California Prison Industry
Authority
It Can More Effectively Meet Its Goals of
Maximizing Inmate Employment, Reducing
Recidivism, and Remaining Self-Sufficient
May 2011 Report 2010-118

Independent NONPARTISAN
TRANSPARENT Accountability

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Elaine M. Howle
State Auditor

CALIFORNIA STATE AUDITOR

Doug Cordiner
Chief Deputy

Bureau of State Audits

555 Capitol Mall, Suite 300

S a c r a m e n t o, C A 9 5 8 1 4

May 24, 2011	

916.445.0255

916.327.0019 fax

w w w. b s a . c a . g o v

2010‑118

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this
audit report covering the operations of the California Prison Industry Authority (CALPIA).
This report concludes that 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. Specifically,
both CALPIA and a consultant it hired were unable to match the social security number of parolees
from the California Department of Corrections and Rehabilitation’s (Corrections) Offender Based
Information System to employment data from the Employment Development Department. We
attempted to measure CALPIA’s impact using a different source—Corrections’ CalParole Tracking
System—but could not because we found more than 33,000 instances of erroneous parolee employer
information in this system. Our audit also revealed that while CALPIA created a set of comprehensive
performance indicators for the entire organization, its opportunity to track its performance is
limited because it only recently finalized a tracking matrix in March 2011. Moreover, several of these
indicators are either vague or not measureable.
We also noted that CALPIA could improve the accuracy of its annual reports to the Legislature.
Although we found that the recidivism rate for parolees who worked for CALPIA were consistently
lower than the rates of the general prison population, CALPIA overstated by $546,000 the savings
it asserts result from the lower recidivism rate. Further, CALPIA did not acknowledge that factors
other than participating in one of its work programs may have contributed to the lower recidivism
rates among its parolees.
CALPIA’s closure of more enterprise locations than it has opened has resulted in a decline of work
opportunities for inmates. Since 2004 it has established two new enterprises and reactivated or
expanded four others; however, during the same time period it closed, deactivated, or reduced the
capacity of six other enterprises at 10 locations, resulting in a net loss of 441 inmate positions. Finally,
although CALPIA’s five largest state agency customers paid more for certain CALPIA products, overall
they saved an estimated $3.1 million during fiscal year 2009–10 when purchasing the 11 products and
services that we evaluated.
Respectfully submitted,

ELAINE M. HOWLE, CPA
State Auditor

California State Auditor Report 2010-118

May 2011

Contents
Summary	

1

Introduction	

5

Chapter 1	
The California Prison Industry Authority Could Improve Its Assessment
of Inmate Employability and Recidivism	

15

Recommendations	

29

Chapter 2
The California Prison Industry Authority Should Continue to Identify
New Enterprises and Monitor Net Profitability 	

31

Recommendations	

46

Appendix
Comparison of the California Prison Industry Authority’s Reported
Recidivism Rates With the Bureau of State Audits’ Recalculation
of Those Rates	

47

Responses to the Audit
California Prison Industry Authority	

49

California State Auditor’s Office Comments on the Response
From the California Prison Industry Authority	
California Department of Corrections and Rehabilitation	
California State Auditor’s Office Comments on the Response
From the California Department of Corrections and Rehabilitation	

55
59
61

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Summary
Results in Brief

Audit Highlights . . .

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.

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

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,

»» It cannot determine its impact on
post‑release inmate employability
because it lacks reliable data.
•	 It is unable to match parolees’ social
security numbers from the Department
of Corrections and Rehabilitation’s
(Corrections) information system to
employment data from the Employment
Development Department.
•	 In attempting to use another of
Corrections’ databases to track
employment data, we noted it
contained numerous errors— we
found more than 33,000
instances of erroneous parolee
employer information.
»» Although CALPIA created a set of
comprehensive performance indicators,
several of these indicators are either
vague or not measurable.
»» Since 2004 it has introduced only a modest
number of new revenue‑generating
enterprises while it has closed, deactivated,
or reduced the capacity of six enterprises at
10 locations throughout the State.
»» Although CALPIA prepared pricing
analyses to support its product-pricing
decisions, it did not document the basis
for how it determines profit margins and
in some instances, we found no analysis
of market considerations.

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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

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May 2011

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.
Recommendations
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.

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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.
Agency Response
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.
 

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Introduction
Background
The Legislature established the California Prison Industry Authority
(CALPIA) to employ inmates 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. Ultimately, CALPIA
was to support itself by generating sufficient revenue from the sale of
products and services to pay for its own expenses. Its administrative
offices are in Folsom, California. As of December 2010 CALPIA
operated 25 manufacturing, service, and agricultural enterprises
within 53 factories and farms located at 20 of the 33 correctional
institutions in the State. Figure 1 on the following page shows
the locations of CALPIA’s enterprise sites at their respective
correctional institutions.
Inmates participating in CALPIA programs produce various
products—including license plates, furniture, and agricultural
commodities—and they provide such services as laundry and
printing. CALPIA reports that as of June 2010 it employed
5,140 male and female inmates statewide, or 3.1 percent of
Corrections’ total adult inmate population of almost 166,000.
Inmates earn 35 cents to 90 cents per hour. During fiscal
year 2009–10, CALPIA recorded a net profit of $3.3 million.
CALPIA operates under the policy direction of an 11‑member
Prison Industry Board (board), which consists of representatives from
industry, labor, state agencies, and the general public. The secretary
of Corrections serves as the board chair. CALPIA is financed by the
Prison Industries Revolving Fund, which is continuously appropriated
for CALPIA purposes, and CALPIA submits its annual budget to the
board for review and approval. The board’s authority over CALPIA
also includes approving new industrial, agricultural, and service
enterprises. State law requires the board to hold meetings at the call
of the chair or a majority of the board.
CALPIA Sells Primarily to State Agencies
State agencies accounted for approximately 98 percent of CALPIA’s
revenue in fiscal year 2009–10. California law requires state
agencies to make maximum use of CALPIA products and to work
with CALPIA to develop additional products to meet agencies’
needs. The responsibility for purchasing goods and services for
state government generally resides with the Department of General
Services (General Services), though General Services may grant this
authority to other agencies. State law provides that General Services

5

5

3

9

6

2

4

13

7

10

8

11
12

2

20

13 California Men’s Colony

Laundry

Wasco

12 Wasco State Prison

• Dairy
• Food & beverage packaging
• Laundry

Corcoran

11 CSP Corcoran and Substance Abuse
Treatment Facility

• Poultry
• Egg production
• Furniture
• General fabrication
• Laundry

Avenal

15

19

• Furniture
• Fabric products

Soledad

Correctional Training Facility

• Crops
• Fabric products
• Dental lab
• Optical
• Laundry

Chowchilla

Central California Women’s Facility
and the Valley State Prison for Women

10 Avenal State Prison

9

8

• Knitting mill
• Fabric products
• Shoes
• Printing
• Laundry

18

Fabric products

Jamestown

Sierra Conservation Center

Dairy

Tracy

Deuel Vocational Institution

• Furniture
• Mattress

San Quentin

CSP San Quentin

• Meat cutting
• Coffee roasting
• Fabric products
• Laundry

Ione

Mule Creek State Prison

• Metal products
• Bindery
• Laundry
• Optical

Vacaville

CSP Solano

San Luis Obispo

7

6

5

4

3

14

16 17

• Metal products
• Metal signs
• License plates
• Printing
• Laundry
• Modular building construction
• Construction services
• Digital services
Career Technical Education
(CTE) Programs
• Pre-apprentice, carpentry
• Pre-apprentice, ironworker
• Pre-apprentice, laborer

Represa

Folsom State Prison and California
State Prison (CSP) Sacramento

Source:  California Prison Industry Authority’s annual report to the Legislature for fiscal year 2009–10.

1

Laundry

Crescent City

1 Pelican Bay State Prison
Tehachapi

Fabric products

Imperial

20 Centinela State Prison

• Bakery
• Shoes
• Laundry

San Diego

19 Richard J. Donovan
Correctional Facility

Laundry

Blythe

18 Chuckawalla Valley State Prison

• Laundry
• Food & beverage packaging
CTE Program
Marine Technology Training Center

Chino

17 California Institution for Men

Fabric products
CTE Program
Pre-apprentice, carpentry

Corona

16 California Institution for Women

• Cleaning products
• Laundry

Lancaster

15 CSP Los Angeles County

Fabric products

14 California Correctional Institution

Figure 1
Locations of the California Prison Industry Authority’s Enterprises and Career Technical Education Programs as of December 2010

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may procure from the private sector the goods that may be available
through CALPIA if doing so is cost‑beneficial and if General Services
continues to include CALPIA in solicitations for quotations for goods.
The law instructs state agencies to consider first whether CALPIA
can meet their needs. However, state agencies can submit waiver
requests to CALPIA to purchase products elsewhere. CALPIA also is
authorized to sell its products and services to other entities—such as
cities, counties, special districts, and other political subdivisions of the
State—as well as to other states and the federal government.
CALPIA recorded $181.8 million in revenue in fiscal year 2009–10.
Corrections, as its largest customer, provided 66 percent of CALPIA
revenues. As Figure 2 shows, purchases by the Department of Motor
Vehicles—which mainly buys license plates—represent another
10 percent of CALPIA revenues. Further, purchases by state mental
hospitals and developmental centers—which mainly buy laundry
services—represent 6 percent of CALPIA revenues. The remaining
18 percent of CALPIA revenues represent purchases by various other
state agencies as well as by the federal government, other states, and
local governmental customers. This level of revenue exceeded CALPIA’s
cost of operations in fiscal year 2009–10, which was $176.8 million.
Figure 2
California Prison Industry Authority’s Revenue by Major Customer
Fiscal Year 2009–10
(Dollars in Millions)
California State University/University of California—$1.4 (1%)
Federal government, other states, and local governments—$3.6 (2%)
Department of General Services—$5.5 (3%)
California Department of Transportation—$5.6 (3%)
State mental hospitals and
developmental centers—$11.6 (6%)

All other state agencies—$16.3 (9%)

California
Department of
Corrections and
Rehabilitation—
$120 (66%)

Department of Motor
Vehicles—$17.8 (10%)

Source:  California Prison Industry Authority’s fiscal year 2009–10 revenue data. Total revenue for
fiscal year 2009–10 was $181.8 million.

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CALPIA Is One of Several Correctional Programs
In its strategic plan, Corrections asserts that it is responsible for
overseeing one of the largest prison populations in the United States.
Further, Corrections’ strategic plan indicates that it enhances
public safety through its safe and secure incarceration of adult and
juvenile offenders, effective parole supervision, and rehabilitative
strategies to reintegrate offenders into the community successfully.
CALPIA is one of several correctional programs available to
Corrections’ inmates. According to inmate employment data from
CALPIA, in June 2010, 5,140 inmates, or 3.1 percent of the inmates
in California’s correctional institutions, were assigned to CALPIA.
Further, according to CALPIA’s fiscal year 2009–10 annual report,
1,321 CALPIA inmates each received a certificate of proficiency
and another 352 CALPIA inmates completed an accredited
certification program. These certifications validate the inmates’
skills and abilities in manufacturing, service, and agricultural
occupations, which they can use upon release from prison. CALPIA
also provides career technical education programs in partnership
with trade unions that offer inmates employment upon their
release. In addition, as of June 2010, Corrections indicates providing
academic programs for 15,400 inmates and vocational education
for 3,700 inmates. These correctional programs aim to equip
inmates with the relevant knowledge and skills to help them find
employment upon release.
Our Previous Audit Reports and Other Reports Offer Various
Recommendations for CALPIA
Since 1996 we have performed four audits of CALPIA, while entities
such as the California Performance Review team and the Corrections
Independent Review Panel provided additional recommendations.
In our 1996 audit report, we offered recommendations to help
CALPIA better manage the costs and profitability of its products
and factories. For example, we recommended that it develop a
method to allocate product costs based on the activity that generates
the costs and that it increase its efforts to monitor competitors’
product prices. In addition, we recommended that CALPIA
measure and report its programmatic benefits, particularly with
regard to inmates’ success following their release. In a follow‑up
audit in 1997, we found that CALPIA had been slow to implement
the recommendations from our 1996 report. In 1998 we reviewed
CALPIA’s practice of purchasing for resale finished products and
services from the private sector and found that this practice was
neither well‑planned nor cost‑effective. In 2004 we reported that
CALPIA could improve certain pricing practices, such as maintaining
adequate documentation to justify its prices. Moreover, CALPIA
had not established participation targets for the number of inmates

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May 2011

it aimed to employ among its various enterprises. Lastly, although
CALPIA had embarked on various activities designed to enhance
the employability of its participants, it had not established targets or
performance measures so that it could track participants’ post‑release
employment to evaluate its performance in successfully preparing its
participants for the job market.
In its August 2004 report, the California Performance Review team
made two recommendations about CALPIA: It recommended that
state law be amended to allow state agencies to purchase goods
and services from a commercial supplier if the values and prices
are superior to those offered by CALPIA. Secondly, the California
Performance Review recommended eliminating CALPIA’s authority
to purchase finished goods and services from the private sector to
resell them to state agencies with little or no value added by inmates.
Further, the Corrections Independent Review Panel, which was
formed to review the State’s youth and adult correctional system,
recommended in June 2004 that the board be dissolved and that
Corrections absorb CALPIA’s administrative functions.
Scope and Methodology
The Joint Legislative Audit Committee (audit committee) asked the
Bureau of State Audits to provide independently reviewed and
verified information related to whether CALPIA provides a positive
contribution to the State’s General Fund by achieving savings
through cost avoidance, increased sales, and savings from reduced
prisoner recidivism. In addition to reviewing and evaluating laws,
rules, and regulations related to the audit objectives, we were asked
to do the following:
•	 Review any post‑employment data and determine whether
the data support or refute CALPIA’s assertions about its
performance in job training leading to released inmates’
employment and in reducing recidivism.
•	 Determine how inmates are selected to participate in
CALPIA programs and how CALPIA determines the inmates’
training needs.
•	 Evaluate CALPIA’s strategic plan, including goals, objectives,
and performance indicators. We were then to ascertain whether
the plan aligns with state law, considers all relevant aspects
of running an efficient organization, and has performance
indicators that are measurable and appropriate.

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•	 Identify how much CALPIA has saved Corrections by allowing
inmates to participate in work programs offered by CALPIA and
determine the accuracy and reasonableness of CALPIA’s savings
calculation, if this calculation exists.
•	 Assess how CALPIA conducts market analyses and price‑setting
for its products, including whether CALPIA performs periodic
analyses of its price‑setting practices to ensure that any cost
efficiencies are passed on to customers. Further, we were to select
a sample of CALPIA’s higher‑selling products and compare the
cost and quality of these products to those of similar products
from the private sector and from other correctional industries.
•	 Identify CALPIA’s main sources of revenue and customers and—
to the extent possible—determine the degree to which CALPIA’s
top five customers paid amounts higher than the market value
for products.
•	 Determine whether CALPIA uses appropriate management
tools, such as cost accounting systems.
To review any post‑employment data and to determine whether the
data support or refute CALPIA’s assertions about its performance in
job training leading to employment and in reducing recidivism, we
interviewed staff and reviewed a report that studied the relationship
between inmates’ participation in CALPIA programs and inmates’
post‑release success. Additionally, we reviewed CALPIA’s efforts to
improve inmate employability and the manner in which it evaluates
or monitors whether the skills that inmates obtain through job
training at CALPIA contribute to inmates’ post‑release success.
Partly to determine the employment success of parolees who
worked at a CALPIA enterprise, we attempted to use post‑release
employment information from Corrections’ CalParole Tracking
System (CalParole), which it uses to record parolees’ activities,
including their employment. In addition, as shown in Appendix A,
we recalculated the recidivism rate for both Corrections’
general‑population parolees and CALPIA’s parolees. To perform
this calculation we obtained and analyzed inmate movement
information found in Corrections’ Offender Based Information
System (OBIS) and inmate job assignment information from
Corrections’ Distributed Data Processing System (DDPS). Further,
the U.S. Government Accountability Office, whose standards we
follow, requires us to assess the sufficiency and appropriateness
of computer‑processed data. To comply with this standard, we
separately assessed each system for the purpose for which we
used the data in this report.

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To assess an inmates’ post‑release employment success, we
obtained data from Corrections’ CalParole. We assessed the
reliability of CalParole by performing data‑set verification
procedures, and electronic testing of key data elements. In addition,
to verify anomalies identified during electronic testing and to
determine if employment related data entered into CalParole was
properly supported by case file documents, we reviewed a sample
of hard‑copy parolee files. We identified no issues in performing
data‑set verification procedures. As further discussed in Chapter 1,
our electronic testing revealed that CalParole contains a significant
amount of erroneous data that precluded us from performing
any viable analysis. In addition, our review of hard‑copy parolee
files further confirmed the limitations of CalParole employment
data. Therefore, we determined that Corrections’ CalParole data
is not sufficiently reliable to assess an inmates’ post‑release
employment success.
For the purpose of calculating Corrections’ general‑population
parolees’ and CALPIA’s parolees’ recidivism rates, we obtained and
analyzed Corrections’ OBIS inmate movement data. We assessed
the reliability of the OBIS by conducting data‑set verification
procedures, electronic testing of key data elements, and performing
accuracy testing. However, we did not test the completeness of
the OBIS data due to the lack of a centralized storage location and
because the source documents required for this testing are stored
at the 33 institutions located throughout the State. We identified
no issues when performing data‑set verification procedures or
electronic logic testing of key data elements. To test the accuracy
of the data, we randomly selected a sample of 29 records from the
OBIS data files obtained from Corrections and conducted tests to
ensure the data contained in those records could be matched
to source documents. Specifically, Corrections was unable to
provide documentation that supported the entries it keyed into
data fields used to specify the type of inmate movement, the date
those movements occurred, and the institution reporting the
movements for five of our 29 sample items. Based on our analysis
and testing, we determined the data obtained from the OBIS to
be of undetermined reliability for purposes of tracking inmate
movements into and out of Corrections’ institutions, which is
used when calculating the recidivism rates for both Corrections’
general‑population parolees and CALPIA’s parolees.
In addition, to review the recidivism rate calculation for CALPIA’s
parolees, we needed to identify those parolees who worked at a
CALPIA enterprise for at least six consecutive months while they
were imprisoned. To accomplish this we acquired Corrections’
DDPS inmate job assignment data. We assessed the reliability
of the DDPS by conducting data‑set verification procedures and
electronic testing of key data elements. We identified no issues

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when performing data‑set verification procedures or electronic
logic testing of key data elements. However, we did not perform
accuracy and completeness testing of the DDPS data due to the lack
of a centralized storage location and because the source documents
required for this testing are stored at the 33 institutions located
throughout the State. As a result, we determined the data obtained
from the DDPS to be of undetermined reliability to identify
those parolees who worked at a CALPIA enterprise for at least
six consecutive months while they were imprisoned.
To evaluate how inmates are selected to participate in CALPIA
programs and how CALPIA determines the inmates’ training
needs, we interviewed staff at both Corrections and CALPIA.
Specifically, we interviewed the inmate assignment lieutenants or
the associate wardens at six institutions with CALPIA enterprises.
Further, we inquired about local operational procedures for
assigning inmates to CALPIA enterprises at 12 institutions
and reviewed the procedures that were available. In addition, we
reviewed Corrections’ operations manual, CALPIA’s proposed
amendments to that manual, and the certifications and career
technical education that CALPIA offers inmates who participate
in its enterprises.
To evaluate CALPIA’s strategic plan—including goals, objectives,
and performance indicators—and to determine whether the plan
aligns with state law, considers all relevant aspects of running an
efficient organization, and has performance indicators that are
measurable and appropriate, we reviewed CALPIA’s strategic plan
and its fiscal year 2010–11 performance tracking matrix for its
strategic business plan. We also interviewed key staff, including
those who were instrumental in the tracking matrix’s development
and use. Further, we reviewed whether CALPIA was tracking
its performance against the indicators it established for fiscal
year 2010–11.
To determine how much CALPIA has saved Corrections by
allowing inmates to participate in its work programs, we reviewed
the accuracy of CALPIA’s calculation of the savings that it reported
to the Legislature for fiscal year 2008–09. Further, we interviewed
staff who were involved in performing the calculation, and we
collected relevant supporting documents to verify whether the
calculation is adequately supported. Because CALPIA did not
include a savings estimate in its fiscal year 2009–10 report to the
Legislature, we were unable to review any estimate of savings
related to that fiscal year.
To assess how CALPIA conducts market analyses and price‑setting
for its products, to determine whether CALPIA’s products and
services are competitively priced, and to understand CALPIA’s

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pricing policies, we interviewed staff about how CALPIA
establishes the prices of products. Additionally, we reviewed the
board’s pricing policy and CALPIA’s pricing analyses procedures.
We also selected a sample of CALPIA’s best‑selling products and
services and compared the cost and quality of these products
and services with those of three similar products or services from
the private sector or from other states’ corrections industries.
Further, we evaluated the manner in which CALPIA identifies
product costs and justifies product prices.
To identify the total amount of revenue that CALPIA received
from customers for its products over the past two fiscal years, we
reviewed CALPIA’s audited financial statements. At the time of our
fieldwork, CALPIA’s most recent audited financial statements were
for fiscal year 2009–10, so we requested supporting revenue and
cost data by customer and enterprise for that fiscal year and fiscal
year 2008–09. We assessed the reliability of the data by performing
accuracy testing for a sample of transactions and by agreeing totals
from CALPIA’s accounting system to CALPIA’s audited financial
statements. We determined that these revenue and cost data
were sufficiently reliable. Finally, we reviewed each enterprise’s
proportion of revenues and contributions toward CALPIA’s overall
profitability in terms of net profit based on its allocation of costs
among enterprises. With regard to assessing CALPIA’s ability to
be self‑supporting, our scope was limited to ongoing operations as
presented in CALPIA’s annual audited financial statements.
To ascertain whether CALPIA uses appropriate management tools,
such as cost accounting systems, we interviewed staff, and we
reviewed and evaluated CALPIA’s procedures for processing claims
and invoices. Finally, we tested data from CALPIA’s accounting
system, which CALPIA also uses to track sales and cost data as well
as inventory that it produces. We did not observe any weaknesses
with CALPIA’s cost accounting system.

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Chapter 1
THE CALIFORNIA PRISON INDUSTRY AUTHORITY COULD
IMPROVE ITS ASSESSMENT OF INMATE EMPLOYABILITY
AND RECIDIVISM
Chapter Summary
Due to a lack of adequate, reliable employment data for released
inmates, the California Prison Industry Authority (CALPIA)
cannot determine the impact that its programs have on inmates’
employment after they are released from prison. Both CALPIA and
a consultant it hired were unsuccessful in matching social security
numbers from the Employment Development Department’s
(EDD) Employment History database with those obtained from
the Offender Based Information System (OBIS) of the California
Department of Correction and Rehabilitation (Corrections).
Further, Corrections’ CalParole Tracking System (CalParole), which
contains employment information for individuals paroled by the
State, contains a significant amount of erroneous data. If its errors
are corrected, CalParole may be able to provide CALPIA with a
means for measuring the post‑release success of parolees who
worked for CALPIA enterprises.
Corrections controls the process of assigning inmates to work
in CALPIA’s enterprises; however, CALPIA has proposed an
amendment to Corrections’ department operations manual
(operations manual) that would change the selection criteria and
put in place several procedural changes to the way in which inmate
assignments occur. If approved by Corrections and the Office
of Administrative Law, these changes will create a standardized
selection process, and, more notably, they will allow CALPIA to
have a final say on which inmates are placed in its enterprises.
In fiscal year 2010–11, CALPIA developed a set of performance
indicators that are more comprehensive than those it used in prior
fiscal years. Although many of these indicators are measurable,
others are not measurable or are vague. Moreover, CALPIA
finalized its indicators late in fiscal year 2010–11, a situation that
limits their usefulness in allowing CALPIA to formally track its
performance earlier in the fiscal year.
Our calculation of CALPIA’s and Corrections’ recidivism rates
produced rates that are generally higher than the rates calculated
by CALPIA and presented in its report to the Legislature for fiscal
year 2008–09. Nonetheless, our calculation confirmed that the
parolee recidivism rates presented by CALPIA are lower than
those of Corrections’ general‑population parolees. In contrast,

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our review of the amount that CALPIA asserts that it saved the
State—an amount based primarily on its recidivism rate—found
several mistakes that resulted in an overstatement of $546,000
in the $9 million of reported savings. Further, CALPIA claimed
responsibility for the savings without acknowledging that other
factors, such as some parolees having higher education levels or
their lack of drug abuse histories, may have contributed to the
recidivism rates for CALPIA’s parolees being lower than those
for Corrections’ general‑population parolees.
CALPIA Lacks a Reliable Source of Employment Information About
Released Inmates
Although CALPIA is able to track parolees with specific training
or certifications, it has no reliable source for determining whether
an individual secured employment related to that training or
certification after parole. Since we last reported on this issue in
2004, CALPIA has begun tracking the enterprises where specific
inmates work, the inmates’ job titles, and any CALPIA certifications
that the inmates possess. However, CALPIA lacks the ability to
measure the quantity and types of post‑release employment that
participants obtain; therefore, CALPIA cannot provide an adequate
perspective on the effectiveness of its efforts to fulfill its statutory
purpose of offering inmates the opportunity to develop effective
work habits and occupational skills.
Using EDD Employment Data Has Proved Futile

CALPIA has been unsuccessful
in finding a reliable source of
post-employment information
that would allow it to measure the
effectiveness of its programs.

In 2004 we reported on CALPIA’s inability to measure whether
the type of post‑release employment that former inmates obtain
is related to the specific training or experience they received
at CALPIA. Since then, CALPIA has developed a new Inmate
Employability Tracking System that allows CALPIA to maintain
inmate worker profiles containing information about inmates’
assignments, job titles, and enrollment in and completion of
certification programs. CALPIA can now identify the training
and certificates that a particular inmate received at an enterprise;
however, CALPIA has been unsuccessful in finding a reliable source
of post‑employment information that would allow it to measure
the effectiveness of its programs in fulfilling one of its statutory
purposes, which is to provide inmates with the opportunity
to be productive and to develop effective work habits and
occupational skills.
CALPIA made two attempts to use employment data maintained by
the EDD. In 2003 it entered into a contract with the EDD to collect
employment‑related data using social security numbers of released

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inmates who worked at CALPIA while they were imprisoned.
CALPIA intended to match the social security numbers from the
EDD’s database with those it obtained from Corrections’ OBIS
to determine whether its vocational programs are successful in
preparing inmates for work outside the prison system. However,
according to the former chief of CALPIA’s Inmate Employability
Program who participated in securing this contract, he understood
that the social security numbers contained in OBIS were not always
reliable. For example, CALPIA staff noticed numerous duplicate
social security numbers as well as numbers that did not agree with
the appropriate names.
In 2004 CALPIA hired a consultant to conduct a comprehensive
review to measure the costs and benefits associated with CALPIA;
the consultant based its review on the post‑release behavior of
parolees who had worked at CALPIA. In 2007 the consultant
reported being unable to measure post‑release employment using
data from the EDD because of an extremely high error rate in social
security numbers. For a sample of 2,490 inmates, the consultant,
with the EDD’s assistance, was able to match less than 1 percent
of quarterly earnings records from the EDD’s database with
parolees’ social security numbers and their first and last names in
Corrections’ records. Even after relaxing the criteria to allow for
potential name changes and misspellings, and after allowing for as
many as two digits of the social security number not to match,
the consultant reported being able to match only about 18 percent
of the records from the EDD with those from Corrections. The
consultant concluded that even when using the relaxed criteria,
measuring post‑release employment using data from the EDD was
impossible. The consultant’s report does not indicate whether the
cause of this problem was faulty social security numbers contained
in the EDD’s data, in Corrections’ data, or in both.
CalParole Data, if Reliable, Could Provide Employment Information
for Parolees
Another potential source of inmate post‑release employment
information resides in CalParole, which allows parole agents
and other staff to enter information identifying current and
past employers of parolees and the dates on which the parolees
began their employment. CalParole does not rely on social
security numbers as the only inmate identifiers. Rather, it also
uses Corrections’ inmate identification numbers, which can be
matched with Corrections’ OBIS. However, before CALPIA can
use CalParole to measure its participants’ post‑release success in
securing employment, Corrections will need to correct several
problems we found with CalParole.

For a sample of 2,490 inmates, the
consultant was able to match less
than 1 percent of EDD’s quarterly
earnings records with parolees’
social security numbers and their
first and last names reflected in
Corrections’ records.

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Of the nearly 645,000 parolee
employment records from
CalParole that we reviewed, at
least 33,000 records contain
erroneous data in the field that
is designed to identify a parolee’s
current employer.

Our review found that the employment fields within CalParole
often contained erroneous, inappropriate data even though a
memorandum signed by the director of Corrections’ Division of
Adult Parole (Parole) stresses the importance of entering accurate
information into the system. Of the nearly 645,000 parolee
employment records from CalParole that we reviewed, at least
33,000 (5 percent of all records) contain erroneous data in the
records’ field that is designed to identify a parolee’s current employer.
These errors include the designations TBD or TBA, which we found
in more than 13,000 instances and words that appear less frequently,
such as taxpayers, which we found in more than 100 instances.
We believe that most of these errors are the result of poor
data‑entry practices by Parole staff. Available employment fields
include two required fields: start date and employer. CalParole also
provides eight optional fields: job title, work phone, five employer
address fields—street, city, county, state, and zip code—and a field
indicating whether the employer is aware that the individual is on
parole. Parole staff must enter data in the two required fields but
not in the optional fields. The employer, job title, and street address
fields allow the user to enter any characters and are limited only
by the total number of characters—which varies from 20 to 26—
allowed in each of these fields. CalParole does not perform any
validation of the optional fields to ensure that they are accurate.
Although the CalParole’s user guide allows only one of two entries
in the employer field—employer name or the word unemployed—
the parole agent’s field book policy states that if parolees are
unemployed, the field should contain one of the following
designations: unemployed, social security income, or school.1
The guide also instructs users to enter the start date and other related
information if a parolee is employed and to enter in the start date field
the date that the parolee was last employed if a parolee is unemployed.
However, in many cases in which a parolee was clearly unemployed,
the employer field contains words other than those allowed as well
as variations of the designations unemployed and social security
income, such as not employed and SSI. Other employment fields
contain extraneous information, such as 123 Unemployed Way and
other variations in the address field, which we found in 310 instances.
Moreover, employer address fields for employed parolees often show
no information at all, even though Parole staff have been directed to
ensure that all available fields, including the employment fields, within
CalParole are populated. Specifically, for more than 290,000 records
that appeared to contain a valid employer, the employer address
fields for more than 20,000 of these records are blank. The large
number of errors in CalParole’s required field for recording employer
1	

The parole agent field book is a parole agent’s record for tracking supervision of a parolee.

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May 2011

information makes it impossible to analyze accurately post‑release
employment data or to compare the rates of employment among
different groups of parolees.
According to its director, Parole has recently initiated a process to
improve the quality of CalParole data. One of the targeted areas is
the empty employer fields in CalParole. The director also indicated
that Parole is currently working on ensuring that parole agents
populate the employer field and other employment‑related fields
with correct and appropriate data. However, Parole was not able to
provide any documentation related to this process as its scope is not
yet finalized.
Our testing of hard‑copy parolee files further confirmed the
limitations of CalParole employment data. We reviewed the files
of 36 parolees from 12 parole units located across the State whom
CalParole listed as employed. For 31 of the 36 parolees, the
hard‑copy files did not contain pay stubs, letters from employers,
or any other reliable documents that would offer proof of
employment to support the employment information recorded in
CalParole. The associate director of Parole asserts that handwritten
notes contained in a parole agent’s field book provide a tangible
document that can be used as supporting documentation for entries
in the CalParole employment field. However, handwritten notes are
not always reliable or accurate, and they introduce the opportunity
for erroneous entries. The results of our testing suggest that Parole
staff often enter information related to parolees’ employment
without verifying its accuracy by using proper documentation.
Entering unverified employment information increases the risk of
entering erroneous data into CalParole and lessens the accuracy
of the analysis of post‑release employment.
CalParole is one of about 40 information systems that Corrections
plans to consolidate, along with paper records, into a fully
integrated, automated system known as the Strategic Offender
Management System (SOMS). According to the business
project manager in charge of SOMS development, Corrections
implemented the initial phase at some of its institutions in
June 2010, and it plans to retire CalParole by May 2013. Two of the
objectives that Corrections wants to achieve with SOMS are to
provide delivery of accurate offender information and to provide
the ability to analyze and report on statewide operational data
and trends. To achieve these objectives, Corrections needs to
ensure that current and historical data are as accurate as possible
before they are converted into SOMS. However, the large number
of erroneous records we found, as well as the lack of verified
employment data, limits the reliability of CalParole data. Thus,
Corrections will need to consider carefully how to best transfer data

Our testing of hard-copy
parolee files further confirmed
the limitations of CalParole’s
employment data.

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from CalParole to SOMS to minimize the importing of erroneous
data. Corrections will need Parole staff to significantly improve
their data entry and supporting documentation practices.
In addition, Corrections has an opportunity to devise modifications
to SOMS to minimize the opportunity for erroneous data entries
and make employment data more reliable. For example, Corrections
could add a field in SOMS with a drop‑down menu that would show
two possible responses to a question about whether a parolee is
employed. If the parolee is employed, SOMS would allow the user to
select yes and fill out the remaining employment fields. If the parolee
is unemployed, SOMS would allow the user to select no, which
would make unavailable all employment fields except the start date
when the individual became unemployed. This change would allow
Parole staff to clearly determine whether an inmate is employed and
minimize the entry of extraneous information once SOMS is in use.

Corrections reported that
13,500 parolees in California were
on non-revocable parole, and
therefore did not need to report to
a parole agent.

Apart from reliability issues, data contained in CalParole are also
limited by the number of inmates that Corrections assigns to
active parole supervision upon their release from prison and by the
length of their parole terms, which can last anywhere from one,
three, or five years to a lifetime. In fiscal year 2009–10, Corrections
indicated that it assigned 122,100 released inmates, or 98.5 percent
of all released inmates, to parole and that it directly discharged
the remaining 1,800, or 1.5 percent. Additionally, because of a law
that went into effect on January 25, 2010, low‑ and moderate‑risk
inmates without serious, violent, or sex‑related offenses are no
longer subject to parole revocation, referred to as non‑revocable
parole, and therefore they need not report to a parole agent. Parole
agents do not maintain the same set of information, including
employment data, about such offenders once they are released.
As of March 2011 Corrections reported that 13,500 parolees
in California were on non‑revocable parole. In spite of these
limitations, CalParole currently is the only viable option that
CALPIA has to track its former inmate employees and to assess the
impact on parolees’ employability that employment in CALPIA’s
enterprises has had.
CALPIA Has Inconsistent Guidelines Governing the Assignment of
Inmates to Its Programs
CALPIA does not have a uniform set of inmate assignment
guidelines that would consistently allow it to have influence in the
inmate assignment process currently controlled by Corrections. As
of April 2011 Corrections manages the inmate assignment process
through a unit classification committee (classification committee)
and inmate assignment lieutenant (lieutenant) at each institution.
A classification committee reviews cases of newly admitted inmates

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and then reviews them again annually. The classification committee
may assign an inmate to a waiting list for one or more correctional
programs, including CALPIA’s enterprises.
Once the classification committee makes its assignments, the
lieutenant enters an inmate’s assignment information into a system
and monitors waiting lists for various programs, including CALPIA
enterprises. If the selected enterprise has an opening, the lieutenant
assigns the inmate to it directly. Otherwise, the lieutenant places
the inmate’s name on the waiting list, as Figure 3 shows. Staff from
six institutions indicated to us that generally the lieutenant fills each
newly vacated position with the inmate on the top of the waiting list.
Figure 3
California Department of Corrections and Rehabilitation Inmate Assignment
Process as of March 2011

An inmate enters a California prison

An inmate comes up for annual review

California Department of
Corrections and Rehabilitations’
(Corrections)
unit classification committee
(classification committee)
conducts an inmate case review

California Prison Industry
Authority (CALPIA)
staff may participate
in the case review by the
classification committee

Based on the classification committee’s guidance,
the inmate assignment lieutenant assigns the inmate
to CALPIA or to other correctional programs

If there is an opening in
CALPIA or in other correctional
programs and no inmates on a
waiting list for that opening, the
inmate assignment lieutenant
(lieutenant) assigns the inmate

If there is no opening in CALPIA
or in other correctional programs,
the lieutenant puts the inmate’s
name on the appropriate waiting
list(s) until an opening occurs

Source:  Bureau of State Audits’ interviews with CALPIA staff and with Corrections’ associate wardens
and inmate assignment lieutenants at six state prisons.

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To compensate for the absence of statewide guidelines, CALPIA
staff at some of Corrections’ institutions created local operational
procedures that sometimes contain inconsistent requirements for
inmate assignments. For example, the operational procedures at the
Richard J. Donovan Correctional Facility require inmates who are
assigned to CALPIA enterprises to possess a high school diploma
or a General Educational Development diploma (GED diploma), or
they must perform at the ninth‑grade education level. However, the
operational procedures of the California Men’s Colony only require
an inmate to perform at the seventh‑grade level. In addition, the
California Men’s Colony requires that to be assigned to a CALPIA
enterprise, an inmate must have a minimum of six months before
the date of his release or parole. Further, the inmate hiring criteria
for the Central California Women’s Facility and the Valley State
Prison for Women vary the time allowed before an inmate’s parole
date depending on the enterprise. According to a branch manager
in CALPIA’s operations division, eight other institutions that
we inquired about use state law and generic inmate assignment
guidelines contained in Corrections’ operations manual to assign
inmates to an enterprise.
CALPIA has proposed an amendment to the operations manual
that would put in place a set of statewide inmate assignment
guidelines, and it will make several procedural changes to the way
inmate assignments are presently made. Due to the amendment’s
regulatory content, CALPIA will have to develop regulations,
which means that amendment of the operations manual may
take up to a year or more to implement. As of March 2011
CALPIA’s general manager had approved the draft amendment,
and CALPIA submitted it to Corrections’ regulation and policy
management branch for review.
According to CALPIA’s assistant general manager of operations
(operations manager), these changes will create a standardized
selection process and, more notably, allow CALPIA to have a final
say on the inmates placed in its enterprises. For example, the draft
amendment requires an inmate to perform at the ninth‑grade
level and to obtain a high school or GED diploma within two years
of the initial assignment to an enterprise. The draft amendment
also states that inmates must have a minimum of two years and a
maximum of five years before their earliest possible release date
from prison. Additionally, the draft amendment outlines a hiring
process that begins with an interested inmate’s completing an
application. After the initial screening of applications to ensure
that each inmate meets CALPIA’s intake eligibility criteria, the
classification committee will review inmates for placement into
CALPIA’s candidate pool. CALPIA will fill its vacant positions after
interviewing the inmates from the pool, first assigning inmates with

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high school or GED diplomas, then those who are enrolled in GED
programs, and finally those who do not have either a high school
diploma or are not enrolled in GED programs.
With these operations manual amendments, CALPIA wants to
ensure inmates’ participation in the enterprises as well as the
success of its programs. According to its operations manager, under
the current system, CALPIA must take the inmate who has been
on the list the longest rather than the most qualified candidate. He
indicated that CALPIA would like to have stricter selection criteria
to reflect the real‑world environment in which released inmates
will have to compete for jobs. Additionally, under the proposed
changes, CALPIA intends to establish a minimum amount of time
that inmates must have remaining on their sentence to be eligible
for assignment to its enterprises. Currently, inmates are sometimes
assigned to enterprises within only a few days of their release dates,
and the operations manager believes that such a short period is
insufficient time for an inmate to learn new skills and gain the full
advantage of an employment opportunity offered by CALPIA.
The proposed amendment will require that inmates have at least
two years or, in exceptional cases, nine months before their release
dates to be assigned to CALPIA enterprises. However, the associate
warden at the California State Prison in Corcoran told us that such
short assignments sometimes happen because the lieutenant does
not have access to the system that shows inmate release dates. If
the amendment to the operations manual is adopted, CALPIA and
Corrections will need to work together to overcome this issue
and any other obstacles that arise.
CALPIA Has Not Formally Tracked Its Newly Developed
Performance Indicators
CALPIA’s approach to measuring performance for fiscal year 2010–11
differs from its approach in the previous two fiscal years in that
it expanded and added a number of new performance indicators,
many of which focus on measurable outcomes. Conversely, in a
summary of its performance indicators for fiscal years 2008–09
and 2009–10, which is the only document CALPIA could provide
us showing its previous performance indicators, only one of its
strategic plan’s five goals had a performance indicator associated
with it; the other four goals had no performance indicators. Although
the summary of prior‑year performance indicators did not specify
how CALPIA would monitor these goals, the assistant general
manager of administration indicated that CALPIA would track
its performance against those goals its staff created and regularly
analyze various reports.

The proposed amendment will
require that inmates have at
least two years or, in exceptional
cases, nine months before their
release dates to be assigned to
CALPIA enterprises.

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CALPIA has since created a set of more
comprehensive performance indicators for
fiscal year 2010–11, but it has just begun to track
its performance formally. In May 2010 California’s
1.	 Maintain California Prison Industry Authority’s (CALPIA)
Prison Industry Board approved CALPIA’s
financial self‑sufficiency.
2010 strategic business plan, which outlines
2.	 Increase opportunities to foster inmate success.
five overarching strategic goals and related
objectives that are generally in line with state law.
3.	 Improve the customer experience, increase customer
Refer to the text box for CALPIA’s five strategic
loyalty, and garner new customers and market share.
goals. To facilitate tracking of its performance for
4.	 Ensure a well‑developed, high‑quality workforce.
fiscal year 2010–11, CALPIA created a tracking
5.	 Improve internal processes, infrastructure, and information
matrix that lists the performance indicators
to support organizational stability and growth.
associated with each goal; staff responsible for
performance; and the supporting documents,
Source:  CALPIA’s 2010 strategic business plan.
reports, and data used to measure its
performance. However, because CALPIA just
finalized the tracking matrix in March 2011, its
opportunity to track performance formally during fiscal
year 2010–11 is limited.
California Prison Industry Authority’s
Strategic Goals

Even though many of CALPIA’s performance indicators are now
measurable, others are either not measurable or appear vague. For
example, the indicators it uses to track the success of its goal to
maintain financial self‑sufficiency are measurable. Specifically, for
this goal, it established a target net‑profit margin of 1 percent to
3 percent, and it set out to increase its revenue by 2.5 percent and
to implement its strategic sales and marketing plan. These indicators
set specific targets that CALPIA can use to gauge its performance
at the end of a particular period. However, some indicators for
other goals do not set specific, measurable performance targets.
For example, one of the indicators CALPIA created to track its
performance on its goal to increase opportunities to foster inmate
success includes a general statement to “establish real world
performance and participation expectations for CALPIA staff and
inmates.” This indicator does not define the meaning of real‑world
performance or participation expectations, making measurement of
CALPIA’s success using this indicator impossible.
Moreover, a number of CALPIA performance indicators are vague
or unclear about what CALPIA is trying to achieve. For example,
as part of the goal to garner new customers and market share,
CALPIA established the following indicator: “revenue trending in
correlation with product launch or changes.” This statement does
not clarify whether CALPIA wants simply to track changes in its
revenue or whether it is trying to reach a certain level of revenue
when it introduces new products or changes. In another instance,
one of the performance indicators that CALPIA created to track its
progress in achieving the fifth goal—to improve internal processes,
infrastructure, and information to support organizational stability

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and growth—lacked clarity. For this performance indicator, which
calls for staff “to establish criteria and regularly assess system
capabilities,” CALPIA did not define what the criteria would
accomplish or to what period regularly refers, and CALPIA did not
identify the systems to assess. Unless it specifies what it is trying to
achieve, CALPIA will be unable to determine its success in reaching
such goals. Rather than establish vague or unclear performance
indicators, CALPIA should establish indicators that are clear and
measurable with intermediate targets that it can reach within the
current fiscal year and then revise those targets in future years to
ensure that it achieves the overarching goal.
The Calculation of CALPIA’s Recidivism Rate and Its Savings to
Taxpayers Warrant Improvements
State law requires CALPIA to provide the Legislature an annual
report. In its annual report for fiscal year 2008–09, CALPIA reported
recidivism rates for inmates who worked at a CALPIA enterprise.
Although our calculation did not result in the same recidivism rates
as the ones CALPIA presented in its annual report, the recidivism
rates of CALPIA parolees were consistently lower than the rates of
Corrections’ general‑population parolees. In addition, CALPIA’s
calculation of the recidivism rates included a minor error in which
parolees who worked at CALPIA enterprises were counted again in
the group of general‑population parolees. Even though we found the
error immaterial, CALPIA should work with Corrections to make
the comparison of recidivism rates more precise. In its report to the
Legislature for fiscal year 2008–09, CALPIA also reported that its
conservative estimates suggest that it will save California taxpayers
up to $9 million annually. However, we found errors causing CALPIA
to overstate these savings by $546,000. Lastly, CALPIA claimed
responsibility for the savings that resulted from a number of parolees
not returning to prison but without CALPIA’s acknowledging other
factors that may have contributed to lower recidivism rates among
its parolees.
The Recidivism Rates for CALPIA Parolees Are Lower Than Those for
General‑Population Parolees
Although our calculation of CALPIA’s recidivism rates did not
produce rates that matched those calculated by CALPIA, our
figures confirmed that the recidivism rates of CALPIA parolees
were lower than those of Corrections’ general‑population
parolees. As the Appendix indicates, CALPIA’s analysis shows
that parolees who worked at a CALPIA enterprise returned to
prison at a lower rate than did general‑population parolees. For
example, it reported that parolees who worked at a CALPIA

Unless CALPIA specifies what
it is trying to achieve, it will be
unable to determine its success
in reaching its goals.

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enterprise and who were released in fiscal year 2007–08, returned
to prison within their first year of release at the rate of 32 percent
compared to a 42 percent rate for general‑population parolees. To
generate Table A.1 shown in the Appendix, CALPIA calculated
the recidivism rates for parolees who were released from prison
during fiscal years 2005–06 through 2007–08 and who worked
at a CALPIA enterprise for at least six months while they were
imprisoned. CALPIA then asked Corrections to use the same
methodology to calculate recidivism rates for general‑population
parolees. At that time, CALPIA’s recidivism rate included only
those felons who were paroled and then returned to prison
because they violated conditions of their parole or because they
committed a new crime, as opposed to a more inclusive method
that Corrections adopted in 2010.

The recidivism rates we
computed for CALPIA parolees
were consistently lower
than the recidivism rates for
general‑population parolees.

We followed the methodology used by Corrections and criteria
provided by CALPIA to recalculate the recidivism rates
CALPIA presented in its annual report to the Legislature for
fiscal year 2008–09. We obtained and analyzed inmate movement
information found in Corrections’ OBIS and inmate job
assignment information from Corrections’ Distributed Data
Processing System to determine which parolees worked at a
CALPIA enterprise for at least six consecutive months while they
were imprisoned. As shown in the Appendix, overall, our calculation
showed higher recidivism rates for both CALPIA and general
population parolees. In spite of these differences, the recidivism
rates we computed for CALPIA parolees were consistently lower
than the recidivism rates for general population parolees.
In 2010 Corrections changed its methodology for calculating
recidivism. It consulted with national experts and researchers to
produce recidivism measures that could facilitate comparisons
across jurisdictions nationwide. As a result, Corrections changed its
definition of recidivism to the following: A recidivist is an individual
convicted of a felony and incarcerated in one of Corrections’ adult
institutions who was later released to parole, discharged after being
paroled, or directly discharged from Corrections during a defined
time period and subsequently returned to one of Corrections’
adult institutions during a follow‑up period. Corrections uses a
three‑year follow‑up period to monitor the recidivism rates of its
inmates. If an inmate returns to prison after the three‑year period,
he or she is not considered a recidivist. Additionally, Corrections
considers only felons in its calculation of the recidivism rates.
By adopting Corrections’ new methodology and excluding from the
total number of general‑population parolees those parolees who
worked at CALPIA’s enterprises, CALPIA will calculate recidivism
statistics that are comparable to those of Corrections. The Appendix
shows that in fiscal year 2007–08, Corrections released 116,497 inmates

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to parole. This general‑population parolee figure includes
CALPIA’s parolees, which may skew the results of the recidivism
rate calculation for general‑population parolees. However, when
we excluded parolees who worked at CALPIA enterprises from
general‑population inmates and then repeated our calculation,
the resulting recidivism rates were not materially different from the
rates that Corrections calculated that counted CALPIA parolees.
Nevertheless, because Corrections provided the recidivism rates
for the general‑population parolees, CALPIA should work with
Corrections to make the comparison of recidivism rates more
accurate and to avoid the future possibility that this discrepancy
between the two calculations could become larger.
CALPIA Can Also Improve Its Savings Calculation
In its report to the Legislature for fiscal year 2008–09, CALPIA
included an estimate of the annual savings that it asserts result
from a recidivism rate that is lower among parolees who worked
at CALPIA enterprises while they were incarcerated. However, we
found a number of errors in CALPIA’s calculation of the estimated
$9 million that it reported saving the State.
CALPIA based its savings calculation on a one‑year difference
in rates of recidivism between parolees who had worked at
CALPIA enterprises while they were incarcerated and parolees
from Corrections’ general population. CALPIA applied the
recidivism rate of the general‑population parolees, which it
calculated to be 42.18 percent, to the 1,637 parolees who worked at
CALPIA enterprises and who were released from prison in fiscal
year 2007–08. CALPIA then compared the resulting 690 parolees
with 521 of its parolees who actually returned to prison. CALPIA
interpreted the difference between these two figures—169—as the
number of parolees who did not return to prison because of their
experiences with CALPIA.
CALPIA then divided the 169 individuals into two groups:
121 parolees who returned to custody on parole violations and
48 parolees who returned to custody because of new convictions.
CALPIA based the division on the actual proportion of its
521 parolees who returned to custody because of parole violations
or new convictions, and it applied this proportion to the
169 parolees. CALPIA’s use of the actual proportion from only
one fiscal year is problematic because the proportion might not
be sufficiently representative. To avoid this possibility, CALPIA
should have averaged proportions of parolees who over the course
of several years returned to custody because of parole violations or
new convictions.

We found a number of errors
in CALPIA’s calculation of the
estimated $9 million that it
reported saving the State.

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For each group, CALPIA applied different cost factors to
expenditures in the areas of law enforcement, judiciary, parole
hearings, and incarceration that would have been incurred if these
169 individuals returned to prison. For example, CALPIA assumed
that parolees with new convictions require additional court
proceedings and serve longer sentences, which would result in
additional costs to the State. Although the division of expenditures
into these cost components appears reasonable, our analysis found
errors in most of the cost components and a lack of documentation
for others.
In reviewing this calculation, CALPIA provided us several work
sheets showing the mathematical calculation used to arrive at
the estimated savings. Because it lacked certain documentation,
CALPIA referred us to a Web site and to a number of individuals to
obtain support for parts of its savings calculation. In one case, the
individual to whom CALPIA referred us used his experience rather
than documented analysis for the estimates he provided CALPIA,
so we were unable to verify his estimates.

The net effect of certain errors—
including a mathematical error
and inadvertently using a different
number of hours—overstated
CALPIA’s savings estimate
by $546,000.

CALPIA’s secondary review of the savings calculation was
inadequate for detecting the errors we found, which amounted to
$81,000 in understated costs and $627,000 in overstated costs. The
overstatement was due to various mistakes. For example, we noted
a mathematical error that resulted in a $539,000 overstatement of
incarceration costs. This error occurred in CALPIA’s calculation
of Corrections’ expenses to incarcerate parolees who violated their
parole. If accurate, the figures on CALPIA’s work sheet would show
that the calculation is $2.96 million rather than the $3.5 million that
actually appears on the work sheet. Further, in the calculation of
the law enforcement costs, CALPIA inadvertently used the number
of hours a police officer spent on one stage of an investigation
that was different from the amount in CALPIA’s supporting
documentation. This error caused CALPIA to overestimate its
savings of law enforcement costs by about $88,000. The net effect of
these errors overstated CALPIA’s savings estimate by $546,000. An
appropriate secondary review should have detected and corrected
these errors. If CALPIA were to account for all errors that we
found in the savings calculation, it would have resulted in a lower
savings estimate than it reported—a reduction from $9 million to
approximately $8.5 million.
Finally, CALPIA’s assumption that the 169 parolees did not
return to prison solely because they had worked at CALPIA’s
enterprises may be flawed. In its report to the Legislature for fiscal
year 2008–09, CALPIA states that it estimates conservatively
that by lowering recidivism and thus avoiding the costs for law
enforcement, the judiciary, parole hearings, and incarceration,
CALPIA saves taxpayers up to $9 million annually. To establish that

California State Auditor Report 2010-118

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inmates’ working at CALPIA enterprises lowers their recidivism,
CALPIA has to control all other possible factors that might prevent
these future parolees from returning to prison. Some of the
169 parolees may exhibit characteristics or have experiences other
than their past involvement in CALPIA enterprises that may have
set them apart from general‑population parolees. According to
recidivism studies by the University of Washington and the Florida
Department of Corrections, factors that may have contributed to
parolees not returning to prison following their release include
the inmates’ older ages and higher education levels as well as their
lack of drug abuse histories. Thus, CALPIA needs to qualify the
variance between recidivism rates for the two groups by stating
that employment with CALPIA is only one of several factors that
may have contributed to the lower recidivism rates for these
169 CALPIA parolees.
We also attempted to review CALPIA’s savings calculation for fiscal
year 2009–10. Although it included in its fiscal year 2009–10 report
to the Legislature a table comparing recidivism rates of CALPIA and
Corrections’ parolees that is similar to Table A.1 in the Appendix,
it did not include a similar savings estimate in its report. Instead,
CALPIA included an assertion that inmates who participated
in CALPIA programs are less likely to return to prison and that
they are more likely to become productive workers who pay taxes
instead of costing California taxpayers approximately $49,000 per
year to incarcerate an individual. The general manager of CALPIA
explained that he decided not to include a more complete savings
estimate because of the difficulty of performing a comprehensive
savings calculation and because CALPIA is not required statutorily
to include that calculation.
Recommendations
To improve the reliability of employment data contained
in CalParole, Corrections should ensure that parole agents
correctly follow procedures related to populating the data
fields of and maintaining CalParole. In addition, 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.

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To ensure that it has a uniform set of inmate assignment standards,
CALPIA should continue its efforts to issue regulations and
complete the amendment of Corrections’ operations manual. It
should then work with Corrections to implement the changes
to the inmate assignment criteria and the assignment process
when the regulations take effect.
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 measure properly 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 ensure that the results 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.

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May 2011

Chapter 2
THE CALIFORNIA PRISON INDUSTRY AUTHORITY
SHOULD CONTINUE TO IDENTIFY NEW ENTERPRISES AND
MONITOR NET PROFITABILITY
Chapter Summary
Since 2004 the California Prison Industry Authority (CALPIA) has
introduced only a modest number of new enterprises in the State.
Because CALPIA closed more enterprise locations than it opened,
there are fewer opportunities for inmates to participate in its
enterprises. CALPIA indicates that economic concerns, particularly
the budget reductions of its state agency customers, have resulted
in a decreased demand for its products.
CALPIA strives to price its products competitively. In contrast to
practices cited in our 2004 audit report on CALPIA programs,
CALPIA’s retention of documented pricing analyses supports the
product pricing decisions that it made for the product sample we
reviewed. These pricing analyses complied with most aspects of
the pricing policy of the Prison Industry Board (board), which
requires CALPIA to consider costs, profit margins, and market
considerations when making pricing decisions. However, the basis
for how CALPIA determined profit margins was undocumented for
most pricing analyses we reviewed, and in some instances we
found no analysis of market considerations. For almost half of
the products and services we evaluated, CALPIA’s prices were
above the average prices for comparable items. On the other hand,
CALPIA’s five largest state agency customers saved an estimated
$3.1 million during fiscal year 2009–10 on the 11 products and
services we evaluated. Specifically, for five of the 11 items, the
State paid $2.2 million more than the average comparable price.
Nevertheless, the State saved $5.3 million for the remaining
six items. Although in certain instances CALPIA’s prices may
be higher than those for products available from other vendors,
purchasing from CALPIA supports opportunities for inmates to
develop effective work habits and occupational skills.
In March 2010 CALPIA, which is generally self‑supporting, began
using an automated process for analyzing the profitability of its
enterprises when overhead costs are considered. When CALPIA did
not include overhead costs in its calculations, only three of CALPIA’s
25 enterprises were unprofitable during fiscal year 2008–09.
However, when CALPIA allocated the appropriate overhead costs to
each of its enterprises, the number of unprofitable enterprises rose
to 11. Although CALPIA gave us an estimate of how it would allocate

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overhead costs for fiscal year 2008–09, in the future CALPIA
plans to use its newly created automated process monthly to assess
profitability more closely by including overhead costs.
Declining Inmate Participation Is the Result of CALPIA’s Closure of
Enterprises Due to Economic Concerns and Other Factors
One of CALPIA’s statutory purposes is to employ inmates under
the jurisdiction of the California Department of Corrections and
Rehabilitation (Corrections) in industrial, agricultural, and service
enterprises. In its mission statement, CALPIA indicates that
employing inmates in these enterprises reduces these individuals’
idleness and increases the stability of inmates’ living environment,
and these factors lead to reduced prison violence and increased
stability and safety within Corrections’ institutions. State law requires
it to provide, in an annual report to the Legislature, the number of
inmates employed in each of its enterprises. Figure 4 illustrates the
decrease in inmate participation as reported by CALPIA over the last
six years relative to Corrections’ inmate population.
Participation in CALPIA’s enterprises
has declined from 5,669 inmates
in June 2004 to 5,140 inmates in
June 2010, a decrease of 9.3 percent.

As the figure indicates, participation in CALPIA’s enterprises
has declined from 5,669 inmates in June 2004 to 5,140 inmates
in June 2010, a decrease of 9.3 percent. During the same
period, Corrections’ inmate population rose from 163,500 in
June 2004 to a peak of 173,312 in June 2007, and it declined to
165,810 in June 2010. The reduction in inmates that CALPIA
employs is significant, particularly in light of recent reductions
to Corrections’ budget for academic and vocational programs.
According to the California Rehabilitation Oversight Board’s
biannual report dated September 15, 2010, Corrections had to
reduce the services that these programs provide to inmates because
of these cuts. Information that Corrections provided indicates
that by June 2010 this budget reduction resulted in a net loss of
roughly 19,000 participants in Corrections’ traditional academic
and vocational programs. Because it is generally self‑sustaining,
CALPIA has the potential to provide employment opportunities to
inmates who are no longer served by Corrections’ vocational and
educational programs.
CALPIA’s Enterprise Closures Has Led to a Significant Decline in Inmate
Participation Rates
There are fewer opportunities for inmates to participate in
CALPIA’s enterprises because it has closed more enterprise
locations than it has opened. Since 2004 CALPIA has launched
only two new enterprises. It established both the modular building

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May 2011

and the construction services enterprises in 2006 and 2010,
respectively. Additionally, CALPIA reactivated and expanded
four other existing enterprises during this period.
Figure 4
Total Number of State Prison Inmates Compared to the Total Number of Inmates Employed by the California
Prison Industry Authority
180,000
175,000
170,000

Number of Inmates

165,000

Total number of inmates

160,000

8,000
6,000
Total number of inmates
employed by the California
Prison Industry Authority
(CALPIA)

4,000
2,000
0
Point in time

June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010

Total state prison inmates

163,500

164,179

172,561

173,312

170,973

167,832

165,817

Total CALPIA inmate employees
Percentage of state prison inmates
employed by CALPIA

5,669

5,598

5,917

6,044

6,020

5,733

5,140

3.5%

3.4%

3.4%

3.5%

3.5%

3.4%

3.1%

Sources:  CALPIA inmate employment data and the California Department of Corrections and Rehabilitation’s monthly population report as of
June 30 for the years 2004 through 2010.

Part of the legislative intent for CALPIA was to reduce inmate
idleness and prison violence. To fulfill these objectives, CALPIA
has the authority to establish new industrial, agricultural, and
service enterprises when it deems that doing so is appropriate.
Although CALPIA includes in its strategic plan an objective for
opening new, sustainable enterprises to provide additional inmate
employment opportunities, its fiscal year 2010–11 annual plan
presented to the board projects a decrease of 198 inmate positions.
The chief of marketing services (marketing chief ) indicates that
CALPIA currently employs four product managers in the marketing
department whose responsibilities include ensuring that products
meet market needs, screening incoming product ideas, and actively
looking for new ideas in the market. The assistant general manager

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of operations (operations manager) indicates that in the past, a
product approval committee made decisions about whether to
add new products. According to the operations manager, CALPIA
no longer uses this committee because CALPIA’s executive
management began making the final decisions about whether to
add new products.
Though the weak economy may have made expansion difficult
in recent years, CALPIA has recently created a revised product
development process and a draft sales and marketing plan to
confront the situation. For example, in its fiscal year 2010–11
draft sales and marketing plan, which was still in draft form as of
April 2011, CALPIA identified three new enterprise and product
development goals—inmate employability, customer need, and
profitability. According to CALPIA’s revised product development
process for fiscal year 2010–11, product success is defined as a
product’s contributing to the overall mission and goals of CALPIA
as outlined in its 2010 strategic business plan. In addition, product
managers, in coordination with prison industry managers, are
responsible for creating an annual enterprise business plan
outlining product development, sales, and manufacturing goals for
the fiscal year as well as efforts required to attain the plan’s goals.
CALPIA Has Closed More Enterprise Locations Than It Has Opened,
Reactivated, or Expanded

CALPIA 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.

Since 2004 CALPIA has established two new enterprises and
reactivated or expanded four existing enterprises. However,
as Table 1 shows, CALPIA 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. To establish,
expand, or reactivate an enterprise—or to close, deactivate, or
reduce an enterprise at one or more prisons—CALPIA submits
recommendations to the Prison Industry Board (board) for its
approval. In these recommendations, CALPIA includes reasons
supporting the change, an analysis of the fiscal impact, and the effects
on the employment of inmate employees as well as on CALPIA staff.
In the analyses it submitted to the board requesting approval for its
recommendation to close, deactivate, or reduce enterprises at certain
locations, CALPIA cited various reasons for these actions at the
prisons, including the bad economy, unprofitability, law changes, and
other problems. For example, in a June 2009 recommendation to
deactivate two furniture factories, CALPIA indicated that the demand
for furniture was declining due to various factors, most prominently
state budget reductions. Additionally, because of profitability concerns,
in April 2009 CALPIA closed one of its three dairies, citing that the
existing capacities at the two remaining dairies could absorb customer

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demand. This decision eliminated 48 inmate positions, but CALPIA
indicated that because of the low security risk of these inmates,
Corrections could easily place them in other work assignments.
Table 1
History of the California Prison Industry Authority’s Enterprises From December 2004 Through December 2010
ENTERPRISE AND
PRISON LOCATION

REACTIVATED

EXPANDED

CLOSED

DEACTIVATED

REDUCED

NUMBER OF INMATE JOBS
ADDED OR (LOST)*

DATE OF ACTION

ESTABLISHED

Modular building
Folsom

May 2006

•

100

Construction services
Statewide

July 2010

•

60

Fabric
Centinela

October 2007

Shoe manufacturing
San Luis Obispo

February 2005

•

56

June 2008

•

15†

August 2010

•

12

Digital services
Folsom
Printing
Folsom
Furniture
Tehachapi
Chuckawalla

•

100

February 2005

•

(33)

February 2005

•

(60)

Folsom

July 2009

Corcoran

July 2009

Tracy

July 2010

San Quentin

July 2010

•
•

(74)

•

(94)

•

Optical lab
Pelican Bay

April 2009

•

San Diego

April 2009

•

Silk‑screening
Tehachapi

(30)

(100)
(250)

September 2004

•

(18)

January 2009

•‡

(10)

Dairy
Soledad

April 2009

•

(48)

Metal fabrication
Corcoran

July 2008

Crops
Wasco

•

Total inmate jobs lost
Total enterprises established, reactivated,
or expanded OR Total enterprises
closed, deactivated, or reduced

(67)
(441)

6

12

Sources:  California Prison Industry Authority (CALPIA) analyses for its recommendations to the Prison Industry Board (board), and board minutes for
December 2004 through December 2010.
Notes:  The date that the enterprise was established, reactivated, expanded, closed, deactivated, or reduced is the date that CALPIA submitted to the
board the analysis for CALPIA’s recommendations, the recommendation’s effective date, or the date that the board minutes were approved. Although
some instances of interim actions occurred, the table reflects the most recent actions.
*	 The number of inmate jobs added is CALPIA’s estimate of the maximum number of jobs that could result from its recommendations to the board.
†	 Although the board minutes indicate that CALPIA may employ up to 35 inmates at the Folsom State Prison Project for the Visually Impaired (FPVI),
20 of these positions already existed when CALPIA took over FPVI from the California Department of Corrections and Rehabilitation.
‡	 A crops program still exists at Wasco; however, it is a component of the Corcoran dairy enterprise and is no longer a stand‑alone enterprise.

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A state law change prompted
a deactivation of two optical
enterprise locations and the loss of
250 inmate jobs.

Further, a state law change prompted a deactivation of two optical
enterprise locations. A 2009 state law removed the optical benefit
coverage under California’s Medical Assistance Program (Medi‑Cal)
for adults 21 years of age or older who do not reside in certain
nursing facilities. Because the main client for CALPIA’s optical
services was Medi‑Cal, in April 2009 CALPIA presented the board
with an analysis estimating that the law change would reduce
demand for CALPIA’s optical products by 69 percent and
reduce this enterprise’s net profit by $4.43 million annually. In
reaction to this change, CALPIA deactivated two optical labs, thus
eliminating 250 inmate positions as well as 35 civil service positions.
According to CALPIA’s operations manager, CALPIA attempted
to reopen its silk‑screening enterprise in 2008 and again in 2009.
However, the reopening did not work due to an inability to reach
agreement on correctional officers’ hours of work and the process
of transporting inmates to the work site. These decisions appear to
be appropriate given the circumstances CALPIA described in its
analyses to the board.
As Table 1 shows, CALPIA established, expanded, or reactivated
six enterprises during this same period. Various opportunities
prompted it to recommend these actions to the board. For
instance, to meet Corrections’ demand for shoe repair services,
CALPIA expanded the scope of its shoe manufacturing enterprise
in 2005 to include shoe repair at the California Men’s Colony in
San Luis Obispo after Corrections gave it shoe repair equipment
that had been used in a vocational education program. CALPIA’s
analysis indicates that before it expanded the scope of this
enterprise, Corrections contracted with outside vendors for
shoe repairs at a cost of $800,000 per year. CALPIA projected
that this expansion of the facility would provide employment
for 56 additional inmate workers at full capacity and provide an
annual cost savings to Corrections of $192,000.
Further, CALPIA reactivated the fabric enterprise at the California
State Prison in Centinela after it was shut down because of frequent
prison lockdowns. According to CALPIA’s analysis for reactivating
the fabric enterprise, this institution’s warden committed to
providing the needed support for the fabric enterprise and
to working with CALPIA to develop a plan to overcome work
disruptions that had previously occurred due to lockdowns. The
recommendation noted that the warden had appealed to CALPIA
to establish more programs at his institution because of the limited
number of viable inmate programs there. CALPIA projected that
this reactivation of the fabric enterprise location would provide
additional employment opportunities for 100 inmate workers
and two civil service positions, and it would supply increased
annual revenues of between $750,000 and $1 million. In total,
these six newly established, reactivated, and expanded enterprises

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were projected to provide up to 343 inmate positions, a number
that helped offset the 784 positions projected to be lost by
closing, deactivating, or reducing the capacity of six enterprises at
10 locations throughout the State.
CALPIA Now Documents Its Pricing Decisions but Could Better
Demonstrate How It Determines Product and Service Prices
State law authorizes CALPIA to set prices for the products and
services that it sells to its customers. In setting prices for its
products, CALPIA follows the pricing policy established by the
board, which requires CALPIA to establish prices at levels sufficient
to achieve profitability while still being competitive in the open
market. Since our 2004 audit, CALPIA has made significant
improvements in how it follows the board’s pricing policy. In our
2004 audit, we found that CALPIA lacked documentation for
product prices and was unable to demonstrate to us how it arrived
at the prices for 19 products we reviewed. Since then, CALPIA
added procedures to standardize and retain documentation of
price reviews. Our current audit showed that price analyses were
available for the 25 products we reviewed.
In reviewing these price analyses, we found that CALPIA generally
followed the board’s policy in setting prices, but it needs to better
demonstrate how it arrives at final prices. To assess whether
CALPIA complies with the board’s pricing policy, we judgmentally
selected a best‑selling product according to fiscal year 2009–10
revenues from each of CALPIA’s 25 enterprises. We then evaluated
whether CALPIA complied with the board’s policy that requires it
to establish price based on a profit margin, cost data, and market
data for comparable products and services. For the 25 items we
reviewed, CALPIA provided analyses of its cost data and the
profit margins. The cost data for these items typically showed each
element of CALPIA’s costs, including materials, labor, freight, and
overhead costs.
Although the price analyses for the 25 items also showed the
profit margins charged on the products, in most cases we could
not tell definitively how CALPIA arrived at the amounts of
the profit margins. An instance in which the determination of the
profit margin was clear was for the price of half‑pint containers
of nonfat milk. In this instance, the price analysis indicated that
CALPIA would simply match the lowest comparable vendor
price unless that price was below cost; in that instance, CALPIA
would price at cost. For the other products we reviewed, the price
analyses noted that the profit margins were certain percentage
markups over CALPIA’s costs to produce the products. Although
the marketing chief indicated that a summary of the pricing review

Although the price analyses for
25 items showed the profit margins
charged on the products, in most
cases we could not tell definitively
how CALPIA arrived at the amounts
of the profit margins.

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May 2011

and final decision is often included in the documentation for the
completed analysis, in these instances the price analyses did not
indicate how CALPIA determined the amounts of the percentage
markup. According to the marketing chief, a pricing analyst collects
the information required by the board’s policy and makes a price
recommendation for the product. A discussion between the analyst
and the marketing chief results in a recommended product price
that is submitted to CALPIA management for approval.

Another element of the board’s
pricing policy is that CALPIA
establish prices based on market
data for comparable products and
services, yet, challenges exist in
obtaining price comparisons for
certain products.

Another element of the board’s pricing policy is that CALPIA
establish prices based on market data for comparable products
and services. Four of the 25 items that we selected were specialized
products, such as custom construction projects, that do not have
comparable market data reasonably available. Therefore, CALPIA
did not perform a price comparison for these four items. Of the
remaining 21 items, CALPIA did not consider any comparable
products or relevant market data in determining the prices of
seven products: almonds, coffee, license plates, metal stickers, eggs,
beef patties, and chicken. According to CALPIA’s marketing chief,
because he was not working for CALPIA at the time when these
prices were set, he does not know why these comparisons did not
occur. Further, he explained that challenges exist in obtaining price
comparisons for beef and poultry products because they must be
produced to satisfy the requirements determined by Corrections.
The marketing chief indicated that although CALPIA has found
some vendors that can provide beef and poultry products to meet
Corrections’ requirements, it has been unable to find a vendor that
can both produce and deliver the product to each of Corrections’
33 prisons. As noted in the next section, in our analysis of CALPIA’s
prices, we were able to obtain three comparable prices for license
plates, almonds, and coffee. By not assessing market data and
comparable prices for all products, CALPIA does not obtain an
accurate assessment of the prices actually offered by other vendors
to use in determining some of its prices. According to the marketing
chief, CALPIA is obtaining price comparisons for all products,
where applicable, during fiscal year 2010–11, and he was able to
provide us with the price comparisons used for two of three items—
almonds and license plates—for which CALPIA had performed a
recent pricing analysis.
Although CALPIA’s Prices Are Generally Competitive, Its Customers
Can Find Lower Prices for Certain Products
CALPIA’s prices were below the average prices for comparable
products and services for more than half of the products and
services we evaluated. To determine how well CALPIA meets
the board’s expectation that it remain profitable while setting
prices that are competitive in the open market, we attempted to

California State Auditor Report 2010-118

May 2011

find comparable products or services so that we could compare
prices with 12 of the 25 products and services we selected to assess
CALPIA’s pricing analysis. We compared the price of each product
or service with the prices of three products or services available
from other vendors—private businesses or other governmental
agencies—that met a similar product or service description. To
identify similar products and services, we reviewed CALPIA’s
picture and description of the product or service and compared
it to the picture and/or description of other vendors’ products
or services. We also obtained prices offered by the private sector
and prison industries in other states, and for one item—half‑pints
of nonfat milk—we used the prices paid by three Corrections’
institutions that do not purchase milk from CALPIA. At times
other vendors’ products differed in packaging and appearance, but
we could not quantify the effect of those differences on price.
Further, CALPIA does not collect sales tax on products purchased by
state entities. However, if state customers were to purchase products
from private vendors, they generally would be required to pay the
sales or use tax in the county in which the vendors are located.
Because state customers account for approximately 98 percent
of CALPIA’s revenues, we increased other vendors’ prices by
8.75 percent, if they were private businesses, to reflect the sales and
use tax rate in Sacramento County, which we used for comparison
purposes in our calculation. Finally, CALPIA generally includes
freight costs in its prices, but figures for vendor freight charges were
not readily available from other vendors. Therefore, we generally
removed CALPIA’s freight costs to better compare the prices
between CALPIA and vendors.
We were able to find comparable items for 11 of the 12 products
or services in our sample. For the remaining sample product, we
were unable to find reasonable comparisons for determining other
vendors’ prices because this product—CALPIA’s beef soy patty—is
made to match Corrections’ content specifications. Therefore, we
were not able to find three vendors with a product that met the
same specifications. CALPIA’s prices for five of the 11 items with
reasonable comparisons—nonfat milk, socks, canvas shoes, cotton
core mattresses, and license plates—are above the average prices for
comparable items. CALPIA’s prices for the remaining six items—
coffee, ergonomic chairs, white cotton‑polyester T‑shirts, bar
soap, almonds, and laundry service—are below the average prices
for comparable items. Of the 11 items, CALPIA’s almonds have
the most competitive price, which is 72 percent below the average
vendor’s price. Its least competitive price is for a mattress product,
which is priced 27 percent higher than the average comparable
product price. These 11 products and services account for
23 percent of CALPIA’s revenue in fiscal year 2009–10.

CALPIA’s almonds have the most
competitive price—at 72 percent
below the average vendor’s price—
and its least competitive price is
for a mattress product—priced
27 percent higher than the average
comparable product price.

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Because CALPIA’s prices are above those of other vendors for
five of the 11 items by a range of 7 percent to 27 percent, in some
instances customers pay a premium to purchase these five items
from CALPIA. We identified CALPIA’s top five customers—
Corrections, the Department of Motor Vehicles, state mental
hospitals and developmental centers, the Department of General
Services, and the California Department of Transportation—by
determining its top revenue sources for fiscal year 2009–10. For
10 of the 11 items, Corrections was generally the primary purchaser.
For the remaining item—license plates—the Department of Motor
Vehicles is the sole purchaser. To calculate the amount that these
five state agencies could have saved by purchasing the five items
from sources other than CALPIA, we multiplied the quantity of
these items that the five state agencies purchased during fiscal
year 2009–10 by the difference between CALPIA’s price and the
average of the other vendors’ prices. If these customers were able to
buy from other vendors at the prices we found and at the quantity
the customers purchased in fiscal year 2009–10, they could have
saved $2.2 million. For the remaining six items, CALPIA’s prices
were below the average prices for comparable items, saving the
five state agencies that purchased these items $5.3 million in fiscal
year 2009–10 over what these items would have cost elsewhere. The
overall estimated net savings to the State for the purchase of these
11 items from CALPIA was $3.1 million.
Finally, CALPIA cannot always make price comparisons for some of
its products because there are no reasonably comparable products.
In some cases, CALPIA makes products to meet a state agency’s
specific need. For example, CALPIA produces for the California
Highway Patrol a metal equipment tray that is specially designed to
fit in the trunk of patrol cars. The price of this product is difficult
to compare to items from private industry because it is not an item
typically sold by other vendors.
Overall, CALPIA Is Self‑Supporting
One of CALPIA’s ultimate goals is to be self‑supporting by
generating enough revenue from the sale of its products and
services to cover its expenses. CALPIA receives its total inflow of
revenue from the sale of its products, services, and contracting
with Corrections to assume responsibility for managing various
career technical education programs, such as preapprenticeship
carpentry and preapprenticeship concrete finishing. CALPIA is
not included in Corrections’ budget and must acquire sufficient
funds to sustain and continue its operations. State law does not
provide significant detail as to how and to what extent CALPIA is
to remain self‑supporting. As shown in Figure 5, according to its
audited financial statements, CALPIA has been profitable during

California State Auditor Report 2010-118

May 2011

recent fiscal years, but from fiscal years 2000–01 through 2007–08,
it had an overall net loss on its operations ranging from $40,000
to $7.84 million. However, over the 18‑year period from fiscal
years 1992–93 through 2009–10, CALPIA profits and losses have
resulted in a net surplus of $7.94 million. According to the chief of
accounting services, CALPIA was able to offset its losses using funds
it retained from profitable years. If needed, state law allows CALPIA
to borrow money for specified purposes from private sources with
the approval of the Department of Finance and from the Pooled
Money Investment Board. However, the chief of accounting services
indicates that CALPIA has not needed to do so during this period.
Figure 5
California Prison Industry Authority’s Net Profit and Loss for the Past 18 Years
(Dollars in Millions)
$10
8
6

Net Profit (Loss)

4
2
0
(2)
(4)
(6)
(8)

2009–10

2008–09

2007–08

2006–07

2005–06

2004–05

2003–04

2002–03

2001–02

2000–01

1998–99

1999–2000

1997–98

1996–97

1995–96

1994–95

1993–94

1992–93

(10)

Fiscal Year
Sources:  California Prison Industry Authority’s annual financial reports for fiscal years 1992–93
through 2009–10.

Some CALPIA enterprises operate at a profit while others operate
at a loss. Although it has been profitable overall from fiscal
years 2008–09 through 2009–10, in fiscal year 2009–10, the net
profit from 12 of CALPIA’s active enterprises offset the losses from
the remaining 13. As Table 2 on the following page displays, during
fiscal year 2009–10 the license plate enterprise earned the highest
net profit at about $4.2 million, and the furniture enterprise was
the most unprofitable with an almost $6.6 million net loss. Even
though certain enterprises are unprofitable, CALPIA asserts that

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California State Auditor Report 2010-118

May 2011

they provide job skills and develop good work habits for inmate
workers. For example, CALPIA’s laundry enterprise had a net loss
of $117,000 for fiscal year 2009–10. However, CALPIA reported
that it provided, on average, monthly employment for 830 inmate
workers during that fiscal year, which is 15 percent of CALPIA’s total
inmate employment. Similarly, the furniture enterprise had a net loss
of $6.6 million in fiscal year 2009–10, but, on average, it provided
employment to 568 inmate workers during the same period, or about
10 percent of the total inmate employment.
Table 2
Profitability of the California Prison Industry Authority’s Enterprises for
Fiscal Year 2009–10 Compared to Their Profitability for Fiscal Year 2008–09
FISCAL YEAR 2009–10
NET PROFIT (LOSS)

FISCAL YEAR 2008–09
NET PROFIT (LOSS)

$4,174,145

$3,884,585

Optical

3,533,463

6,868,251

Fabric products

3,395,712

3,918,451

Cleaning products

2,092,349

1,013,638

Printing

2,079,610

2,282,027

ENTERPRISE

License plates

Meat cutting

805,057

5,293

Knitting mill

422,802

303,439

Coffee roasting

367,832

623,937

Egg production

243,263

464,336

Metal signs

234,833

329,151

Poultry

171,215

(342,480)

Dental

32,140

19,677

(160)

(88,694)

Bakery

(11,293)

(11,464)

Bindery

(16,304)

693,167

Shoes

(40,897)

(382,644)

Food and beverage packaging

(64,211)

958,089

Mattresses

Laundry

(116,567)

(235,435)

Modular construction

(394,448)

1,757,605

Digital services

(414,163)

(487,617)

Crops

(662,686)

(1,287,973)

Metal products

(710,117)

(2,201,000)

Dairy

(1,480,427)

(3,690,777)

General fabrication

(3,759,618)

(1,116,773)

Furniture

(6,594,281)

(6,319,826)

Silk‑screening*
Totals

(5,889)

2,174

$3,281,360

$6,959,137

Sources:  Fiscal years 2008–09 and 2009–10 draft reports on estimated profits by industry for the
California Prison Industry Authority (CALPIA).
*	 This enterprise closed completely in September 2004, and the monetary amounts shown
represent the revenues that passed through this enterprise from an attempt by CALPIA to reopen
the enterprise.

California State Auditor Report 2010-118

May 2011

In response to the unprofitability of the furniture enterprise,
CALPIA has cut inmate positions at four furniture factories since
July 2009. The assistant general manager of marketing (marketing
manager) indicated that the deactivations and reductions resulted
from a continuing decline in demand for furniture primarily due to
the poor state of the economy and the budget cuts experienced by
state agencies, which are expected to continue. Conversely, fabric
products, one of CALPIA’s most profitable enterprises, earned a
net profit of $3.4 million for fiscal year 2009–10 and employed an
average of 1,300 inmates, providing the highest inmate employment
of all its enterprises.
Some enterprises experienced significant changes in profitability
between fiscal years 2008–09 and 2009–10. For example, the
optical enterprise, with a reduction in net profit of $3.3 million
between these fiscal years, has been affected by a 2009 state
law that removed the Medi‑Cal optional benefits coverage for
adults 21 years of age or older who do not reside in certain
nursing facilities. General fabrication saw its net loss increase by
$2.6 million. According to the marketing manager, this enterprise
has experienced a revenue decrease and has substantial fixed costs
to cover. Dairy, which operated at a net loss during both fiscal years,
saw its net loss decrease by $2.2 million in fiscal year 2009–10.
According to the marketing manager, the loss reduction was due to
CALPIA’s action to close the dairy enterprise at the Correctional
Training Facility as well as a decrease in fixed costs.
CALPIA Recently Began Including Overhead Costs When Calculating
Enterprise Self‑Support
Before January 2010 CALPIA did not routinely allocate overhead
cost among its enterprises in evaluating their overall profitability.
Specifically, it did not routinely allocate costs for such items as
central office and retirement overhead to the enterprise level.
Instead, according to the assistant general manager of administration
(administration manager), CALPIA allocated these overhead
costs only on an as‑needed basis. According to the administration
manager, if an enterprise’s viability needed further analysis, staff
would calculate a more accurate estimate of operating income
or loss.
Although CALPIA routinely calculated the gross profit of its
enterprises, this calculation only included the cost of goods
sold and did not include overhead costs. Without allocating all
expenditures, some enterprises may appear profitable when they
are not. For example, CALPIA’s overhead expenditures in fiscal
year 2008–09 were $41 million. Without the allocation of its
overhead expenditures, 22 of the 25 CALPIA’s enterprises appear

In response to the unprofitability
of the furniture enterprise,
CALPIA has cut inmate positions
at four furniture factories since
July 2009.

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May 2011

profitable. However, when the $41 million is allocated, only 14 of the
25 active enterprises remain profitable. We did note, however, that
the price analyses that CALPIA uses to establish prices for products
generally included overhead expenses.
According to the administration manager, before 2010 CALPIA
assessed enterprise profitability using reports on monthly revenue,
statements of operations by enterprise, and comparisons of budget
to actual expenses, along with estimated percentages to capture
overhead costs—which include central office, distribution and
transportation, selling and administrative, and nonoperating
revenues and expenditures. She indicated that the operations
division branch and enterprise managers conducted extensive
analyses of these data but that many anomalies are associated with
each enterprise; therefore, it is important to consider underlying
factors that are not available from the automated monthly financial
reports. Because this process was cumbersome, in January 2010
CALPIA began developing a report, known as an estimated profit
report that would automatically capture this information.
The administration manager noted that, in response to our request,
CALPIA compiled a version of an estimated profit report using
audited financial statement data from fiscal year 2008–09 with an
allocation of fiscal year 2009–10 overhead costs. She cautioned
that this report is not indicative of the operating income or
loss that would have been calculated if the report existed in fiscal
year 2008–09. Although the estimated net profit report was only
recently created, she asserted that historically, CALPIA has used
an appropriate and sound measuring methodology to calculate
the net profit of each enterprise. The administration manager
indicated that in the future CALPIA would use this estimated profit
report monthly beginning in March 2010. Table 3 shows how the
profitability of CALPIA’s enterprises changes when overhead costs
are allocated.
If CALPIA does not allocate
overhead costs, CALPIA’s
financial data shows that only
three enterprises are unprofitable,
rather than the 11 enterprises when
such costs are allocated.

If CALPIA does not allocate overhead costs, its financial data
shows that only three enterprises are unprofitable. However, when
CALPIA does allocate overhead costs, the number of unprofitable
enterprises grows to 11. Four of these enterprises—laundry, general
fabrication, furniture, and dairy—have significant freight costs;
therefore, the true profitability of these four enterprises are the
most affected when CALPIA includes overhead in its calculations.

California State Auditor Report 2010-118

May 2011

Table 3
California Prison Industry Authority’s Enterprise Profitability
With and Without the Allocation of Overhead Costs
Fiscal Year 2008–09

ENTERPRISE

Optical

FISCAL YEAR
2008–09 GROSS
PROFIT (LOSS)

LESS OVERHEAD
COSTS

FISCAL YEAR
2008–09 NET
PROFIT (LOSS)

$9,855,570

$2,987,319

$6,868,251

Fabric products

8,107,086

4,188,635

3,918,451

Laundry

5,155,759

5,391,194

(235,435)

License plates

4,634,422

749,837

3,884,585

Food and beverage packaging

3,478,399

2,520,310

958,089

Printing

3,180,918

898,891

2,282,027

Modular construction

2,496,425

738,820

1,757,605

Cleaning products

1,903,491

889,853

1,013,638

Egg production

1,492,189

1,027,853

464,336

General fabrication

1,385,364

2,502,137

(1,116,773)

Bindery

1,234,430

541,263

693,167

Meat cutting

1,221,185

1,215,892

5,293

Bakery

989,973

1,001,437

(11,464)

Coffee roasting

917,668

293,731

623,937

Knitting mill

728,444

425,005

303,439

Mattresses

584,825

673,519

(88,694)

Metal signs

554,139

224,988

329,151

Poultry

500,304

842,784

(342,480)

Furniture

424,937

6,744,763

(6,319,826)

Shoes

423,539

806,183

(382,644)

Dairy

158,243

3,849,020

(3,690,777)

Dental

151,169

131,492

19,677

Digital services

(257,389)

230,228

(487,617)

Metal products

(485,568)

1,715,432

(2,201,000)

Crops

(909,337)

378,636

(1,287,973)

2,733

559

2,174

$47,928,918

$40,969,781

$6,959,137

Silk‑screening*
Totals

Source:  Fiscal year 2008–09 draft report on estimated profits by industry for the California Prison
Industry Authority (CALPIA).
*	 This enterprise closed completely in September 2004, and the monetary amounts shown
represent the revenues that passed through this enterprise from an attempt by CALPIA to reopen
the enterprise.

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Recommendations
CALPIA should continue to use its recently improved method
of identifying new product ideas and the changing needs of
state agencies.
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 use
the estimated net profit report on a regular basis to review the
profitability of each enterprise and to make decisions on how to
improve the profitability of those enterprises that are unprofitable.
We conducted this audit under the authority vested in the California State Auditor by Section 8543
et seq. of the California Government Code and according to generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives
specified in the scope section of the report. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,

ELAINE M. HOWLE, CPA
State Auditor
Date:	

May 24, 2011

Staff:	

John Baier, CPA, Audit Principal
Jerry A. Lewis, CICA
Lisa Ayrapetyan
Dan Claypool
Shannon Wallace, CPA

IT Audit Support:	 Michelle J. Baur, CISA, Audit Principal
Ryan P. Coe, MBA
Legal Counsel:	

Scott A. Baxter, JD

For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.

California State Auditor Report 2010-118

May 2011

Appendix
COMPARISON OF THE CALIFORNIA PRISON INDUSTRY
AUTHORITY’S REPORTED RECIDIVISM RATES WITH
THE BUREAU OF STATE AUDITS’ RECALCULATION OF
THOSE RATES
In its report to the Legislature for fiscal year 2008–09, the
California Prison Industry Authority (CALPIA) reported that
parolees who worked at its enterprises have lower recidivism
rates than do parolees from the general inmate population of
the California Department of Corrections and Rehabilitation
(Corrections). In Table A.1 on the following page, we show the
data that CALPIA provided to the Legislature. The column labeled
CALPIA—Total Number of Parolees—includes parolees who worked
at a CALPIA enterprise for at least six months while they were
imprisoned, and the column labeled Corrections—Total Number
of Parolees—includes all inmates, both general population and
parolees in the CALPIA column, who were released during each of
the three fiscal years represented. Dashes represent data that were
absent from the table that CALPIA presented to the Legislature. As
Table A.1 shows, in all instances in which comparable data exist, the
recidivism rate for CALPIA is lower than that for Corrections.
In Table A.2 on the following page, we recalculated the recidivism
rates reported by CALPIA and found that CALPIA’s claim of lower
recidivism rates than those for Corrections is correct. Specifically,
although our calculation did not produce the same recidivism
rates that CALPIA calculated, it confirmed that the recidivism rates
of CALPIA parolees were lower than those of Corrections’
general‑population parolees. We used Corrections’ methodology
and CALPIA’s criteria to perform our calculation. This calculation
was based on inmate movement information found in Corrections’
Offender Based Information System and inmate job assignment
information from Corrections’ Distributed Data Processing System
to determine which parolees worked at a CALPIA enterprise
for at least six consecutive months while they were imprisoned.
However, we arrived at different numbers than CALPIA reported.
For example, CALPIA determined the number of CALPIA parolees
released in fiscal year 2007–08 was 1,637, and our calculation
showed this number as 2,235. Despite these differences, our
calculations also show that in every instance in which comparable
data exist, the recidivism rate for CALPIA’s parolees is lower than
that for Corrections’ general‑population parolees.

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Table A.1
Recidivism Rates as Reported by the California Prison Industry Authority
CALIFORNIA
PRISON
INDUSTRY
AUTHORITY
(CALPIA)

CALIFORNIA DEPARTMENT
OF CORRECTIONS
AND REHABILITATION
(CORRECTIONS)

CALPIA

CORRECTIONS

CALPIA

CORRECTIONS

CALPIA

CORRECTIONS

ONE-YEAR

ONE-YEAR

TWO-YEAR

TWO-YEAR

THREE-YEAR

THREE-YEAR

FISCAL YEAR

TOTAL NUMBER
OF PAROLEES

TOTAL NUMBER OF
PAROLEES*

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

2007–08

1,637

116,497

—

—

—

32%

42%

40%

2006–07

1,853

115,522

31

43

43

56%

44%

—

2005–06

1,822

108,637

32

45

43

59

44

63%

Source:  CALPIA’s annual report to the Legislature for fiscal year 2008–09.
*	 As stated on page 47, the total number in the column showing the number of Corrections’ parolees includes both general-population parolees
and the parolees in the CALPIA column.

Table A.2
Recidivism Rates as Calculated by the Bureau of State Audits
CALIFORNIA
PRISON
INDUSTRY
AUTHORITY
(CALPIA)

CALIFORNIA DEPARTMENT
OF CORRECTIONS
AND REHABILITATION
(CORRECTIONS)

CALPIA

CORRECTIONS

CALPIA

CORRECTIONS

CALPIA

CORRECTIONS

ONE-YEAR

ONE-YEAR

TWO-YEAR

TWO-YEAR

THREE-YEAR

THREE-YEAR

FISCAL YEAR

TOTAL NUMBER
OF PAROLEES

TOTAL NUMBER OF
PAROLEES*

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

RECIDIVISM
RATE

2007–08

2,235

116,574

—

—

—

41%

47%

52%

2006–07

1,745

115,596

38

47

52

58%

55%

—

2005–06

1,275

108,711

35

49

49

61

55

65%

Sources:  The Bureau of State Audits’ analysis based on the data retrieved from Corrections’ Offender Based Information System and Distributed Data
Processing System. As noted in the Scope and Methodology, we concluded that both systems used in this analysis are of undetermined reliability.
*	 As stated on page 47, the total number in the column showing the number of Corrections’ parolees includes both general-population parolees
and the parolees in the CALPIA column.

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49

May 2011

(Agency comments provided as text only.)
Prison Industry Authority
560 East Natoma Street
Folsom, CA 95630
May 4, 2011
Elaine Howle, CPA*
State Auditor
Bureau of State Audits
555 Capitol Mall, Suite 300
Sacramento, California 95814
Dear Ms. Howle:
Attached is the California Prison Industry Authority’s (CALPIA) response to the findings and
recommendations in the Bureau of State Audits (BSA) draft audit report titled “California Prison Industry
Authority: It Can More Effectively Meet Its Goals of Maximizing Inmate Employment, Reducing Recidivism,
and Remaining Self‑Sufficient”.
The CALPIA asked a member of the legislature to request this audit via the Joint Legislative Audit Committee
because we were interested to learn how the CALPIA had improved since BSA’s previous audit conducted in 2004.
We are pleased that the BSA recognizes the taxpayer benefits of CALPIA through lower prices and reduced
recidivism. The report establishes that CALPIA remains self‑sufficient despite the global recession. The BSA
has confirmed that inmates who participate in CALPIA programs have a lower rate of recidivism after release
than the California Department of Corrections and Rehabilitation (CDCR) general population. In addition, the
BSA acknowledged that for a majority of product prices tested by the BSA, CALPIA prices were lower than
the average price of similar products available, saving taxpayers money.
We appreciate the recommendations the BSA has made regarding improvements in the methodology for
determining the recidivism rate for CALPIA offender participants and the General Fund savings that accrue
via this reduced recidivism rate. We are grateful for the extended time the BSA has taken to conduct the
audit and we look forward to your assistance to ensure the areas that require further clarification and/or
discussion are addressed before the report is finalized.
If you have any questions or need additional information, please contact me at (916) 358‑2699.
Sincerely,
(Signed by: Charles L. Pattillo)
CHARLES L. PATTILLO
General Manager

*  California State Auditor’s comments begin on page 55.

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Response to the Assessments and Recommendations
Bureau of State Audits Report
CHAPTER 1 ASSESSMENTS:

3

4

5

1.	

CALPIA lacks a reliable source of Employment Information about released inmates.

	

CALPIA concurs. CALPIA does not have access to a reliable source of employment data.

2.	

Using EDD Employment Data has proved futile.

	

CALPIA concurs.

3.	

CalParole System Data, if reliable, could provide employment information for Parolees.

	

CALPIA has not been briefed on CalParole data collection. It is not possible to respond to this assessment.

4.	

CALPIA has inconsistent guidelines governing the assignment of inmates to its programs.

	

CALPIA does not concur with this assessment. CALPIA has established, to the extent possible,
guidelines that are aligned with the demographics of the institutions that currently have an
established CALPIA program. Given that the primary responsibility for inmate assignments rest with
CDCR and not CALPIA, this has proven to be a challenge.

	

In 2009, CALPIA started the process to establish regulations that governs the assignment of inmates
to its programs. This process has taken longer than CALPIA would like, but given the required
regulatory review by the Office of Administrative Law, CALPIA can do little to quicken the process.
CALPIA expects these regulations to be implemented in the summer of 2012.

5.	

CALPIA has not been formally tracking its newly developed organization‑wide
performance indicators.

	

CALPIA does not concur with this assessment. CALPIA has established a matrix to track the
performance related to each goal.

6.	

Improvements are warranted in the calculation of CALPIA’s recidivism rate and its savings
to taxpayers.

	

CALPIA concurs with the suggestion to improve the savings calculations related to recidivism and
general fund savings, and the BSA acknowledgement that CALPIA provides a savings to taxpayers
and CDCR.

–1–

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May 2011

Response to the Assessments and Recommendations
Bureau of State Audits Report
7.	

The recidivism rates for CALPIA parolees are lower than those for general population Parolees.

	

The BSA has confirmed that inmates who participate in CALPIA programs have a lower rate of
recidivism after release than the CDCR general population. While CALPIA concurs with the assessment,
we do not agree with the data that was presented in Table A.2. Table A.2 assessment appears to be
flawed. The table represents BSA recidivism calculations and is 28% higher in FY 2007-08 than CALPIA’s.
CALPIA has reviewed our calculations and can not determine the source of this discrepancy. CALPIA
stands by its original calculations.

8.	

CALPIA’s savings calculation can also be improved.

	

CALPIA concurs, and is pleased that the BSA audit confirmed an $8.4 million dollar savings to
California taxpayers in 08-09 FY alone.

6

7

CHAPTER 1 RECOMMENDATIONS:
1.	

CALPIA should continue its efforts to issue regulations and complete the amendment of
Corrections Operations Manual. It should then work with Corrections to implement the changes
to the inmate assignment criteria and the assignment process when the regulation takes effect.

	

CALPIA recognized the need to establish regulations for assigning inmates to its program and has
been working with CDCR since 2009 prior to the BSA audit. Therefore, this assessment is consistent
with the current direction of the organization. We appreciate the auditor documenting our efforts.

2.	

CALPIA should ensure all its performance indicators are clear, measurable, and consistently
tracked. It should follow through with properly measuring its organization‑wide performance
and tracking each performance indicator. Also, CALPIA needs to create a process that will allow
its management to review the results of performance tracking and ensure that the results can be
recreated at least annually.

	

CALPIA concurs that consistently tracking performance is important, but some of the assessments are
inaccurate and based on a “point in time”.

	

BSA has chosen to identify three (3) performance metrics out of approximately 50 that have been
established for the organization and is attempting to come to an over arching conclusion based on
this selective and narrow sampling. For instance, BSA uses the following example “establish real world
performance and participation expectations for CALPIA staff and inmates” with the assertion that this is not
measurable; it should be noted that this performance measure was taken from Goal 2 which has a total of
10 performance measures all of which Goals and Reports are tracked to specific outcomes. A “Real World
Work Model” can and will be measured through successful outcomes of the inmates that participate

–2–

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Response to the Assessments and Recommendations
Bureau of State Audits Report
	

in CALPIA programs. As part of CALPIA’s inmate assignment criteria, inmates will be required to “apply”
for a position in CALPIA and will not be assigned on the current first come first serve basis. Requiring
inmates to apply for position is consistent with “Real World” standards and it is measurable.

	

CALPIA established a goal of adopting ISO 9000 as the foundation of its statewide quality
management system. In 2007, CALPIA completed its first phase of implementing ISO 9000 with the
certification of the General Fabrication enterprise. This enterprise produces modular furniture known
as Century Systems. Since 2007, the Modular Building Enterprise, Furniture Enterprise, CALPIA’s
Central Office (includes administration, operations, marketing/sales divisions) and the On‑Time
Delivery program have been certified. In addition, Phase 1 of the Fabric Enterprise certification began.
The Fabric Enterprise, Knitting Mill Enterprise and Mattress Enterprise will complete the certification
process by June 2011. CALPIA’s plan is to have all Enterprises certified by December 2014.

3.	

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 is performed. It
should also qualify its savings by stating that employment at CALPIA enterprise may be one of
several factors that contributed to the lower recidivism of its inmates.

	

CALPIA concurs.

CHAPTER 2 ASSESSMENTS:

9
10
11

1.	

Declining inmate participation is the result of CALPIA’s closing of enterprises due to economic
concerns and other factors.

	

CALPIA concurs with this assessment. CALPIA has been greatly affected by the economic downturn.

2.	

CALPIA’s lack of enterprise expansion has led to a significant decline in inmate participation rates.

	

CALPIA does not concur with this assessment. To make the general statement that “lack of enterprise
expansion has led to a significant decline in inmate participation rates” is an over‑simplification of
the situation. The BSA audit attempts to convey to the reader that CALPIA has done little or nothing
to increase program opportunities. Specifically, the BSA audit infers that CALPIA has closed more
programs than it has opened. This is simply untrue. When reviewing CALPIA programs, it is critical
to look at the entire array of programs. CALPIA currently operates two different program categories,
traditional CALPIA enterprises and Career Technical Education (CTE) programs (CALPIA vocational
education). The BSA audit does not acknowledge all of the CTE programs.

–3–

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Response to the Assessments and Recommendations
Bureau of State Audits Report

	

Given the CALPIA mission to rehabilitate inmates while they are incarcerated, it is inappropriate
not to include all of the CTE programs started by CALPIA over the last 5 years. CALPIA currently
operates 6 CTE programs throughout the state located at CIW, CIM, FSP (2 Programs), and CSP‑SAC
(2 Programs). These programs have proven to have a high impact on reducing recidivism, and provide
service to inmates that should be included in CALPIA offender counts.

3.	

CALPIA now documents its pricing decisions but could better demonstrate how product and
service prices are determined.

	

As stated in the audit CALPIA retained price analyses for the 25 items reviewed. CALPIA will continue
to seek out reasonable and logical comparable market data when completing pricing analyses. As
noted in conversations with BSA staff, retrieval of comparable data is often difficult to locate and
judge usefulness and validity, however CALPIA continues to recognize the value of collecting
and using this data sensibly in that it provides current insight into best value for our customers.

4.	

Although CALPIA’s prices are generally competitive, its customers can find lower prices for
certain products.

	

As stated in the audit, CALPIA products were priced lower in 6 out of 11 products and services
evaluated, saving the State an estimated $3.3 million annually for these selected products alone,
not including further administrative costs incurred by individual customers’ procurement processes.
CALPIA will continue to strive to reduce costs and therefore prices, while retaining self‑sufficiency
and providing job skills to inmate employees.

5.	

Overall, CALPIA is self‑supporting.

	

CALPIA concurs with this assessment. We are pleased that the BSA recognizes that CALPIA remains
self‑sufficient consistently with our statutory requirement, despite the global recession.

6.	

CALPIA recently began including overhead costs when calculating enterprise self‑support.

	

The overhead costs have always been monitored and documented within the financial statements
for CALPIA.

CHAPTER 2 RECOMMENDATIONS:
1.	

CALPIA should continue to use its recently improved method of identifying new product ideas
and the changing needs of state agencies.

	

CALPIA concurs with this recommendation.
–4–

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Response to the Assessments and Recommendations
Bureau of State Audits Report

13

2.	

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

	

CALPIA concurs with the BSA recommendation that it should continue to document associated costs,
market data, prices and margins when completing pricing analyses. Consideration of specific market
data should be based on sound business reasons and an explanation of how product and services
final prices are determined should be included more systematically.

3.	

CALPIA should continue to ensure that its managers use the Estimated Profit Report on a regular
basis to review the profitability of each enterprise and to make decisions on how to improve the
profitability of those enterprises that are unprofitable.

	

CALPIA currently utilizes this report on a monthly basis. However, profitability is not the only factor in
deciding whether an enterprise within CALPIA is viable or valuable to its overall mission.

–5–

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May 2011

Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON
THE RESPONSE FROM THE CALIFORNIA PRISON
INDUSTRY AUTHORITY
To provide clarity and perspective, we are commenting on the
response to our audit from the California Prison Industry Authority
(CALPIA). The numbers below correspond to the numbers we
placed in the margins of CALPIA’s response.
It is misleading, at best, for CALPIA to conclude the sole reason
that parolees that worked for a CALPIA enterprise return to prison
at a lower rate than parolees from the general prison population. As
we state on pages 28 and 29, to reach such a conclusion, CALPIA
has to control for all other possible factors that might have caused
parolees not to return to prison. Unless CALPIA can control for
all other possible factors, it needs to qualify the variance between
recidivism rates for the two groups by stating that employment with
CALPIA is only one of several factors that may have contributed to
the lower recidivism rates.

1

CALPIA’s comment regarding areas requiring further clarification
and discussion is puzzling. We discussed the findings included in
our report during a formal exit conference and during the five-day
period when CALPIA was reviewing the draft report. We stand by
the findings and conclusions contained in our report and believe
they are clear and require no further discussion.

2

Because the CalParole Tracking System is under the jurisdiction
of the California Department of Corrections and Rehabilitation
(Corrections), we did not brief CALPIA on our findings related to it.

3

CALPIA is missing the point. We did not conclude that the inmate
assignment guidelines do not align with the demographics of
the institutions. Rather we concluded they were inconsistent.
Specifically, the four institutions with inmate assignment guidelines
had inconsistencies among them as described on page 22.
Moreover, because it is making the effort to amend Corrections’
operations manual to implement statewide guidelines, even
CALPIA recognizes that inconsistencies exist.

4

Although CALPIA established a matrix to track its performance
during fiscal year 2010–11, as noted on page 24, the matrix was not
finalized until March 2011. Thus, for nine months of the fiscal year
CALPIA was unable to formally track its performance.

5

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6

We disagree with CALPIA’s assertion that our methodology for
calculating recidivism is flawed. As we state on pages 10, 11, 26,
and 47 of the report, we analyzed Corrections’ Offender Based
Information System (OBIS) inmate movement data to calculate
parolee recidivism rates. OBIS is the system used by Corrections
to capture and maintain all adult offender information, including
movement data, from the time offenders are committed to
Corrections through the time of their discharge. Moreover, as we
state on those same pages of the report, we utilized Corrections’
Distributed Data Processing System (DDPS) to determine which
parolees worked at a CALPIA enterprise for six consecutive
months while they were imprisoned. DDPS is the system used
by Corrections to track day‑to‑day inmate job assignments.
Our analysis did result in higher recidivism rates than CALPIA’s
calculation of recidivism rates for inmates working in its
enterprises during the three years we analyzed; however, our
calculations confirmed CALPIA’s assertion that inmates who work
in CALPIA enterprises have lower recidivism rates than general
population inmates.

7

CALPIA incorrectly concludes that we “confirmed an $8.4 million
dollar [sic] savings to California taxpayers in 08-09 FY alone.” We
did review CALPIA’s calculations and confirm that it overstated the
savings included in the CALPIA report to the Legislature for fiscal
year 2008–09. However, as we note on pages 28 and 29, CALPIA
claimed responsibility for this savings without acknowledging other
factors that may have contributed to the lower recidivism rates.

8

CALPIA’s inference that we reached our conclusions based on a
sample of “three performance [indicators] out of approximately 50”
is erroneous. To clarify, we identified 75 performance indicators in
the tracking matrix that CALPIA provided us, not “approximately 50”
as CALPIA indicates, of which we concluded 39 were either not
measurable or appear vague.  Rather than include our conclusions
on all 75 performance indicators in the report, we included
six examples to provide a balanced view of our conclusions. 
Specifically, on page 24 we describe three performance indicators
that we believed were measurable and on pages 24 and 25
we describe three performance measures that are either not
measurable or appear vague.

9

Despite our efforts to fully brief CALPIA, it misses the point of our
analysis of changes in number of inmates employed at enterprises
shown in Table 1 on page 35. Our audit does not infer that
“CALPIA has closed more programs [emphasis added] that it has
opened,” rather we conclude that CALPIA has closed, deactivated,
and reduced more enterprise locations than it has opened,
reactivated, and expanded. CALPIA’s enterprises attempt to earn
a profit by selling goods and services, as opposed to a training or

California State Auditor Report 2010-118

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certification program that may or may not be associated with an
enterprise. Table 1 shows that CALPIA’s actions have resulted in a
net loss of 441 inmate positions at CALPIA enterprises since 2004,
which is consistent with the decline of inmate employees shown
in Figure 4 on page 33. Therefore, we stand by our conclusion
that CALPIA’s lack of enterprise expansion has led to a significant
decline in inmate participation rates.
As a point of clarification, the career technical education (CTE)
programs that CALPIA refers to were established under a contract
with Corrections. According to CALPIA’s latest report to the
Legislature, $5.4 million of the $8.4 million cost for these programs
between fiscal years 2008–09 and 2010–11 has been reimbursed.
Because CALPIA is partially reimbursed to operate the CTE
programs—rather than establishing an enterprise that will attempt
to earn a profit by selling goods or services—we did not separately
consider them in our analysis of changes in inmate positions
at CALPIA enterprises. However, we recognize that certain
of these CTE programs are included within existing CALPIA
enterprises that we show in Table 1 on page 35.

10

Contrary to CALPIA’s statement, we discuss the career technical
education and certification programs on page 8. We also include the
three locations that CALPIA offers CTE programs on the map of
the 20 CALPIA locations shown in Figure 1 on page 6.

11

As noted on page 43, CALPIA informed us that, before
January 2010, it allocated overhead costs on an as‑needed basis
only. As a result, it is difficult to understand how CALPIA can
assert that it has always monitored its overhead costs. Moreover,
although overhead costs are documented in CALPIA’s year‑end
financial statements, it is important for CALPIA to routinely
allocate overhead costs to its enterprises during the year to properly
manage those enterprises that may be so unprofitable that they
could jeopardize CALPIA’s overall self‑sufficiency.

12

We agree that “profitability is not the only factor in deciding
whether an enterprise within CALPIA is viable or valuable to its
overall mission.” However, because state law requires that CALPIA
must be self-sufficient, CALPIA should be closely monitoring
the finances of those unprofitable enterprises that it chooses to
continue to operate.

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May 2011

(Agency comments provided as text only.)
California Department of Corrections and Rehabilitation
P.O. Box 942883
Sacramento, CA 94283-0001
May 4, 2011
Ms. Elaine M. Howle, State Auditor*
Bureau of State Audits
555 Capitol Mall, Suite 300
Sacramento, CA 95814
Dear Ms. Howle:
The California Department of Corrections and Rehabilitation (CDCR) is submitting this letter in response to
the Bureau of State Audits’ report (BSA) entitled California Prison Industry Authority: It Can More Effectively
Meet Its Goals of Maximizing Inmate Employment, Reducing Recidivism, and Remaining Self‑Sufficient.
BSA reviewed CDCR’s CalParole database as a measurement of the California Prison Industry Authority’s
(PIA) impact on post‑release inmate employability. However, the purpose of CalParole is to track and store
critical parolee data for departmental staff and local law enforcement. It was never designed to collect and
analyze post‑release employment data to determine if PIA can more effectively meet its goals of maximizing
inmate employment. As noted in the report, CalParole is set to be retired in May 2013. As such, it would
not be fiscally prudent to undertake the noted modifications to CalParole as recommended by BSA. CDCR
will continue with its efforts to formalize the Parole Performance Index reporting system which will greatly
improve the integrity of the existing data, without incurring unnecessary expense.
In regards to the 645,000 CalParole records BSA reviewed, which included active, revoked, suspended,
discharged and pre‑parole offenders, we believe it is appropriate to see entries such as “TBD” (To Be
Determined) or “TBA” (To Be Announced) in the Employment Field. These entries are often used in the
pre‑parole phase, which encompasses a period of up to 6 months prior to release. At the time of those
entries, parole staff have no way of knowing if the parolee will be employed upon release or unemployed, as
it has yet to be determined or announced. By classifying the 13,000 “TBD” and “TBA” entries as erroneous, the
report showed the error rate for all records is 5 percent. We respectfully submit that these entries are in fact
not errors, and the amended error rate is actually 3 percent.
We would like to thank BSA for their work on this report. If you should have any questions or concerns,
please contact me at (916) 323‑6001.
Sincerely,
(Signed by: Terri McDonald for)
SCOTT KERNAN
Undersecretary, Operations

*  California State Auditor’s comments appear on page 61.

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Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE CALIFORNIA DEPARTMENT OF
CORRECTIONS AND REHABILITATION
To provide clarity and perspective, we are commenting on
the response to our audit from the California Department of
Corrections and Rehabilitation (Corrections). The numbers
below correspond to the numbers we placed in the margins of
Corrections’ response.
Our recommendation is not for Corrections to modify the
CalParole Tracking System (CalParole) but rather, as stated on
page 29, that as Corrections prepares to move CalParole data into
the Strategic Offender Management System (SOMS), it should
modify the employment-related fields for parolees in SOMS to
minimize the opportunity for erroneous data entries. We clarified
the text on page 20 to more clearly parallel this recommendation. 

1

Our conclusion for what constitutes valid entries into the employer
data field of CalParole is based on Corrections’ CalParole user
guide and the parole agent’s field book policy. As we state on
page 18 of the report, the user guide indicates that employer names
or the word “unemployed” are valid entries into the employer
field. Additionally, the parole agent’s field book policy states that
“social security income” and “school” are also valid entries into the
employer data field if the parolee is unemployed. However, neither
of these sources indicates that TBD (to be determined) or TBA (to
be announced) are valid entries into the employer data field of the
CalParole Job file. Despite several requests, we were not provided
with any other documentation providing guidance for acceptable
entries into CalParole. If Corrections believes that TBD and TBA
are indeed valid entries, it should update the CalParole user guide
and parole agent’s field book policy with this information.

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cc:	

Members of the Legislature
Office of the Lieutenant Governor
Milton Marks Commission on California State
Government Organization and Economy
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press