resulted in a decreased demand for its products.

We noted that CALPIA strives to price its products competitively. Our review of a sample of products and services shows that it retained documentation of pricing analyses to support its product-pricing decisions. These pricing analyses generally comply with the board's pricing policy, which requires CALPIA to consider costs, profit margin, and market considerations when making pricing decisions. However, for most pricing analyses we reviewed, CALPIA did not document the basis for how it determined profit margins, and in some instances we found no analysis of market considerations. For five of the 11 products and services we evaluated, CALPIA's prices were above the average prices for comparable items that are available from other vendors. Nevertheless, because CALPIA's prices were lower for the other six items, its five largest state agency customers realized an estimated net savings of $3.1 million during fiscal year 2009-10 by purchasing these 11 items from CALPIA.

Finally, although CALPIA is generally self-supporting overall, in January 2010 it began using an automated process for analyzing the profitability of its enterprises when overhead costs are included. For fiscal year 2008-09, if CALPIA did not include overhead costs in its calculations, only three of its 25 enterprises were unprofitable. However, when CALPIA allocated overhead costs to each enterprise, the number of unprofitable enterprises rose to 11. CALPIA gave us an estimated allocation of its overhead costs for fiscal year 2008-09, but it plans to use its newly created automated process monthly to assess profitability after overhead costs are included.


To improve the reliability of employment data contained in CalParole, Corrections should ensure that parole agents follow procedures related to accurately populating the data fields and maintaining CalParole. Additionally, supervisors of parole agents should conduct periodic reviews of parolee files to verify whether employment fields are completed appropriately and whether employment is documented adequately.

As Corrections prepares to move CalParole data into SOMS, it should modify existing employment-related fields and add to SOMS new fields that are currently not available in CalParole so that Corrections can minimize the opportunity for erroneous data entries and make employment data more reliable.

To allow it to measure progress in meeting the goals in its strategic plan, CALPIA should ensure that all of its performance indicators are clear, measurable, and consistently tracked. It should also continue its efforts to properly measure its performance and to track each performance indicator. Further, CALPIA needs to create a process that will allow its management to review the results of performance tracking and to ensure that the results provided to management can be re-created at least annually.

CALPIA should maintain the source documentation used in calculating the savings it brings to the State as well as ensure that an adequate secondary review of its calculation occurs. It should also qualify its savings by stating that employment at CALPIA enterprises may be just one of several factors that contribute to the lower recidivism of its inmates.

When performing analyses to establish prices for its products, CALPIA should document the basis for each product's or service's profit margin and should also ensure that it always considers and documents market data when making pricing decisions.

CALPIA should continue to ensure that its managers regularly use its automated process that includes the allocation of overhead to review the profitability of each enterprise and to make decisions on how to improve the profitability of those enterprises that are unprofitable.


Although CALPIA generally agreed with our recommendations and some of our conclusions, it disagreed with our conclusion related to measurability of its performance indicators and their tracking. Additionally, CALPIA disagreed with some of our conclusions related to the consistency of inmate assignment guidelines and declining inmate participation in its enterprises.

Corrections disagreed with our recommendation related to improving the reliability of parolee employment data.