FOLLOW-UP

May 2006

A Review of the Department of Corrections’
Prison Industries Program
1.

BACKGROUND
In October 2003, we
published a performance
audit of the South
Carolina Department of
Corrections’ (SCDC)
prison industries program.
Our audit focused on a
program in which private
sector companies contract
with SCDC for the use of
inmate labor.

SCDC has implemented this recommendation. In our follow-up review, we found that SCDC
published performance measures for the prison industries program in its FY 04-05 annual
accountability report. These measures pertain to the department’s mission of providing inmates
educational and vocational training, engaging inmates in productive work, and preparing inmates
for re-entry into their communities. SCDC has also published broad goals that pertain to its
mission.
2.

The Employment Security Commission (ESC) should review its methodology for
determining displacement and inmate wages to ensure that inmates are not taking jobs
from private sector workers and that wages are similar to those of private sector workers.
We concluded that the ESC has not implemented this recommendation, because it made no
significant changes in its method for determining inmate wages. In our 2003 review, we analyzed
contracts in which inmates were used to manufacture goods sold through interstate commerce. We
found that the ESC did not have an adequate method for determining (1) whether inmate workers
displaced workers who were not inmates, and (2) whether inmates were paid wages comparable to
those of workers who were not inmates.

We addressed
performance measures,
the potential for inmates to
displace other South
Carolina workers,
deductions made from
inmate wages, and the
purchase of inmate-made
products by government
entities.
In our follow-up review,
we found that 5 (38%) of
our 13 recommendations
had been implemented.

The Department of Corrections should establish goals and performance measures for the
prison industries program that accurately reflect the degree to which the program is
assisting the department in meeting its mission. This information should be reported as
part of the agency’s accountability report.

In February 2006, the ESC and SCDC signed a document with a methodology for determining
whether the use of inmates will cause the displacement of non-inmate workers. The factors to be
considered, according to this document, are the local unemployment rate, a statement from the
company saying that currently employed workers will not be displaced, and the professional
judgment of local ESC staff. This document also includes a method for ensuring that inmate wages
are comparable to non-inmate wages. However, we found no significant difference between the
2006 method of analyzing wages and the method we found to be inadequate in our 2003 review.
3.

The Department of Corrections should list the additional benefits received by private
sector companies in its annual accountability report.
SCDC has not implemented this recommendation. In our 2003 review, we found that private
companies contracting with prison industries did not pay fringe benefits for SCDC inmates, paid
nominal rent for the use of SCDC buildings, and received electricity at a discounted rate. During
our follow-up review, we found that SCDC’s FY 04-05 accountability report contained no reference
to benefits received by companies contracting with prison industries.

4.

The Department of Corrections should examine the feasibility of bidding out inmate labor.
SCDC has not implemented this recommendation. In our 2003 review, we found that SCDC did not bid

out its inmate labor services. During our follow-up review, SCDC reported that “a quarterly notice is
placed in the South Carolina Business Opportunities Bulletin to advise private sector companies of
any opportunity to contact Prison Industries for potential partnership.” SCDC, however, provided
no documentation that it had examined the feasibility of bidding out inmate labor.
5.

The Department of Corrections should ensure that inmate training wages are paid entirely
by the private sector company hiring the inmates.
SCDC has implemented this recommendation. In our 2003 review, we found one instance in which
SCDC paid half of inmate wages for a private company during a 160-hour training period. After the
U.S. Justice Department questioned the practice, during our 2003 review, SCDC notified the
company that the practice would be discontinued. During our follow-up review, SCDC reported that
companies “currently pay the entire amount of inmate training wages.”

6.

SCDC has implemented this recommendation. In our 2003 review, we found that SCDC had not
consulted with the ESC before establishing a training period for inmate workers. During our followup review, in February 2006, SCDC and the ESC established a methodology for establishing a
training period. They signed an agreement stating that “[t]he web-based national Occupational
Information Network (O*Net) would be an appropriate system for evaluating training criteria.”

METHODOLOGY
We received information
from the Department of
Corrections, the
Employment Security
Commission, and the
Budget and Control Board
regarding the
implementation of the
audit’s recommendations.
We reviewed this and other
information, interviewed
officials, and verified
supporting evidence as
appropriate.

FOR MORE
INFORMATION

The Department of Corrections should consult with the Employment Security
Commission when establishing a training period with private companies.

7.

The Department of Corrections should take steps to ensure that companies are billed
properly for inmate labor.
SCDC has implemented this recommendation. In our 2003 review, we found two instances where
prison industries failed to bill companies accurately. In our follow-up review, we reviewed a limited
sample of invoices submitted to companies by SCDC and found no evidence of inaccurate billing.

8.

SCDC should ensure that it complies with all state laws that require deductions from the
wages of inmates in its prison industries program who produce goods or perform
services for private organizations.

9.

SCDC and the Department of Social Services (DSS) should coordinate with each other to
ensure that legally required wage deductions are made for child support.
SCDC has not implemented these two recommendations. In our 2003 review, we found that SCDC
had not coordinated with DSS to ensure that child support deductions were made from the wages
of SCDC inmates working for private companies that made goods sold through interstate
commerce. In our follow-up review, we analyzed the records of the 50 highest paid inmates in
2005 and found that 9 had court-ordered child support debts, according to DSS. For four of the
nine inmates, SCDC made no wage deductions in 2005 to pay these debts, according to county
clerks of court. The four inmates had earnings ranging from $14,255 to $18,589 and year-end
child support debts ranging from $7,430 to $20,222. During our follow-up review, DSS and SCDC
began a new effort to ensure an adequate system of child support wage deductions.

10. SCDC should ensure that it regularly reviews inmate sentencing documents to ensure
that wage deductions are made for court-ordered victim restitution.

Our October 2003 report
and this document are
published on the Internet at
www.state.sc.us/sclac

SCDC has implemented this recommendation. In our 2003 review, we noted that SCDC had not
adequately made legally required deductions from the wages of inmates who worked for private
companies. In our follow-up review, SCDC documented that it made victim restitution deductions
in calendar year 2005.
11. The General Assembly should consider amending state law so that state agencies are
required to follow the same purchasing laws whether buying goods and services from the
South Carolina Department of Corrections or from other vendors.

LEGISLATIVE AUDIT COUNCIL
1331 Elmwood Ave., Ste. 315
Columbia, SC 29201

(803) 253-7612

George L. Schroeder
Director

12. The General Assembly should consider amending state law so that local governments
have the authority to purchase any of the inmate-produced products sold by SCDC.
The General Assembly has not implemented these two recommendations. In our 2003 review, we
found that state law did not require state agencies to solicit competitive bids, quotes, or proposals
when purchasing goods and services from prison industries. We also found that state law
prohibited the sale of retreaded tires, produced by prison industries, to local governments. In our
follow-up review, we found that the General Assembly had not considered amending these laws.
13. The materials management office of the Budget and Control Board should implement a
formal process for complying with §24-3-330 (B) of the South Carolina Code of Laws. This
process should include regular monitoring and reporting of state agency compliance with
the laws pertaining to state agency purchases of SCDC goods and services.
The Budget and Control Board has not implemented this recommendation. In our 2003 review, we
found that state law required state agencies to buy goods and services from prison industries when
its prices were the same or less than those charged by other vendors. State law also required the
Budget and Control Board to “monitor the cooperation of state …agencies in the procurement of
goods, products, and services from the Division of Prison Industries….” In 2003 and during our
follow-up review, the board reported that it did not have a formal process for monitoring state
agency cooperation in the procurement of items from prison industries. Board officials stated that
“a formal audit process…is not authorized by current statute.”