Louisiana Legislative Auditor - Prison Enterprises - Evaluation of Operations, Department of Public Safety and Corrections, 2019

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PRISON ENTERPRISES EVALUATION OF OPERATIONS
DEPARTMENT OF PUBLIC SAFETY AND CORRECTIONS

PERFORMANCE AUDIT SERVICES
ISSUED MAY 1, 2019

LOUISIANA LEGISLATIVE AUDITOR
1600 NORTH THIRD STREET
POST OFFICE BOX 94397
BATON ROUGE, LOUISIANA 70804-9397

LEGISLATIVE AUDITOR
DARYL G. PURPERA, CPA, CFE

ASSISTANT LEGISLATIVE AUDITOR
FOR STATE AUDIT SERVICES
NICOLE B. EDMONSON, CIA, CGAP, MPA

DIRECTOR OF PERFORMANCE AUDIT SERVICES
KAREN LEBLANC, CIA, CGAP, MSW

FOR QUESTIONS RELATED TO THIS PERFORMANCE AUDIT, CONTACT
EMILY DIXON, PERFORMANCE AUDIT MANAGER,
AT 225-339-3800.

Under the provisions of state law, this report is a public document. A copy of this report has been
submitted to the Governor, to the Attorney General, and to other public officials as required by
state law. A copy of this report is available for public inspection at the Baton Rouge office of the
Louisiana Legislative Auditor and online at www.lla.la.gov.

This document is produced by the Louisiana Legislative Auditor, State of Louisiana, Post Office
Box 94397, Baton Rouge, Louisiana 70804-9397 in accordance with Louisiana Revised Statute
24:513. Ten copies of this public document were produced at an approximate cost of $19.00.
This material was produced in accordance with the standards for state agencies established
pursuant to R.S. 43:31. This report is available on the Legislative Auditor’s website at
www.lla.la.gov. When contacting the office, you may refer to Agency ID No. 9726 or Report ID
No. 40170017 for additional information.
In compliance with the Americans With Disabilities Act, if you need special assistance relative to
this document, or any documents of the Legislative Auditor, please contact Elizabeth Coxe, Chief
Administrative Officer, at 225-339-3800.

LOUISIANA LEGISLATIVE AUDITOR
DARYL G. PURPERA, CPA, CFE

May 1, 2019

The Honorable John A. Alario, Jr.,
President of the Senate
The Honorable Taylor F. Barras,
Speaker of the House of Representatives
Dear Senator Alario and Representative Barras:
This report provides the results of our performance audit of Prison Enterprises (PE). The
purpose of the audit was to evaluate PE’s overall operations, including whether it met its
statutory purposes.
Overall, we found that PE met its three statutory purposes: to use the resources of the
Department of Corrections (DOC) in the production of food, fiber, and other items needed by
inmates to help lower the cost of incarceration; to provide products and services to state
agencies, parishes, municipalities, other political subdivisions, and public employees; and to
provide work opportunities for offenders.
However, we also found some areas in which the organization could strengthen its
operations. For instance, although PE was able to help reduce the costs of incarceration by
paying $3.8 million in wages to offenders between fiscal years 2016 and 2018, it could provide
officials with information about how it lowered other incarceration costs as well.
In addition, between fiscal years 2016 and 2018, 22.7 percent of PE’s total sales were to
state agencies other than DOC. Those sales might have been higher if a mechanism were in place
to ensure state agencies complied with the law that requires them to buy products and services
from PE if the prices are less than those of the Office of State Procurement.
PE also provided work opportunities for offenders. However, nearly 40 percent of the
offenders working for PE are serving life sentences, and some offenders are working in fields
that the Louisiana Workforce Commission has projected to decrease in the future. This means
many of the offenders working for PE may not be learning job skills that could help them after
they are released.
We found, as well, that PE’s expenses exceeded its revenues and that the organization
used more cash than it generated in 11 of the past 23 years. PE also did not comply with its

1600 NORTH THIRD STREET • POST OFFICE BOX 94397 • BATON ROUGE, LOUISIANA 70804-9397
WWW.LLA.LA.GOV • PHONE: 225-339-3800 • FAX: 225-339-3870

The Honorable John A. Alario, Jr.,
President of the Senate
The Honorable Taylor F. Barras,
Speaker of the House of Representatives
May 1, 2019
Page 2

pricing policy for some manufactured items between fiscal years 2016 and 2018. As a result, the
organization overcharged customers by at least $55,306 and undercharged customers by at least
$81,947 for items whose prices should have been fixed.
In addition, PE had no comprehensive marketing plan to help promote its products and
services, nor did it have a process for tracking whether the approximately $117,000 spent on
marketing efforts between fiscal years 2016 and 2018 generated a financial benefit proportionate
to the costs.
PE also did not ensure that all complaints were logged and resolved in a timely manner,
and it did not have an effective process in place to make sure orders were delivered on time. We
found that the number of complaints PE received increased by 121.2 percent between fiscal years
2016 and 2018, and late deliveries increased from 30.7 percent to 40.3 percent.
The following report contains our findings, conclusions, and recommendations. Appendix
A contains PE’s response to this report. I hope this report will benefit you in your legislative
decision-making process.
We would like to express our appreciation to the management and staff of PE and DOC
for their assistance during this audit.
Respectfully submitted,

Daryl G. Purpera, CPA, CFE
Legislative Auditor
DGP/aa
PRISON ENTERPRISES

Louisiana Legislative Auditor
Daryl G. Purpera, CPA, CFE
Prison Enterprises - Evaluation of Operations
Department of Public Safety and Corrections
May 2019

Audit Control # 40170017

Introduction
We evaluated Prison Enterprises’ (PE) overall
operations, including whether it met its statutory purposes.
PE is an ancillary agency within the Department of Public
Safety and Corrections. We conducted this audit because
of legislative interest, and because we have not conducted
a performance audit of PE since 1997.1 State law
(R.S. 15:1153) requires that PE meet the following three
purposes, in order of priority:

The mission of Prison Enterprises is
to lower the costs of incarceration by
providing productive job opportunities
to offenders that instill occupational and
skills training while producing quality
products and services for sale to state
and local governments, non-profit
organizations, political subdivisions,
and others. Operations of PE’s
programs serve to further the DOC
Reentry Initiative by enabling offenders
to increase the potential for successful
rehabilitation and reintegration into
society.



To utilize the resources of the Department
of Corrections (DOC) in the production of
food, fiber, and other necessary items used
by the inmates in order to lower the cost of
incarcerating offenders.



To provide products and services to state agencies and agencies of parishes,
municipalities, other political subdivisions, and public employees.



To provide work opportunities for offenders.

During fiscal year 2018, PE operated 27 different operations within manufacturing,
wholesale, service, and agricultural industries at seven of the state’s eight correctional facilities
and one privately-run correctional center.2 PE produces various products, such as garment items,
furniture, and license plates, and provides canteen items to state correctional facilities and
janitorial services to state buildings. As of June 30, 2018, 62 full-time state employees assist PE
with performing administrative functions and overseeing industry operations and transportation
activities across the state. PE is funded solely through interagency transfers; fees; self-generated
revenues from its sales to state agencies, municipalities, parishes, and non-profit organizations;
as well as sales of agricultural products on the open market. In fiscal year 2018, PE’s total
revenues for all industries were approximately $27.9 million, and total expenditures were
approximately $28.0 million. The majority of PE’s expenditures (approximately $21.2 million,

Our 1997 performance audit of PE can be found here:
http://www.lla.state.la.us/PublicReports.nsf/D4B512B51DF4B38986256FF80067E151/$FILE/00000960.pdf.
2
Winn Correctional Center in Winnfield, LA

Evaluation of Operations

Prison Enterprises

or 75.2%) in fiscal year 2018 was spent on the costs of goods sold, which includes raw materials,
factory overhead, and related personnel expenses.
As of June 30, 2018, 7673 offenders worked for PE operations, representing
approximately 7.2% of the 10,692 offenders who were earning incentive wages or good time
while incarcerated in state facilities at that time. Exhibit 1 shows PE’s operations across the
state, and Appendix C contains a detailed overview of these operations.
Exhibit 1
Map of PE Operations as of June 2018

Source: Prepared by legislative auditor’s staff using information provided by PE.

The objective of this performance audit was to:
Evaluate PE’s operations, including whether it met its statutory purposes.
Our results are summarized on the next page and discussed in further detail throughout
the remainder of the report. Appendix A contains PE’s response to this report, and Appendix B
details our scope and methodology. In addition, Appendix D summarizes the findings and
recommendations from our 1997 performance audit of PE, Appendix E lists selected best
practices from Correctional Industries: A Guide to Reentry-Focused Performance Excellence,
Appendix F details PE net income by industry for fiscal years 2016 through 2018, and Appendix
G details PE expenditures during this time.
3

This number includes 82 offenders working at the privately-run Winn Correctional Center.

Evaluation of Operations

Prison Enterprises

Objective: To evaluate PE’s operations, including whether it
met its statutory purposes.
Overall, we found that PE met its three statutory purposes; however, we found areas where it
could strengthen its operations. We identified the following:




During fiscal years 1996 through 2018, PE’s expenses exceeded its revenues,
and PE used more cash than it generated in 11 (47.8%) of the last 23 years.
In addition, operations, such as silk screen, printing, and corn and cotton
production were not profitable at all during fiscal years 2016 through 2018.
Because best practices recommend that correctional industries be financially
sustainable and maintain positive cash flow in order to ensure long-term viability,
PE should document its evaluation of the profitability of each operation and limit
non-essential expenditures that affect its financial sustainability.



Evaluation of Operations

Prison Enterprises

wholesale prices for canteen items, such as candy bars, which may result in
offenders paying higher prices for these items.




PE has not ensured that all complaints are logged and resolved timely and
has not developed an effective process to ensure that orders are delivered on
time. According to best practices, good customer service is important because it
directly impacts sales; however, the number of PE complaints increased by
121.2% between fiscal years 2016 and 2018, and late deliveries increased from
30.7% to 40.3%.

Many of these findings are the same or similar to the findings we cited in our 1997
performance audit of PE. These issues and our recommendations to strengthen PE’s processes
are explained in further detail in the sections below.

PE met its first statutory purpose of reducing the cost of
incarceration by paying $3.8 million in offender wages from
fiscal year 2016 through 2018, but could better demonstrate
how it lowered other incarceration costs. For example, PE
sold $17 million in products and services to DOC in fiscal
year 2017 but has not demonstrated whether these sales
reduced costs for correctional facilities.
PE’s first statutory purpose is to lower the cost of incarcerating offenders, which it meets
by paying incentive wages for all DOC offenders, whether they work for PE or DOC, that would
otherwise be paid out of the state general fund. As mandated by the Louisiana Administrative
Code,4 PE paid approximately $1,243,779 in incentive wages to all offenders during fiscal year
2018, of which approximately $145,325 (11.7%) was paid to offenders working in PE
operations.5 PE incentive wage rates range from an introductory rate of $0.02 to $0.20 per hour
depending on the skill, industry, and nature of the work performed by the offender. According to
PE, although state law6 authorizes it to pay higher salaries to offenders working in PE operations,
it has not yet done so because of budget constraints. With the exception of three states,
4

LAC 22:I.331
According to the 2018 National Correctional Industries Association (NCIA) Directory, Louisiana is only one of
three states that require its correctional industries to pay non-correctional industry offender wages, along with North
Carolina and Massachusetts.
6
R.S. 15:873 states that the rate of compensation for DOC offenders is no more than 20 cents per hour; for offenders
assigned to Prison Enterprises is up to 40 cents per hour; and for offenders who work as certified academic and
educational tutors is up to $1.00 per hour.
5

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Prison Enterprises

Louisiana has the lowest incentive pay rate ranges for offenders working in correctional
industries,7 according to the 2018 National Correctional Industries Association (NCIA)
Directory.8 Some offender workers can choose to earn a reduction in their sentences, known as
good time, instead of wages. However, DOC policy9 states that offenders not eligible to earn
good time must work three years before they can earn incentive pay. Exhibit 2 shows the pay
rates of offenders working for PE as of June 30, 2018.
Exhibit 2
Pay Rates for Offenders Working in PE Operations
As of June 30, 2018
Number of
Percentage of
Pay Rate Per Hour
Offenders
Offenders
$0.00*
104
13.6%
$0.02** – 0.10
180
23.5%
$0.11 – 0.20
350
45.6%
Suspended Pay Due To Disciplinary Action
2
0.3%
Good Time Earned
131
17.0%
Total
767
100%
*DOC policy states that offenders not eligible to earn good time must work three years
before they can earn incentive pay.
**Introductory incentive pay rate starts at $0.02 per hour in accordance with DOC Policy.
Source: Prepared by legislative auditor’s staff using information provided by PE.

PE also states that it reduces the cost of incarcerating offenders by having its staff
supervise offenders working in PE operations, reimbursing correctional facilities for correctional
officers that supervise PE janitorial crews, and obtaining lower prices for meat and canteen items
with bulk purchases for all state correctional facilities. In addition, PE states that it further
lowers incarceration costs because offenders working in its operations consistently have lower
recidivism rates than the overall offender population. According to DOC, the five-year
recidivism rate for offenders in state correctional institutions was 43.4% in 2018, compared to
31.9% for offenders working in PE operations.
Although not required by law, PE could better document how it has lowered other
incarceration costs, including how its $17 million in sales to DOC and correctional facilities
during fiscal year 2017 helped reduce incarceration costs. PE was also cited in our 1997
report for not measuring or documenting the cost-effectiveness of providing products and
services to DOC. Exhibit 3 outlines PE’s $17 million in sales to DOC in fiscal year 2017, by PE
operation.

Best practices refer to PE and its counterparts in other states as correctional industries.
According to the 2018 NCIA Directory, offenders in Arkansas, Georgia, and Texas do not receive incentive wages.
9
DOC Regulation No. B-09-001, Offender Incentive Pay and Other Wage Compensation
8

Evaluation of Operations

Prison Enterprises
Exhibit 3
PE Sales to DOC by PE Operation
Fiscal Year 2017
PE Operation
Sales $

Sales %
Canteen Distribution Center
$7,722,269
45.3%
Wakefield Meat Plant
3,704,406
21.7%
Hunt Soap Plant
1,140,534
6.7%
LCIW Garment Factory/Uniforms
1,087,657
6.4%
Winn Garment Factory
1,022,378
6.0%
Hunt Garment Factory
631,133
3.7%
Embroidery/Uniforms
424,133
2.5%
Metal Fabrication
408,384
2.4%
Mattress, Broom, and Mop Factory
397,867
2.3%
Print Shop
236,705
1.4%
DCI Chair Plant
132,683
0.8%
Allen Furniture Restoration
94,041
0.6%
Silk Screen Shop
34,196
0.2%
Tag Plant
741
0.0%
Total
$17,037,126 100.0%
Source: Prepared by legislative auditor’s staff using information
provided by PE.

Demonstrating PE’s cost-effectiveness is important, in part, because state law10
authorizes Louisiana correctional facilities to purchase products and services from vendors
located in the parish in which the correctional facility is located, if the prices are less than those
of OSP or PE. However, DOC internal policy requires all state correctional facilities to purchase
products from PE unless there is a compelling reason to utilize another vendor. Two of the three
facilities we spoke with purchased their products from PE without researching other vendors that
may have offered products of similar quality at lower prices. The third stated that it rarely gets
DOC approval for such purchases from another vendor.
Other states, such as Mississippi and California, are required to issue annual reports to the
legislature and other stakeholders that provide information about their correctional industries.
Although PE issues an annual report to DOC, this report is not on PE’s website and does not
include detailed information on how it lowers the cost of incarceration. In contrast, PE’s
contract of available products with prices is available on OSP’s website and is updated annually.
Matter for Legislative Consideration: The legislature may wish to consider
requiring PE to report annually on how it lowered the cost of incarcerating offenders and
complied with its first statutory purpose.

R.S. 15:1157, revised by Act No. 248 of the 2017 Regular Legislative Session, effective June 14, 2017.

Evaluation of Operations

Prison Enterprises

PE met its second statutory purpose of providing products
and services to state and local agencies. From fiscal years
2016 to 2018, 22.7% of its total sales were to state agencies
other than DOC. However, sales to state agencies may have
been higher if a mechanism existed to ensure that state
agencies comply with the law that requires them to
purchase products and services from PE if the prices are
less than those of the Office of State Procurement.
PE met its second statutory purpose to provide products and services to state and local
agencies. From fiscal years 2016 through March 2018, PE sold over $74.4 million in products
and services. Of this amount, approximately $42.8 million (57.5%) was sold to DOC, and
approximately $16.9 (22.7%) million was sold to other state agencies. Exhibit 4 shows a
breakdown of all PE sales from fiscal years 2016 through 2018.
Exhibit 4
PE Sales ($74.4 Million Total Sales)
Fiscal Years 2016 through 2018*

Department
of
Corrections
$42,768,634
57.5%

Other State
Agencies
$16,869,250
22.7%

Agricultural
Commodities
$8,716,843
11.7%
Local
Governments
2,924,673
3.9%

Other
$3,091,992
4.2%

*We obtained JD Edwards data from PE in March 2018; therefore, this
analysis does not include all sales for fiscal year 2018.
Source: Prepared by legislative auditor's staff based on JD Edwards
data provided by PE.

State agencies purchase items such as furniture, cleaning supplies, license plates, and
garments from PE. Exhibit 5 shows what state agencies purchased from PE during fiscal year
2017.

Evaluation of Operations

Prison Enterprises

Exhibit 5
PE Sales to State Agencies
Fiscal Year 2017
Executive Branch State Agency
Examples of Purchases
Department of Public Safety (Excluding DOC)
License plates, cleaning supplies, furniture
Division of Administration
Janitorial services, furniture
Department of Transportation and Development
Janitorial services, furniture
Office of Juvenile Justice
Meat products, garments, canteen
Louisiana Workforce Commission
Janitorial services, garments, cleaning supplies
Department of Health
Furniture, garments
Department of Children and Family Services
Garments, mattresses
Department of Culture, Recreation, and Tourism
Furniture, garments
Secretary of the State
Furniture, silk screen services
Department of Environmental Quality
Silk screen services
Department of Civil Service
Furniture restoration
Department of Justice
Furniture, silk screen services
Department of Wildlife and Fisheries
Furniture, cleaning supplies
Department of Revenue
Silk screen services
Department of Natural Resources
Silk screen services
Department of Agriculture and Forestry
Embroidery services, cleaning supplies
Department of Veterans Affairs
Print services, silk screen services
Department of Education
Silk screen services
Public Service Commission
Print services, silk screen services
Total
Note: Total amounts do not match due to rounding.
Source: Prepared by legislative auditor’s staff based on JD Edwards data provided by PE.

Amount
$3,226,794
2,327,921
389,661
323,498
252,034
202,510
126,687
37,114
24,906
11,364
9,690
9,050
4,388
1,515
1,250
984
964
837
344
$6,951,509

Sales to state agencies may have been higher if a mechanism existed to ensure that
state agencies comply with the law11 that requires them to purchase products and services
from PE if the prices are less than those offered on statewide contracts through the Office
of State Procurement (OSP).12 According to OSP management, it does not have any processes
to ensure that state agencies follow the statutory requirement to buy from PE. OSP stated that
one way for PE to increase sales would be to monitor invitations for bids from other state
agencies and contact these agencies directly with its offer if it can provide the products or
services requested. According to OSP, it advises other state agencies to contact PE when
services and products they are requesting for OSP to bid may be available through PE (i.e.,
furniture, signage, uniforms, etc.). According to the 2018 NCIA Directory, 12 of the 32 states
that mandate their correctional industries receive preference in the State Procurement process
also have a mechanism to enforce this requirement. For example, five of these states13 require
state agencies to obtain a certification from correctional industries staff that correctional
industries cannot provide a product as requested before an agency’s purchase from another
vendor can be approved.
Matter for Legislative Consideration: The legislature may wish to consider
specifying who should enforce R.S. 15:1157(A)(1)(2) to ensure that state agencies are in
11

R.S. 15:1157(A)(1)
OSP manages the purchasing of equipment, goods, supplies, and operating services needed by state agencies by
researching, developing, and issuing statewide and agency-specific contracts.
13
Colorado, Missouri, Ohio, Virginia, and West Virginia
12

Evaluation of Operations

Prison Enterprises

compliance with the requirement to purchase products and services from PE when the
prices are less than those offered on statewide contracts through OSP.

PE met its third statutory purpose of providing work
opportunities for offenders. However, this statutory
purpose does not align with other states and best practices
that recommend correctional industries teach transferable
job skills to help offenders get jobs after release. Currently,
39.2% of offenders in PE are serving life sentences, and
32.5% of PE offenders are working in fields that LWC has
projected to have a decrease in future employment.
Unlike 21 other states and best practice14 recommendations, PE’s statutory purpose of
providing work opportunities for offenders does not require that the work opportunities explicitly
assist offenders with finding employment after they are released. Other states’ laws require their
programs to focus specifically on providing work opportunities to help offenders become
productive citizens once they are released. For example, Colorado15 is required to provide
offenders with training and general work skills that will assist them in finding employment upon
release, and Washington16 provides work training and experience so offenders can qualify for
better work upon release. Best practices17 also recommend that PE create a work environment
that simulates real world work experience and effectively trains and prepares offenders for the
transition to private sector employment upon release. This includes creating a culture focused on
offender reentry success through employment readiness, implementing certificate based soft
skills training, providing certified technical skills training, and providing post release
employment services.
Most offenders participating in PE are serving sentences longer than 10 years, and
32.5% of PE offenders are working in fields that LWC has projected to have a decrease in
employment in the future. Of 76718 total offenders working for PE as of June 30, 2018, 301
(39.2%) were serving life sentences and will likely never be released from correctional facilities.
However, according to PE, offenders serving life sentences serve as a stable workforce for its
operations and provide training to new offenders. Exhibit 6 shows the number of PE offenders
working in each industry broken down by their earliest eligible release dates as of June 30, 2018.

Correctional Industries: A Guide to Reentry-Focused Performance Excellence (see Appendix E)
Colorado R.S.17-24-102
16
Revised Code of Washington 72.09.100
17
See Appendix E.
18
This number includes 82 offenders working at the privately-run Winn Correctional Center.
15

Evaluation of Operations

Prison Enterprises

Exhibit 6
Earliest Release Dates for PE Offenders
As of June 30, 2018
Earliest Release Date
Number of
Percentage of
Eligibility
Offenders
Offenders
Within 10 years
325
42.4%
Within 11 to 20 years
74
9.6%
Within 21 to 30 years
29
3.8%
Within 31 to 40 years
12
1.6%
Within 41 to 60 years
19
2.5%
Within 61 to 90 years
7
0.9%
Life Sentence
301
39.2%
Total
767
100.0%
Source: Prepared by legislative auditor’s staff using information
provided by PE.

Although any job training for offenders has value, not all of PE’s job opportunities mirror
employment opportunities available in the private sector in Louisiana. For example, according
to PE, 30.1% of its offenders worked in garment factories as of June 30, 2018, but industry
projections from LWC from 2016 to 2026 estimate that employment in textile product mills19
will decrease by 4.3%, and apparel manufacturing jobs will decrease by 4.5%.20 However,
27.0% of PE offenders worked in the furniture manufacturing and metal fabrication operations
during this same time, and LWC projected employment in these areas to increase by 10.0% and
8.4%, respectively.
Best practices21 recommend that correctional industries conduct research to ensure that
the skills offenders learn align with the needs of the current job market. Correctional industries
should also consult directly with private sector employers and business associations to determine
the types of technical and soft skills they require. One of PE’s strategic goals for fiscal years
2015 through 2022 is to increase involvement with DOC’s Office of Reentry Services, which
aims to prepare offenders for successful reintegration into their communities. By better
coordinating with DOC’s reentry division, PE could create a mechanism that tracks whether
released offenders were successful in finding employment related to the training they received
while working for PE. In July 2018, PE and DOC’s reentry division received approval from the
State Apprenticeship Council to establish a welder/fitter Registered Apprenticeship Program at
Angola. Offenders who successfully complete this program will have their certification placed
in a nation-wide federal database available to potential employers upon release.
While PE is certified to participate in the Prison Industries Enhancement (PIE)
program,22 it has not been able to find a private sector partner to participate in the
19

According to the Bureau of Labor Statistics, textile product mills manufacture textile products by purchasing
materials and adding decorative stitching such as embroidery or other art needlework on textile products, including
apparel.
20
“State of Louisiana 2016-2026 Projected Employment by Industry”
http://www.laworks.net/LaborMarketInfo/LMI_OccIndustryProj.asp?years=20162026
21
See Appendix E.
22
The Bureau of Justice Assistance, a part of the United States Department of Justice, certified the Department of
Public Safety and Corrections as a PIE program participant on January 20, 1994.

Evaluation of Operations

Prison Enterprises

program since fiscal year 2011. The PIE Certification Program was created by Congress in
1979 to encourage states and units of local government to establish employment opportunities
for offenders that approximate private sector work opportunities. PIE is designed to place
offenders in a realistic work environment, pay them the prevailing local wage for similar work,
and enable them to acquire marketable skills to increase their potential for successful
rehabilitation and meaningful employment upon release. This program also requires that
offenders receive minimum wage and allows that victim restitution, room and board, and other
financial obligations be deducted from offender wages. According to the 2018 NCIA Directory,
of the 45 correctional industries that were PIE certified as of August 2017, 23 had offenders
working in a PIE program.
During our 1997 audit, we found that PE was participating in only one PIE program,
Company Apparel Safety Items, Inc. (CASI), which sold garments for medical use and employed
30 offenders. Our report cited PE for not actively pursuing PIE projects and instead, waiting for
businesses to approach them. According to PE management, CASI was closed in 2011 because
state hospitals consolidated their purchasing and it was cheaper for them to buy overseas. PE
management stated it is currently seeking private businesses to partner with for PIE programs.
Matter for Legislative Consideration: The legislature may wish to consider
amending R.S. 15:1153 to specify that the work opportunities PE is required to provide to
offenders reflect LWC’s employment projections and be prioritized for offenders who
will be released.
Recommendation 1: PE should work with DOC’s Office of Reentry Services to
better coordinate work opportunities in PE industries with those in the current job market
to enhance offenders’ successful reintegration into their communities.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will continue working with the DOC Office of Reentry
Services and will also continue to demonstrate that offenders participating in its programs
have lower recidivism than the overall Department. See Appendix A for PE’s full
response.
Recommendation 2: PE should continue to actively seek businesses to partner with
and to again participate in the PIE program and provide offenders with work
opportunities that are relevant to the job market and pay higher wages.
Summary of Management’s Response: PE agrees with this recommendation
and stated that it will continue to actively seek businesses to partner with and will
participate in a PIE program should a viable opportunity become available. See
Appendix A for PE’s full response.

Evaluation of Operations

Prison Enterprises

During fiscal years 1996 through 2018, PE’s expenses
exceeded its revenues, and PE used more cash than it
generated in 11 (47.8%) of the 23 fiscal years. In addition,
operations such as silk screen, printing, and corn and cotton
production were not profitable at all during fiscal years
2016 through 2018. Because best practices recommend that
correctional industries be financially sustainable and
maintain positive cash flow in order to ensure long-term
viability, PE should document its evaluation of the
profitability of each operation and limit non-essential
expenditures that affect its financial sustainability.
R.S 15:1157 requires PE to sell its manufactured
Financial sustainability exists when
products at a cost that is not less than cost of raw
sales revenue generated covers all costs
and financial obligations associated with
materials23 and its services at a cost that is not less than
correctional industries operations.
the cost for providing the services. Best practices24 also
recommend that correctional industries be financially
Source: Correctional Industries: A Guide to
sustainable and maintain positive cash flow in order to
Reentry-Focused Performance Excellence,
2017.
ensure long-term viability (see text box). It is important
for PE to be financially sustainable because it is not
appropriated any state general funds by the legislature. Our 1997 audit found that expenses
exceeded revenues for 17 (43.5%) of PE’s 39 operations in fiscal year 1995. To evaluate its
financial sustainability, PE policies require it to develop forecasts (such as offender labor
projections, inventory requirements, overhead expenses, and cash flow projections), review
monthly and annual financial statements for each industry, and develop new product structures25
reflecting changes in the cost of finished goods. According to PE management, it analyzes
gathered information along with any factors26 that impacted or are expected to impact sales and
expenses. However, PE does not document how the review of this information impacts
management’s decisions concerning financial sustainability.
During fiscal years 1996 through 2018, PE’s expenses exceeded its revenues for 11 of
the 23 fiscal years. Exhibit 7 shows PE’s net income for fiscal years 1996 through 2018.
Appendix F details PE’s net income, by industry, for fiscal years 2016 through 2018, and
Appendix G details PE expenditures during this time.

While the law requires PE to recoup at least the cost of raw materials, it does not require PE recoup costs
associated with personnel expenses, incentive wages, factory overhead, and operating and administrative expenses.
24
See Appendix E.
25
A product structure lists all materials needed to produce and ship a particular product.
26
Since PE provides a wide variety of products and services, different factors drive costs differently in each
industry. For example, the floods in 2016 resulted in the LCIW Garment factory moving to a different location and
operating at a smaller scale.

Evaluation of Operations

Prison Enterprises

Exhibit 7
PE Net Income
Fiscal Years 1996 through 2018
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
-$500,000
-$1,000,000
-$1,500,000
-$2,000,000

Source: Prepared by legislative auditor's staff using information from PE's Income Statements for FY96 through
FY18.

During fiscal years 1996 through 2018, PE used more cash than it generated in 11 of
the 23 years. Exhibit 8 shows PE’s net cash flow for fiscal years 1996 through 2018. A cash
flow analysis shows how well an agency is generating cash for future operations and, if an
agency uses more cash than it is producing, how this will impact future operations. Best
practices27 state that correctional industries should maintain sufficient operating funds needed to
pay monthly bills and to purchase raw materials and goods to efficiently run business operations.
According to PE, it has been able to meet all financial obligations during fiscal years 1996
through 2018.

See Appendix E.

Evaluation of Operations

Prison Enterprises

Exhibit 8
PE Net Cash Flow
Fiscal Years 1996 through 2018
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
-$500,000
-$1,000,000
-$1,500,000

Source: Prepared by legislative auditor's staff using information from PE's Income Statements from fiscal
years 1996 through 2018.

During fiscal years 2016 through 2018, PE’s chair plant, silk screen, print shop,
rangeherd,28 corn, cotton, orchard, and flight bird operations never incurred enough
revenue to exceed their expenses and lost a total of $4.7 million during this time period.
According to PE management, while it would be ideal for all of PE’s operations to be selfsupporting, it believes that financial sustainability only applies to PE overall and not to
individual operations. Exhibit 9 summarizes the net income for individual operations from fiscal
years 2016 through 2018.

Excludes DCI Rangeherd operations.

Evaluation of Operations

Prison Enterprises
Exhibit 9
PE Net Income by Operation
Fiscal Years 2016 through 2018

Industry/Operation

FY16

FY17

FY18

Manufacturing
Garment Operations
Hunt Garment Factory
Winn Garment Factory
LCIW Garment Factory
Furniture Operations
Allen Furniture Restoration
DCI Chair Plant
Other Manufacturing Operations
Silk Screen
Embroidery
Hunt Soap
Tag Plant
Metal Fabrication
Mattress, Broom, and Mop Plant
Print Shop
Net Income Manufacturing
Canteen Distribution Center
Wakefield Meat Plant
Net Income Wholesale
Janitorial
Canteen Package Program
Net Income Services
Rangeherd Operations
DCI Rep Heifers
LSP Rangeherd
Hunt Rangeherd
RLCC Rangeherd
Wade Rangeherd
Crop Operations
LSP Corn
Cotton
Soybeans
Milo
Other Agricultural Operations
Land and Ag Management
DCI Orchard
Horse Program*
Flight Bird*
Net Income Agriculture
DOC Incentive Wages
Transfer to General Fund
Net Income Support
PE Total Net Income

($193,804)
192,384
315,248

($12,787)
312,588
265,750

$115,679
426,330
35,981

(166,965)
(70,894)

(171,900)
(43,675)

57,141
(36,913)

(98,692)
(7,739)
116,870
565,688
(29,861)
12,072
(69,972)
564,336
Wholesale
476,840
133,573
610,413
Services
47,611
47,611
Agriculture

(112,671)
42,269
250,993
1,181,435
(19,714)
149,524
(6,191)
1,835,620

(93,445)
60,910
170,126
346,461
81,163
66,420
(36,222)
1,193,630

277,827
85,412
363,239

336,666
123,939
460,605

122,853
148,676
271,529

127,912
201,392
329,304

181,159
(756,378)
(155,326)
(41,543)
(199,544)

5,155
(481,359)
(35,974)
(21,711)
(180,290)

224,649
(936,655)
(83,034)
(18,129)
(104,025)

(237,314)
(5,193)
(58,805)
(22,889)

(182,168)
(105,874)
(20,880)
(47,113)

(259,315)
(146,197)
18,451
-

(62,512)
(5,719)
(180,737)
(36,824)
(1,581,626)
Support
(1,225,375)
(331,106)
(1,556,481)
($1,915,747)

34,937
(5,733)
28,178
(92,903)
(1,105,735)

197,331
(5,762)
(7,486)
(1,120,173)

(1,076,327)
(1,076,327)
$288,326

(1,098,454)
(1,098,454)
($235,087)

*Horse Program and Flight Bird operations closed in FY17 and FY18, respectively.
Note: Total amounts do not match due to rounding.
Source: Prepared by legislative auditor’s staff using information from PE’s Income Statements for FY16 through
FY18.

Evaluation of Operations

Prison Enterprises

PE should document its analysis of each operation’s financial sustainability and
management’s subsequent business decisions. This documentation should include an
assessment of the corrective action needed to improve profitability and whether non-financial
benefits, such as providing work opportunities to offenders, outweigh any financial losses.
According to PE management, in some cases it operates unprofitable operations because these
operations support other profitable operations, such as using corn to feed livestock. However,
other states, such as Colorado, require managers of unprofitable shops to prepare business plans
to improve the shops’ performance. These plans are required to include corrective actions, such
as market expansion, price adjustments, staffing and offender employment changes, and other
efficiency measures that shop managers plan to take to improve profitability.
Providing work opportunities to offenders is a key aspect of PE’s statutory purpose and
realizing non-financial benefits by utilizing offenders in operations, even if unprofitable, may
actually outweigh the losses the operations experience. In fact, best practices29 suggest that
correctional industries’ more lucrative business units can be used to offset the financial losses
associated with operating other business units that are not financially self-sufficient but employ
numerous offenders or offer valuable work skills. However, PE does not document when a loss
is acceptable or whether the losses are offset by the benefits achieved. For example, PE stated
that it shut down its Horse Program in fiscal year 2017 and Flight Bird Operations in fiscal year
2018 because the market shrunk for these operations so revenues did not consistently cover their
expenses and management determined that resources could be better used in other operations.
PE management should also document what specific factors it takes into consideration when
deciding to maintain operations that are not self-sufficient.
During fiscal years 2016 through 2018, PE’s expenditures included mandated
payments of over $1.6 million to other state agencies. According to PE management, trying to
effectively operate a financially sustainable business within a government setting is challenging.
For instance, PE is mandated to pay the Office of Technology Services for IT support, the Office
of Risk Management for insurance coverage, the Department of Civil Service for the cost of
operating the state civil service system,30 and OSP for bidding services on PE’s behalf.
Furthermore, the legislature swept $331,106 from PE into the General Fund during fiscal year
2016 even though PE does not receive any state general funds. Exhibit 10 shows mandated
payments PE incurred during fiscal years 2016 through 2018.

29
30

See Appendix E.
R.S. 42:1383

Evaluation of Operations

Prison Enterprises

Exhibit 10
PE Mandated Interagency Payments
Fiscal Year 2016 through Fiscal Year 2018
Agency
FY16
FY17
FY18

Total
Office of State Procurement
$185,136
-*
-*
$185,136
Office of Risk Management
261,858
315,516
370,859
948,233
Office of Technology Services
19,063
56,314
22,990
98,366
Department of State Civil Service
23,940
25,296
23,949
73,185
Transfer to General Fund
331,106
331,106
Total
$821,103
$397,126
$417,798 $1,636,026
*DOC paid PE’s OSP charges for fiscal years 2017 and 2018.
Source: Prepared by legislative auditor’s staff based on documentation provided by PE.

PE management should consider limiting non-essential expenditures that affect its
financial sustainability, including at least $5,164 in agency funds spent during fiscal years
2016 through 2018 that that do not appear necessary to meet its statutory purposes.
According to PE, some of these expenses are used for its Annual Awards and Training
Conference to show appreciation for its staff. PE also paid for staff to participate as a team and
sponsored a hole during the Louisiana Correctional Association (LCA) Golf Tournament held in
Lake Charles, LA during fiscal years 2016 and 2018. According to PE, the golf tournament is
part of the LCA conference, which is attended by a large portion of PE customers, and gives PE
the opportunity to advertise its products and services as well as interact with existing and
potential customers. Exhibit 11 contains PE expenses we identified as not related to its purpose
during fiscal years 2016 through 2018.
Exhibit 11
PE Expenses not Related to Agency Purpose
Fiscal Year 2016 through Fiscal Year 2018
Purpose

Expense
Plaques for PE employees
PE Annual Awards and Training Conference
Duffle Bags for PE employees
Annual Awards and Training Conference
Sponsorship of Golf Hole and
Louisiana Correctional Association Golf
Team Registration
Tournament, FY16 and FY18
Coasters for PE employees
PE Annual Awards and Training Conference
Screened Shirts
PE Annual Awards and Training Conference
Total
Source: Prepared by legislative auditor’s staff based on documentation provided by PE.

Amount
$2,858
739
720
653
194
$5,164

In addition, even though it is not against the law for PE to use its self-generated funding
to feed its offenders or staff that oversee these offenders, PE could improve its financial
sustainability by minimizing non-essential expenses. For example, during fiscal years 2016
through 2018, PE spent at least $29,447 on holiday and appreciation meals for offenders and
staff and $20,700 for canteen items that PE states was for offenders working overtime and other
incentives. According to PE management, it attempts to create an environment similar to a work
environment as recommended by best practices.31 Since PE’s budget does not allow it to give
pay raises or bonuses to offenders or staff, feeding them during holidays and providing canteen
items as incentives is PE’s way of showing its appreciation and boosting morale.
31

See Appendix E.

Evaluation of Operations

Prison Enterprises

Recommendation 3: PE should document how its review of forecasts, financial
statements, updated product structures, and other financial information impacts
management’s decisions concerning financial sustainability.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will continue to produce, analyze, and document its
financial position to further enhance its overall financial sustainability. See Appendix A
for PE’s full response.
Recommendation 4: PE should considering limiting non-essential spending on food
and other items for offenders and staff.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will continue to monitor and limit non-essential
expenses. See Appendix A for PE’s full response.

PE did not comply with its pricing policy for some
manufactured items during fiscal years 2016 through 2018.
As a result, PE overcharged customers by at least $55,306
and undercharged customers by at least $81,947 for items
whose prices should have been fixed based on PE’s
statewide contract. In addition, unlike other states, both PE
and DOC markup wholesale prices for canteen items.
PE’s pricing policy states that the current price quoted in its statewide contract through
OSP will be utilized when pricing its products. In addition, R.S. 15:1157 requires PE to sell its
manufactured products at a cost that is not less than the cost of raw materials used to
manufacture the product. For PE to remain financially sustainable, it should charge prices for its
manufactured products that cover its operating expenses beyond the cost of raw materials and
consider current economic conditions and competitors.
Some customers were charged less or more for manufactured products than what
was allowed by PE’s pricing policies. We identified 1,536 instances when customers were
charged prices different from those listed on the statewide contract. During fiscal years 2016
through 2018, PE overcharged customers by approximately $55,306 and undercharged customers
by approximately $81,947 for items whose prices should have been fixed based on PE’s
statewide contract.32 In some cases, PE charged all customers the same price for an item
throughout an entire contract period, but that price was different than the price stipulated in PE’s
statewide contract and no explanation was provided in its financial system. In other cases, PE
charged different prices for the same items for different customers during the same contract
32

Some records where the prices charged did not match statewide contract prices had descriptions in the sales order
data explaining why some customers were charged more (added features, different specifications than the contract,
etc.) or less (showroom models sold “as is,” discounts given for volume, etc.) than the contract price. However, we
excluded these sales orders from our analysis.

Evaluation of Operations

Prison Enterprises

period, as shown in Exhibit 12. In our 1997 report, we also found that some products were
potentially underpriced or overpriced.
Exhibit 12
Examples of Different Prices Charged by PE for Same Items on Statewide Contract
Fiscal Years 2016 through 2018
Item Description
Bed Locker without
Hanger
Densified Polyester
Foam Mattress

Customer
Sheriff
Correctional Facility
Correctional Facility
Correctional Facility
Police Jury
Sheriff

Order
Period
March
2016 to
June 2016
December
2016 to
January
2017

Contract
Price
$130.00

$42.00

Sheriff
August to
DOC
October
$61.75
Correctional Facility
2017
Non-Profit
Other State Agency
One Dozen Heavy
September
Non-Profit
$73.00
Duty Mops
2017
Correctional Facility
Source: Prepared by legislative auditor’s staff using data provided by PE.
5 Gallons Non-Skid
Floor Wax

Price
Charged
$85.00
$125.00
$115.00
$42.00
$40.00

Number
of Units
8
25
200
553
1,000

$42.00

$61.75
$56.75
$56.75
$61.75
$73.00
$68.00
$73.00

4
12
8
5
2
50
40

In addition, PE charged customers prices for custom items that were below the set pricing
model. PE’s policy stated that prices could be set below the pricing model with approval;
however, it did not require this approval to be documented. We reviewed the product structures
and prices of 67 custom items sold during fiscal years 2016 through 2018 and found that 31
(46.3%) had a markup at least 10.0% lower than the pricing model, including 12 (17.9%) with a
markup at least 50.0% lower than the pricing model, all without documentation of justification
for the lower prices. Examples of comparable items ordered in the same fiscal year with
different markups are shown in Exhibit 13.
33

A pricing model is a factor by which PE multiplies raw material costs in order to calculate the preliminary selling
price that will cover overhead costs. PE management establishes a pricing model for each manufacturing operation
annually.

Evaluation of Operations

Prison Enterprises

Exhibit 13
PE Custom Products Sold at Different Markups for Different Customers
Fiscal Year 2016
Customer
Nonprofit Organization
Correctional Institution
Nonprofit Organization
Correctional Institution
Nonprofit Organization
Sheriff's Office
State Agency
Sheriff's Office

Item
Mahogany Table Desk with One
Drawer
Mahogany Bookshelf and Cubby
Poplar Porch Swing
Mahogany Conference Table
Mahogany Printer Table
Mahogany Conference Chairs
Reupholstered Side Chairs
Conference Room Chairs with Arms
on Casters and Embroidered Logo

Pricing
Model

Actual
Markup

Pricing
Model
Price

Actual
Price
Charged

Difference
in Pricing

2.85
2.85
2.85
2.85
2.85
2.85
2.85

1.03
2.14
1.03
2.50
1.04
2.13
1.26

$555
$1,323
$441
$1,862
$329
$602
$215

$200
$995
$160
$1,635
$120
$450
$95

($355)
($328)
($281)
($227)
($209)
($152)
($120)

2.85

2.43

$763

$650

($113)

Source: Prepared by legislative auditor’s staff using PE data and information contained in sales order files.

PE does not require that deviations from its pricing policy be documented. PE
management stated that they sometimes charge customers lower prices if doing so will allow
them to get a sale that would otherwise go to competitors, increase the volume of sales, or create
a relationship with a new customer. In addition, according to PE, it may need to change the price
of a product from what is listed on its statewide contract if it notices that the statewide contract
price is wrong. However, PE’s policy does not require that it document the reasons for any
deviations from the statewide contract prices, nor that PE staff periodically review the prices
posted on OSP’s website to ensure they are correct. Requiring and reviewing such
documentation would help ensure that PE charges customers consistent and correct prices, which
is the goal of setting annual statewide contract prices through OSP.
PE’s policy states that the marketing manager or higher level supervisor must approve
prices that do not follow the pricing policy; however, the marketing manager is the same person
who calculates prices for custom orders. In addition, PE does not document the reasons for
changing product prices or markups for customers so it is not possible to determine if price
reductions for certain customers generated a sales benefit proportionate to the reduction in prices.
Documenting price changes is important because PE changed its pricing policy in fiscal year
2018 to allow it to use the pricing model to determine the preliminary selling price rather than
the minimum price of a product. The marketing manager has the latitude to adjust the
preliminary selling price as deemed appropriate, but the policy does not require the marketing
manager to document an explanation for the price change.
Unlike other states, both PE and DOC markup wholesale prices for canteen items,
which may result in higher prices for offenders.34 PE canteen operations consist of PE
purchasing canteen items in bulk from vendors, marking the price up by approximately 20%,35
and then reselling the bulk items to correctional facilities. According to PE, this markup covers
PE’s costs of operating the Canteen Distribution Center at Louisiana State Penitentiary at
34

State laws and rules governing PE do not provide any specific guidance on pricing for items purchased for resale,
such as canteen items.
35
As of fiscal year 2018, markup on canteen items is 20.5%, 19.0% on tobacco items, and varies for personal
property items.

Evaluation of Operations

Prison Enterprises

Angola, delivering products to correctional facilities, and other expenses. However, state
correctional facilities then further markup canteen prices and resell the items to offenders.
According to DOC, this markup is used to cover the costs of operating the individual canteens
and to invest in offender programs such as vocational/educational, religious, recreational, or
library services.
On average, correctional facilities charge
approximately 33.3% markup on canteen items
purchased from PE. As a result, both PE and DOC
make excess revenue from canteen items sold to
offenders (see example at right). In turn, PE is able to
subsidize other industries operating at a loss with its net
income from canteen operations. During fiscal years
2016 through 2018, PE received approximately
$1.1 million in net income from its canteen operations.

Canteen Markup Example
Beef Stew (11.25 oz.)
PE purchases from vendor for $1.66

PE sells to correctional facility for $2.00
(20.5% markup)

DOC sells to offender for $2.67*
(Additional 33.3% markup)

*Total markup of $1.01 or 60.8%
The additional 33.3% markup by correctional
facilities on all canteen items sold by PE during fiscal
years 2016 through 2018 resulted in DOC making approximately $378,000 in excess revenue
from offenders for canteen items. We spoke with officials from 12 other states’ correctional
industries36 and found that in all 12 states canteen items are sold directly to offenders, unlike
PE’s process of selling bulk canteen items to Louisiana correctional facilities who then in turn
sell to offenders. The canteen vendors in four states own the inventory and set prices,37 whereas
the remaining eight states’ correctional industries that buy items in bulk and sell them directly to
offenders provided us with their markup percentages for canteen items. Apart from Minnesota,
which charges markups ranging from 0-50%, none of the remaining seven states charge a
markup higher than 32.75%.

Recommendation 5: PE should document the reasons for the deviations from the
statewide contract prices to ensure that PE charges customers consistent prices. In
addition, PE should document the reasons for charging customers prices that deviate from
the pricing model as well as who authorized any deviations so that these changes can be
monitored and analyzed for reasonableness.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it does document deviations from the pricing model as
reflected in the price of the products it sells. Due to the thousands of items sold
throughout the year, it would be difficult to document to the degree that is being
recommended since every situation is different and the pricing model is used as a guide
and not a unilateral calculation. See Appendix A for PE’s full response.

We contacted correctional industries in 12 of the 14 states that run canteen operations through correctional
facilities: Colorado, Indiana, Iowa, Kansas, Minnesota, Montana, North Dakota, Pennsylvania, Utah, Washington,
West Virginia, and Wisconsin.
37
Four states’ correctional industries are contracted to pick and package offenders’ individual orders, but canteen
vendors own the inventory, price products, and process offenders’ orders.

Evaluation of Operations

Prison Enterprises

LLA Additional Comments: Documenting the reasons for any deviations from the
statewide contract prices as well as who authorized any deviations would help ensure that
PE charges customers consistent and correct prices, which is the goal of setting annual
statewide contract prices through OSP.
Recommendation 6: PE should require staff to periodically review its statewide
contract prices posted on OSP’s website for accuracy so that it can ensure that customers
are charged correct prices.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will work with the Office of State Procurement to
ensure the prices published on the statewide contract match with what is submitted by
PE. See Appendix A for PE’s full response.
Matter for Legislative Consideration: The legislature may wish to consider
providing guidance on how PE should price its wholesale products, including markup for
canteen products.

PE has not developed a comprehensive marketing plan that
describes how it will promote its products and services, as
recommended by best practices. In addition, PE does not
have a process for tracking whether the approximately
$117,000 spent on marketing efforts during fiscal years 2016
through 2018 generated a financial benefit that is
proportionate to the costs, as required by policy.
PE policy requires that it develop a written marketing plan that is reviewed regularly to
ensure it remains consistent with changing markets. Furthermore, PE policy states that
promotional items must be of minimal cost, constitute an expenditure that is dedicated to public
purposes, and create a public benefit proportionate to the cost. According to the Principles of
Marketing,38 a marketing plan enables management to evaluate whether an organization can
meet customers’ needs in a way that allows for its financial sustainability. These best practices
also state that the process of achieving sustainable growth requires a systematic approach
including the evaluation of current operations, the identification of long term goals, and the
strategies to reach those goals. In addition, because of the prohibitions under Article VII, §14 of
the Louisiana Constitution regarding the donation of public funds or property, PE should
document the public purpose for giving away promotional items and whether this donation
created a public benefit proportionate to the cost to ensure compliance with the law.
While PE has developed a written marketing plan as required by policy, it is not
comprehensive as recommended by best practices.38 Instead, PE provided us with a two-page
38

Principles of Marketing, 2010: https://open.lib.umn.edu/principlesmarketing/chapter/16-2-functions-of-themarketing-plan/

Evaluation of Operations

Prison Enterprises

Marketing Overview from July 2016 that discusses how PE serves its customers through an
updated website, showrooms, and experiments with email marketing. This document also
discusses how the state’s budget issues and the privatization of state correctional facilities and
parish jails make it more difficult for PE’s sales staff to compete with private sector vendors for
business in these facilities. However, PE should develop a more comprehensive marketing plan
(as outlined below) to ensure it remains financially sustainable in changing markets. Our 1997
report found that PE did not have a marketing plan and recommended that PE develop formal
sales and marketing plans that documented the needs of all of PE’s product lines. According to
the Principles of Marketing, a good marketing plan should do the following:


Identify customers’ needs.



Evaluate whether the organization can meet those needs in some way that allows
for profitable exchanges with customers to occur.



Develop a mission statement, strategy, and organization centered on those needs.



Pursue advertising, promotional, and public relations campaigns that lead to
continued successful exchanges between the organization and its customers.



Engage in meaningful communications with customers on a regular basis.

During fiscal years 2016 through 2018, PE spent $117,058 on travel, conference
registrations, promotional items, and samples but did not determine the return on
investment, such as whether these costs led to future sales or other positive business
outcomes. According to the Principles of Marketing, a marketing plan allows an organization to
pursue successful advertising and promotional activities. While not included in its Marketing
Overview, PE management developed a policy that allows it to give away promotional items and
product samples to attract new customers and encourage current customers to purchase
additional products. For example, during fiscal years 2016 through 2018, PE spent $41,102 in
travel expenses for staff to attend conferences and promote PE products and services, $19,759 to
register as a vendor at these conferences, and gave away $27,054 worth of promotional items
such as coasters, umbrellas, and koozies. In addition, PE spent over $500 on a lunch in March of
2016 for 10 newly-elected sheriffs at its headquarters to introduce them to PE’s products and
services. Exhibit 14 contains a breakdown of promotional materials given away by PE staff
during fiscal years 2016 through 2018.

Evaluation of Operations

Prison Enterprises

Exhibit 14
PE Promotional Items Given Away
Fiscal Years 2016 through 2018
Promotional Item
Quantity

Cost
Tote Bags
2,448
$5,681
License Plate Candy Dishes
21,000
5,250
Koozies
3,100
4,421
Pens
4,000
3,045
Lip Balm
3,300
2,892
Keychains
1,100
1,906
Coasters
500
1,131
Tape Measures
1,206
993
Umbrellas
100
749
Back Packs
Unknown
723
USB 2GB
50
263
Total
$27,054
Source: Prepared by legislative auditor’s staff based on
documentation provided by PE.

For some orders, customers requested that PE build prototypes of the product, such as
triple bunk beds, barbeque pits, locker boxes, and garbage cans. PE documents these
expenditures as samples and stores some of the prototypes in the PE showrooms for other
potential customers to view. PE also gives away samples of its products, such as cleaning
supplies, shirts, and sheets, to potential customers with the hope that they will be satisfied with
the product and place an order with PE. However, PE does not consistently document who
received the samples or if the expenses incurred by building/giving away these samples resulted
in any return on investment, such as attracting new customers or generating additional revenues.
For example, according to PE, the $2,856 in furniture prototypes given to Bayou Segnette State
Park resulted in more than $175,000 in subsequent furniture sales; however, PE did not designate
this additional revenue as a related sale to the prototypes in its financial system. Exhibit 15 lists
some examples of the total $28,635 in product samples that PE built or gave away during fiscal
years 2016 to 2018 along with the costs for these samples.
Exhibit 15
Examples of PE Prototypes/Samples Given to Customers
Fiscal Years 2016 through 2018
Sample Product
Customer
Quantity

Cost
Furniture Prototypes
Bayou Segnette State Park
11
$2,856
High-Back Intensive Use Chairs*
Not documented
4
2,020
Sheets
Not documented
144
760
Mattress
Warden
2
163
Name Plates/Holders
Office of State Parks
10
71
Embroidered Shirts
Allen Parish
15
59
*According to PE, these chairs are used by its sales department as samples to show the product
to its customers at trade shows and in its showroom. However, PE could not provide us with
supporting documentation.
Source: Prepared by legislative auditor’s staff based on documentation provided by PE staff.

Evaluation of Operations

Prison Enterprises

While PE has developed a policy that states that promotional items should be
dedicated to public purposes and create a public benefit proportionate to the cost, it does
not require staff to document such purposes or benefits. We reviewed selected sales
documentation39 for fiscal years 2016 through 2018 and identified $14,081 in products that PE
did not charge to customers. For example, PE embroidered briefcases with the DOC logo and
employee names for DOC’s Annual Awards Day. However, PE did not bill DOC for these
products because it classified them as promotional since they show potential customers what PE
can do. However, DOC is already PE’s biggest customer, as shown in Exhibit 4. Exhibit 16
details products we identified that PE did not bill to customers during fiscal years 2016 to 2018.
Exhibit 16
PE Products Delivered But Not Billed*
Fiscal Years 2016 through 2018
Item

Quantity
7,700
30
3
108
25
9 cases
15
1
10
2
1,000

Amount
Not Billed
$9,149
2,736
799
374
258
213
158
157
151
63
21
$14,081

Holiday Decorations
Refurbished Furniture for DOC
Inaugural Seals
Sheets for DOC Awards Day
Briefcases embroidered with DOC employee names and logo
Household Items for DOC Credit Union
Golf Signs for Golf Tournament sponsors
Refurbished chair for DOC employee
Briefcases embroidered with sheriff logo
Plaques
Business cards for DOC employees
Total
Note: Total amounts do not match due to rounding.
*This amount could be underestimated because PE expenses non-inventory items at the time
of purchase instead of linking the costs to the appropriate interdepartmental sale.
Source: Prepared by legislative auditor’s staff based on documentation provided by PE.

In addition to the prohibitions under Article VII, §14, against the donation of public funds
or property, R.S. 15:1157(A)(4) mandates that PE recovers the costs of raw materials used to
manufacture its products.40 Therefore, to satisfy both R.S. 15:1157 and Article VII, §14, PE
must ensure that it receives compensation for its services or products in an amount that covers its
costs. If these products were promotional items or samples, PE should document the public
purpose served and whether the public benefit was proportionate to the cost.
If PE staff were required to track promotional materials given away at each conference,
entities that attended each conference, and whether these attendees became new customers of PE
or increased their current purchasing, management could determine whether PE targeted the right
customers at the right locations (i.e., conferences, expos). According to PE’s sales manager,
attending conferences is part of PE’s marketing process; however, the July 2016 Marketing
39

We reviewed documentation that was designated as interdepartmental sales but had shipping addresses for
customers outside of PE industries or operations.
40
A limited exception is afforded in situations in which the manufactured product is deemed to be spoiled,
overstocked, obsolete, or otherwise not saleable at a cost equal to or greater than the raw material costs. Such
situations must be documented before the Director of PE may authorize a sale at less than the raw material cost.

Evaluation of Operations

Prison Enterprises

Overview does not list conferences as means of serving current or potential customers.
Management could monitor the success of its marketing practices by specifying the business
purpose of each employee attending conferences, listing the conferences staff will attend, and
requiring staff to track whether the promotions given away at the conferences increase PE sales.
Documenting the samples given away to customers and tracking whether those samples
generated future orders would also allow PE to determine if the cost spent on samples was
justifiable.
Recommendation 7: PE should develop a comprehensive marketing plan that
includes factors such as goals and direction for attainable future marketing efforts; clear,
realistic, and measurable targets; deadlines for meeting those targets; and a budget for all
marketing activities.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will work to further enhance its marketing plan to meet
goals and objectives that will continue to allow PE to be self-sufficient. See Appendix A
for PE’s full response.
Recommendation 8: PE should require staff to document customers attending and
reasons for attending each conference; track the quantity of promotional items and
product samples given away, to whom they are given, and for what purpose; and track
whether the public benefit was proportionate to the cost and whether future sales were
generated.
Summary of Management’s Response: PE disagrees with this recommendation
and stated that it will continue to monitor the public benefit of its marketing efforts and
ensure the expense is proportionate to the cost of these efforts. However, to track these
efforts to the degree of this recommendation would not align with industry standards and
require substantial investment in staff and resources that could potentially create
inefficiency with its marketing department. This recommendation would also provide a
result that is not readily defensible as PE cannot prove that a specific promotional item
results in a particular or immediate sale and it could even be several years before a
customer tries PE’s products as a result of repeated marketing efforts over time. See
Appendix A for PE’s full response.
LLA Additional Comments: In addition to measuring marketing efforts’ success,
documenting the recipients and purpose of these efforts would strengthen PE’s internal
controls to ensure that promotional items are not given away for purposes other than
marketing.
Recommendation 9: PE should bill customers for all services and products provided
to ensure compliance with R.S. 15:1157 and Article VII, §14 of the Louisiana
Constitution.

Evaluation of Operations

Prison Enterprises

Summary of Management’s Response: PE agrees with this recommendation
and stated that it will continue to bill customers appropriately and comply with all
applicable laws. See Appendix A for PE’s full response.

PE does not ensure that all complaints are logged and
resolved timely and has not developed an effective process
to ensure that orders are delivered on time. According to
best practices, good customer service is important because it
directly impacts sales; however, the number of PE
complaints increased by 121.2% between fiscal years 2016
and 2018, and late deliveries increased from 30.7% to
40.3%.
According to the Principles of Marketing,
Exhibit 17
customer service is important because it directly
PE Logged Complaints
impacts sales.41 In accordance with this best practice,
Fiscal Years 2016 through 2018
PE has two performance indicators related to customer
Total Cost
Fiscal
Number of
Related to
service. One states that PE will decrease the percentage
Year
Complaints
Complaint
of customer complaints received by 5.0% by fiscal year
FY16
33
$5,944
2019. The other states that PE will deliver 100% of
FY17
50
3,665
orders on time. However, according to PE’s complaint
FY18*
73
11,432
log, customer complaints increased from 33 to 73, or by
Total
156
$21,041
121.2%, from fiscal year 2016 to fiscal year 2018; and
*FY18 includes complaints through 6/11/18.
42
the total cost related to these complaints increased
Source: Prepared by legislative auditor’s
92.3%, totaling $21,041 as shown in Exhibit 17. In
staff using information provided by PE.
addition, according to our analysis, late deliveries
increased from 30.7% in fiscal year 2016 to 40.3% in fiscal year 2018.
PE is required by the American Correctional Association (ACA) Standards for
Correctional Industries to have a formalized and active customer service program that provides
periodic feedback to management to ensure customer satisfaction. In addition, according to the
Principles of Marketing, tracking customer satisfaction is one way to measure marketing
effectiveness. PE developed a policy that complies with ACA Standards and states that when
staff receives a complaint about an order of manufactured products, they forward it to the
Customer Service Representative (CSR) for resolution.43
PE does not ensure that all complaints and their related costs are logged and
resolved timely. Although PE’s policy establishes a process for tracking and resolving customer
complaints for manufactured products, the policy does not clearly define what constitutes a
41

Principles of Marketing, 2010: https://open.lib.umn.edu/principlesmarketing/chapter/16-2-functions-of-themarketing-plan/
42
This is the cost of repair or replacement of the item plus transportation cost associated with the pick-up of the
damaged item or delivery of the fixed or replacement item.
43
The CSR is also the PE headquarters warehouse manager but is not a part of PE’s sales and marketing staff.

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Prison Enterprises

complaint and how to categorize complaints. As a result, some issues are treated as complaints
while other similar issues are not. For example, we reviewed sales documentation from fiscal
year 2018 and identified 51 issues that were not logged as complaints. These issues, shown in
Exhibit 18, were similar to other complaints that were included in the log, such as wrong item
specifications, incorrect order quantities, and missing items. Properly capturing and categorizing
complaints is important because PE policy requires management to conduct a complete analysis
of trends in complaints received at the end of each month and each calendar year.
Exhibit 18
PE Complaints by Category
Fiscal Years 2016 through 2018
Number of
Complaints
in Log

Number of
Complaints
Not in Log*

Total**
Number of
Complaints

Wrong Item
Specifications

116

Incorrect
Quantity of Item

Missing Items

Damaged Items

Item Quality

Return or
Exchange

Complaint
Category

Number of Complaints by
Operation***
Silk Screen (37), Print (24), Embroidery
(12), Embroidery/Uniforms (9), Tag (7),
LCIW Garment/Uniforms (6), Winn
Garment (6), LCIW Garment (4), Allen
Furniture (3), Mattress/Broom/Mop (3),
Hunt Soap (2), Metal Fabrication (2),
Canteen Distribution Center (1)
Mattress/Broom/Mop (3), Silk Screen (3),
Embroidery/Uniforms (2), Hunt Soap (2),
LCIW Garment (2), Allen Furniture (1),
Embroidery (1), Hunt Garment (1), Tag (1),
Winn Garment (1)
Silk Screen (6), DCI Chair (4), Print (4),
Embroidery (3), Embroidery/Uniforms (1),
LCIW Garment (1), Winn Garment (1)
Allen Furniture (5), DCI Chair (3), Silk
Screen (3), Hunt Soap (2)
Allen Furniture (21), DCI Chair (11), Silk
Screen (7), Metal Fabrication (3), LCIW
Garment (2), Print (2), Embroidery/
Uniforms (1), Hunt Garment (1), Hunt Soap
(1)
Silk Screen (3), Canteen Distribution Center
(1), Embroidery (1), Embroidery/Uniforms
(1), Mattress/Broom/Mop (1)

Total
167
59
226
Note: Since the complaint log does not categorize the reason for complaints, we created these categories based on
our review of the sales documentation.
*Complaints not in the log are only from fiscal year 2018.
**The number of complaints in this table exceeds the total number of complaints received because complaints can
fall under multiple categories.
***Five complaints concerned more than one operation and the operation could not be identified for nine
complaints.
Source: Prepared by legislative auditor’s staff using information from PE sales documentation.

PE also does not ensure that the costs of all complaints are included in the complaints
log, as required by policy. The cost of a complaint includes the cost of repair or replacement of
the item plus transportation costs associated with the pick-up of the damaged item or delivery of

Evaluation of Operations

Prison Enterprises

the fixed or replacement item. In the log, the cost of 63 (44.1%) of 143 closed complaints was
blank or marked $0, but we found that 38 of these complaints were missing the associated costs
for repaired or replaced items that staff had noted in the supporting documentation. We also
found that 23 (45.1%) of the 51 missing complaints we identified had associated costs, including
one complaint that resulted in the reprinting of 20,000 envelopes.
In addition, PE’s policy does not specify a timeframe in which complaints should be
resolved. We found that PE sometimes took months to resolve customers’ issues. For example,
we found documentation on eight orders in which customers or PE staff specifically stated that
the customer reached out to PE between two and five times over a period of up to 74 days before
receiving a response. In addition, our review found that 29 (16.8%) of 173 complaints44 took at
least three months to resolve, with one complaint taking 456 days to be resolved. According to
best practices in resolving customer complaints published by the Federal Benchmarking
Consortium,45 a speedy response to complaints can improve customer loyalty by as much as
25%. PE could increase customer satisfaction by requiring staff to make initial contact with
customers and resolve their complaints within a certain amount of time.
Unlike its manufacturing industry, PE does not have a formal complaints process
established for its wholesale industry. According to Income Statements from fiscal years 2016
through 2018, PE’s wholesale industry, which includes the sale of canteen and meat products
almost exclusively to state correctional facilities, accounted for 45.0% of overall sales. DOC
policy requires46 state correctional facilities to buy their canteen items and meat from PE, but
there is no formal process for filing or resolving complaints regarding these items. According to
PE, it does not have a complaints policy for wholesale operations because it does not produce
these items. However, PE is responsible for ordering bulk canteen items, warehousing the bulk
items, and transporting the orders to correctional facilities, all of which are activities that could
result in customers not being satisfied and thus wanting to file a complaint. In practice, PE staff
responds to canteen complaints when they receive them via email or phone, but they are not
required to formally track these complaints for quality control purposes and timely resolution.
PE does not have an effective process to accurately track or report whether orders
were delivered on time. The timely delivery of products or services is important because bad
customer experiences can negatively impact PE sales and consequently its financial
sustainability. PE’s process for calculating delivery time compares the customers’ requested
delivery dates to the shipped dates instead of the actual delivery dates, so PE management does
not know if customers received orders on time. By tracking the actual delivery date, PE
management could accurately determine if its orders are delivered on time and identify and
address any production or delivery issues. Using PE’s current methodology comparing
requested delivery dates to shipped dates, our analysis of PE sales order data found that the
percent of orders not delivered on time increased from 30.7% in fiscal year 2016 to 40.3% in

This includes complaints in PE’s log and complaints we identified that were missing from the log.
National Performance Review “Serving the American People: Best Practices in Resolving Customer Complaints”
https://govinfo.library.unt.edu/npr/library/papers/benchmrk/bstprac.html
46
DOC policy states that correctional facilities shall purchase PE products unless there is a compelling reason to
utilize another vendor.
45

Evaluation of Operations

Prison Enterprises

fiscal year 2018.47 Compared to our analysis, the number of orders not delivered on time during
fiscal years 2016 and 2017 in LAPAS48 is understated. As shown in Exhibit 19, the percent of
orders actually not delivered on time was more than twice what PE reported for fiscal years 2016
and 2017, as well as the first two quarters of fiscal year 2018.

Fiscal
Year
2016

2017

Exhibit 19
PE Wholesale and Manufacturing Orders Not Delivered On Time
Fiscal Years 2016 through 2018*
Total Orders
Orders Not On
% Not On
% PE
Industry
(LLA
Time (LLA
Time (LLA
Reported Not
Calculated)
Calculated)
Calculated)
On Time
Wholesale

1,985

932

47.0%

Manufacturing

2,348

400

17.0%

Total

4,333

1,332

30.7%

Wholesale

1,791

1,047

58.5%

Manufacturing

2,340

651

27.8%

Total

4,131

1,698

41.1%

889

457

51.4%

1,145

362

31.6%

Wholesale
2018*

Manufacturing

14.3%

19.7%

16.6%

Total
2,034
819
40.3%
Total
10,498
3,849
36.7%
*Only includes orders through the end of Quarter 2 (December 31, 2017), which was the latest quarter for
which LLA had complete sales order data.
Note: We excluded 1,464 duplicate orders that PE included in its calculations.
Source: Prepared by legislative auditor’s staff using PE data.

According to PE, statutory requirements for bidding sometimes contribute to delays
in completing customer orders. PE is subject to the state Procurement Code and therefore must
go through OSP for purchases of $5,000 or more. As a result, PE is dependent on OSP to
conduct the competitive bidding process to secure raw materials and other products which are
necessary to fulfill customer orders. The bidding process can be delayed if bidders are required
to submit product samples to confirm that specifications are met or if vendors protest a bid
award. Also, if vendors who are awarded a purchase order by OSP do not deliver products as
required by the quality, quantity, or timeliness of the bid, PE may have to go through the bid
process again, which further delays the process. According to PE, it takes time to file deficiency
reports with OSP and go through the process of resolving issues with deliveries for subsequent
orders. If PE attempts to keep excess materials in stock to avoid potential delays, this aids its
ability to deliver customer orders timely, but it ties up its storage space and financial resources.

In PE’s JD Edwards system, the requested delivery date defaults to the order date if staff does not manually
change it. We included in our results the 42.1% of wholesale orders and 2.0% of manufacturing orders that had a
requested date equal to the order date, as this is the same data that PE used to calculate its performance indicators for
fiscal years 2016 through 2018.
48
Act 1465 of 1997 (the Louisiana Government Performance and Accountability Act) required that each agency
(budget unit) receiving an appropriation in the General Appropriation Act or the Ancillary Appropriation Act
produce a series of performance progress reports. The purpose of these reports is to track the agency’s progress
toward achievement of annual performance standards.

Evaluation of Operations

Prison Enterprises

Conducting a survey of current and potential customers would allow PE to formally
evaluate customer satisfaction with its products and services. Obtaining customer feedback
through surveys is an important tool in ensuring products and services meet customer needs. We
found that three other states’ correctional industries’ websites49 have an online survey asking for
feedback on customer satisfaction. As discussed above, PE has not consistently collected
complaint information and our review identified multiple customer service issues. PE should
consider developing an online customer satisfaction survey to put on its website or sending an
email or written survey out periodically in order to formally assess customer satisfaction.
Recommendation 10: PE should ensure its complaints process includes (1) how
customers should file complaints, (2) which PE staff are responsible for resolving
complaints and within what timeframe, (3) a requirement that all complaints be logged,
and (4) how each type of complaint should be resolved.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will work to further enhance its complaint process and
continue to resolve each complaint in an appropriate manner. See Appendix A for PE’s
full response.
Recommendation 11: PE should categorize complaints to provide feedback to staff
and ensure that staff collects all required information in order to use complaints data to
identify and address ongoing performance issues.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will continue to categorize complaints in the manner
that best serves its operations. See Appendix A for PE’s full response.
LLA Additional Comments: PE’s current process does not require it to categorize
the reasons for complaints, so we had to create the categories for our analysis based on
our review of the sales documentation. Properly capturing and categorizing complaints is
important because PE policy requires management to conduct a complete analysis of
trends in complaints received at the end of each month and each calendar year. This
analysis is also important because according to PE’s complaint log, customer complaints
increased from 33 to 73, or by 121.2%, from fiscal year 2016 to fiscal year 2018.
Recommendation 12: PE should track all costs of complaints, including
transportation costs, in order to measure customer service and industry performance as
required by PE policy.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will work to ensure that all excess transportation and
other costs are tracked where applicable. See Appendix A for PE’s full response.

Texas, Washington, and Pennsylvania

Evaluation of Operations

Prison Enterprises

Recommendation 13: PE should analyze delivery times based on the actual delivery
dates to determine if orders are on time.
Summary of Management’s Response: PE partially agrees with this
recommendation and stated that it will analyze the feasibility of implementing systems or
processes that will further enhance the tracking of on-time deliveries. See Appendix A
for PE’s full response.
Recommendation 14: PE should develop a formal complaints policy for its
wholesale operations to help ensure that it addresses all complaints and resolves all
issues.
Summary of Management’s Response: PE disagrees with this recommendation
but stated that it will continue to address all complaints and resolve all issues within its
wholesale operations and consider the feasibility of implementing these processes into
the complaints policy. See Appendix A for PE’s full response.
Recommendation 15: PE should develop and administer a formal survey to assess
customer satisfaction with its products and services.
Summary of Management’s Response: PE agrees with this recommendation
and stated that it will work through its marketing department to create and implement a
survey to assess customer satisfaction. See Appendix A for PE’s full response.

APPENDIX A: MANAGEMENT’S RESPONSE

A.1

A.2

A.3

A.4

A.5

A.6

A.7

A.8

A.9

A.10

A.11

A.12

A.13

A.14

A.15

A.16

A.17

A.18

A.19

A.20

A.21

A.22

APPENDIX B: SCOPE AND METHODOLOGY
GEMENT’S RESPONSE
This report provides the results of our performance audit of Prison Enterprises (PE), an
ancillary agency within the Department of Public Safety and Corrections. We conducted this
performance audit under the provisions of Title 24 of the Louisiana Revised Statutes of 1950, as
amended. This audit generally covered the period of July 1, 2015, through June 30, 2018,
although our analysis included historical information going back to 1996. We focused on PE’s
wholesale and manufacturing operations, as they comprised more than 76.6% of PE’s total
revenue of approximately $21 million in fiscal year 2018. Our audit objective was to:
Evaluate PE’s operations, including whether it met its statutory purposes.
We conducted this performance audit in accordance with generally-accepted Government
Auditing Standards issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and our conclusions based on our audit objective. We believe
the evidence obtained provides a reasonable basis for our findings and conclusions based on our
audit objective. To answer our objective, we reviewed internal controls relevant to the audit
objective and performed the following audit steps:


Researched and reviewed Louisiana Revised Statutes, Administrative Code,
Executive Budget documents, PE and Department of Corrections (DOC) policies,
PE’s 2017 Annual Report, and PE’s website to understand PE’s purpose,
operational requirements, and goals.



Interviewed personnel at PE, DOC, selected state correctional facilities, and the
Office of State Procurement (OSP) to gain an understanding of PE processes as
well as challenges faced by PE and its customers.



Observed a PE board meeting and operations at the Canteen Distribution Center at
Louisiana State Penitentiary, as well as the Garment Factory at Elayn Hunt
Correctional Center.



Researched and reviewed correctional industries audits conducted by other states
and literature on best practices for correctional industries in addition to a 1997
performance audit on PE conducted by our office.



Researched and reviewed the statutory purpose of correctional industries in all
other states, excluding four states without correctional industries, in order to
determine if other states specifically require that correctional industries provide
employment opportunities to assist offenders with finding employment after they
are released.

B.1

Evaluation of Operations

Appendix B



Obtained and analyzed information from PE staff on PE offenders’ pay rates and
sentence lengths as of June 30, 2018. We identified and removed 31duplicates in
the offender information provided by PE prior to conducting our analysis.



Obtained 2016-2026 Projected Employment by Industry for the State of Louisiana
from the Louisiana Workforce Commission website.



Contacted correctional industries in 12 of the 14 states that run canteen operations
through correctional industries according to 2017 National Correctional Industries
Association Directory, the Department of Corrections in five southern states, and
Louisiana’s private Transitional Work Program to gather information on canteen
and garment prices, pricing practices, and operations.



Obtained and analyzed DOC Canteen Quarterly Financial Statements to calculate
DOC’s revenue from canteen sales.



Obtained and analyzed PE policies, Business Plan, and Marketing Overview, as
well as researched and reviewed best practices for marketing and customer
service.



Obtained PE’s JD Edwards (JDE) database as of March 16, 2018, containing
financial information, sales and purchase order information, and inventory
information in order to evaluate types of customers that purchased PE products,
PE’s types of expenditures, pricing of manufactured products, and timeliness of
order delivery. To assess the reliability and validity of the data, we tested for
duplicates and blanks, compared totals from JDE data to financial statements, and
determined the data was valid and reliable for the purpose of answering our audit
objective.


To evaluate financial sustainability of PE operations overall, pulled
Income Statements and Balance Sheets from the JDE data for fiscal years
1996 through 2017. To evaluate PE’s financial sustainability by industry
and operation, we analyzed Income Statements from the JDE data for
fiscal years 2016 through 2018. Although the data we received did not
include complete information for fiscal year 2018, to include fiscal year
2018 results in this analysis, we obtained and analyzed a copy of the fiscal
year 2018 Income Statement and Balance Sheet from PE staff after
accounting for that period was complete.



To evaluate the types of customers who bought PE products, we pulled
sales for fiscal years 2016 through 2018 from the General Ledger table in
JDE using Audit Command Language (ACL) software and created
categories based on the customer name in Excel. This analysis only
included sales through March for fiscal year 2018.



To evaluate the types of items purchased by state agencies, we pulled sales
to state agencies from the General Ledger table using ACL software and
recorded the PE operations from which each agency purchased PE
B.2

Evaluation of Operations

Appendix B

products. Due to the amount of sales records, we only performed this
analysis for fiscal year 2017.


To evaluate PE’s types of expenditures, we first reviewed expense
categories in the income statement and used these categories to create the
chart of expenditures in Appendix G. Using the Pivot Table function in
Excel, we analyzed details for purchase orders related to food, samples,
advertising, travel, or miscellaneous expense categories in the General
Ledger from the JDE purchase order tables. We also reviewed all records
in the JDE sales order data for transfer sale transactions, or internal sales
between PE operations, in order to identify additional promotional
materials and samples as well as documentation that was designated as
transfer sales but had shipping addresses for customers outside of PE
industries or operations. For purchase and transfer sale order records that
did not have detailed descriptions in the JDE data, we obtained and
reviewed selected paper files.



To evaluate whether PE charged customers established contract prices for
items listed on State Contract through OSP, we used “Item Numbers”
identifying unique products to match sales order records from the JDE
database to tables with products’ contract prices obtained from the OSP
website for fiscal year 2018 and from PE staff for fiscal years 2016 and
2017. Since PE does not update its contract prices on a consistent annual
basis and neither PE nor OSP could provide the precise date that contract
prices were updated on OSP’s website, we used dates provided by PE
management for when each year’s prices became effective. We manually
reviewed the 1,794 records where the sale price did not match the
effective contract price and excluded 258 (14.4%) records from our results
because the item descriptions included different specifications than the
contract, extra features, false matches, showroom items that are sold at “as
is,” negative or zero quantity, or because the item description did not
provide adequate information to determine how to calculate the item’s
price. We did not review the 10,114 records with contract items where the
sale price did match the effective contract price; however, these records
may have included item descriptions indicating that a higher or lower
price should have been charged.



To analyze the actual markups used to price custom manufactured
products not listed on the contract, we narrowed our review to a targeted
selection of 103 sales order records in the JDE database because PE only
documents custom orders’ cost information in the paper sales order files.
We selected custom sales order records from a range of business units by
identifying similar products ordered within the same pricing model year
that were sold to different categories of PE customers, such as correctional
facilities, state agencies, sheriffs, local government, and non-profits.
According to PE, its practice is to attach cost information (i.e., product
structures) to sales documentation for custom products, but only 67

B.3

Evaluation of Operations

Appendix B

(65.0%) of the 103 records reviewed had cost information attached.
Where available, we used cost information to calculate each product’s
actual markup and compared it to the effective pricing model when the
order was placed.




To determine the percent of orders not delivered on time, we analyzed
JDE sales order records based on the parameters of the JDE report that PE
uses to calculate the percent of orders on time for performance indicator
reporting. To compare our results to reported PE performance indicators,
we limited our analysis for fiscal year 2018 to the two quarters for which
we had complete data. Our analysis filtered wholesale and manufacturing
sales order records to evaluate records based on invoice date, exclude
transfer sales, and exclude the six operations that PE does not include in
their analysis (e.g., uniforms). We analyzed sales orders by fiscal year
overall rather than by month. A sales order can have multiple lines
shipped at different times. PE considers an order “not on time” if one line
from that order has an Actual Shipped Date after the Requested Delivery
Date. By running the JDE report on a monthly basis, PE counts the same
order as “on time” or “not on time” in every month that the order was
invoiced. Because orders in our scope had lines invoiced in up to 12
different months, counting orders monthly resulted in 1,464 duplicate
orders counted. We analyzed whether sales orders had at least one line not
on time by fiscal year overall in order to calculate the percent of unique
orders not on time by fiscal year. We also calculated the percent of orders
where the Requested Delivery Date defaulted to the Order Date in order to
determine the percent of orders that may have been misidentified as being
not on time; however, we included these orders in our results because they
were included in the data that PE used to calculate its performance
indicators.

To analyze PE’s process for tracking and resolving complaints, we obtained and
analyzed the PE complaints log, PE’s binder of paper complaints documentation,
information related to complaints found in PE staff emails (obtained by LLA’s
Investigative Audit section), and paper sales order files. Due to time constraints,
we limited our search for complaints not in the log to fiscal year 2018. We did
not include complaints made after June 11, 2018, the date of the last complaint in
the log. We counted unique complaints made by customers rather than the
number of orders with complaints, as the same order can have multiple
complaints and the same complaint can involve more than one order.


To analyze the reasons and costs of complaints in the log, we reviewed
complaint descriptions and cost information from the complaints
documentation and PE staff emails, used auditor judgment to create
categories of reasons for complaints, and recorded any costs that were not
included in the log (excluding transportation costs). To analyze the time
to resolve complaints in the log, we considered a complaint unresolved if
the issue had not yet been fully corrected. For 53 (34.0%) of 156

B.4

Evaluation of Operations

Appendix B

complaints in the log, we found documentation of an earlier complaint
date than the log’s complaint date. For 11 (7.7%) of 143 closed
complaints, we found documentation that the complaint was unresolved
after the log’s close date. Many complaints were unresolved as of the
latest documented discussion of the complaint, so we used the earliest and
latest date available for each complaint to calculate the minimum time that
each complaint was open before resolution. For the 13 open complaints,
we compared the earliest date to the date that we received the log (August
7, 2018) in order to determine how long the complaints had been open.


To identify complaints not in the log, we searched available
documentation for issues similar to those recorded in the log. We
compared the order number, customer, date, and description of each
complaint found to the log to ensure that it was not already recorded. We
categorized complaints by reason, recorded any costs associated with
resolving the complaint (excluding transportation), and compared the
earliest date and latest date that they were discussed to determine their
minimum time to resolution. For 33 (64.7%) of the 51 unlogged
complaints, we only found documentation where the complaint was
reported, so it was not possible to determine how long they were open.



Sent PE the methodologies and preliminary results of our analyses for
review; adjusted our analyses based on feedback and additional
documentation and information that PE provided.

B.5

APPENDIX C: OVERVIEW OF PRISON ENTERPRISES OPERATIONS
PE runs its manufacturing, wholesale, service, and agricultural industries at seven of the state’s eight correctional facilities and
one privately-run correctional center (Winn). Each correctional facility is responsible for assigning work for the offenders, and any
offender can be assigned to work for PE operations. The exception is Janitorial Services, where the offender must be a trusty.50
Because of the availability of land and infrastructure, the majority of PE operations are located at the Louisiana State Penitentiary at
Angola. The exhibit bellows contains an overview of PE operations as of June 30, 2018.
Correctional
Institution

Allen
Correctional
Center
Kinder, LA

David Wade
Correctional
Center
Homer, LA

Industry

Manufacturing

Established

No. of
PE
Staff
(Filled)

No. of
PE Staff
(Vacant)

No. of
PE
Staff
(Total)

No. of
Offenders

Allen Furniture Restoration is a full service furniture
manufacturing and refurbishing operation. Services
offered include rebuilding, stripping, and refinishing
wooden desks, chairs, credenzas, and student
classroom desks; reupholstering furniture; and
manufacturing custom wood and upholstered pieces
and production of new chairs.

FY95

Land and Agriculture Management operations are
responsible for managing the timber at each of the
state’s correctional facilities.

FY95
0

Description of Operations

Agriculture
Rangeherd (cattle) operations include the sale of
calves and proceeds on the sale of breeding cattle
which are culled from the herds.

FY95

Trusties are offenders classified as minimum security offenders who are given privileges that are not available to the general offender population.

C.1

Evaluation of Operations

Correctional
Institution

Industry

Manufacturing

Dixon
Correctional
Center
Jackson, LA

Wholesale

Agriculture

Services

Elayn Hunt
Correctional
Center
St. Gabriel, LA

Manufacturing

Agriculture
Louisiana
Correctional
Institute for
Women
St. Gabriel, LA

Manufacturing

Appendix C

Description of Operations

No. of
PE
Staff
(Filled)

No. of
PE Staff
(Vacant)

No. of
PE
Staff
(Total)

No. of
Offenders

119

FY95

Established

Chair Plant operations produce a complete line of
office chairs.

FY02

Embroidery operations produce a wide variety of
embroidered emblems and designs, which are placed
on items sold by PE garment factories as well as other
wholesale clothing.

FY01

Wakefield Meat Plant operations, located in
Wakefield, Louisiana, procure meat and related
products in bulk and ship ordered quantities to the
various correctional facilities in the state.

FY95

Rangeherd (cattle) operations include the sale of
calves and proceeds on the sale of breeding cattle
which are culled from the herds.

FY95

Orchard operations include growing pecan trees,
muscadine trees, etc.

FY99

Janitorial Service operations use offender labor to
provide cleaning and grounds services to various state
office buildings in the Baton Rouge area.

FY95

Soap Plant operations produce and package a wide
range of janitorial soaps and chemicals.
Garment Factory operations produce two major
products, jeans and pants, as well as custom garment
screening.
Rangeherd (cattle) operations include the sale of
calves and proceeds on the sale of breeding cattle
which are culled from the herds.
Garment Factory operations produce T-shirts, scrub
suits, offender jumpsuits, sheets, and pillowcases, as
well as custom garment screening.

C.2

FY95
FY13

Evaluation of Operations

Correctional
Institution

Industry

Appendix C
No. of
PE
Staff
(Filled)

No. of
PE Staff
(Vacant)

No. of
PE
Staff
(Total)

No. of
Offenders

186

Description of Operations

Established

Mattress, Broom, and Mop Factory operations
manufacture cotton, foam, polyester, and innerspring
mattresses; pillows; regular and warehouse push
brooms, mops, and scrub brushes; and related items.

FY95

Silk Screen operations produce plastic and metal
nameplates; screened decals, street and highway signs;
screened aluminum, steel and corrugated plastic signs;
screening services for T-shirts, caps and other textile
items; and the sale of sign hardware. Also offers the
capability to laser engrave wood and plastic.

FY95

Tag Plant operations produce license plates for
distribution by the Louisiana Office of Motor Vehicles,
including regular plates, personalized and specialty
plates, and motorcycle plates.

FY95

Metal Fabrication operations produce beds, lockers,
cell vents, security screens, and custom metal items.
PE has incorporated powder coating of metal products
into this operation.

FY95

Print Shop operations include a wide range of printing
services, including printing forms, brochures, booklets,
newsletters, and business cards; binding services; and
various special projects.

FY95

Wholesale

Canteen Distribution Center operations supply items
to state correctional facilities for sale to offenders. PE
also sells personal property items purchased by
offenders.

FY95

Services

Canteen Packaging Program is a partnership
between PE and Union Supply. Family and friends can
order pre-approved food and hygiene products and
personal property items for eligible offenders
incarcerated in state correctional facilities.

FY16

Manufacturing

Louisiana State
Penitentiary
Angola, LA

C.3

Evaluation of Operations

Correctional
Institution

Louisiana State
Penitentiary
Angola, LA
(Cont.)

Raymond
Laborde
Correctional
Center
Cottonport, LA

Industry

Appendix C

Description of Operations

Established

No. of
PE
Staff
(Filled)

No. of
PE Staff
(Vacant)

No. of
PE
Staff
(Total)

No. of
Offenders

Rangeherd (cattle) operations include the sale of
calves and proceeds on the sale of breeding cattle
which are culled from the herds.

FY95

Crop operations are responsible for growing and
harvesting corn, cotton, soybeans and milo, which are
sold on the open market or used to feed PE livestock.

FY95

Transportation operations are responsible for
delivering orders to PE customers.

FY95

Support
Operations

Operations include Administrative Office, Equipment,
and Vehicle Maintenance.

FY95

Agriculture

Rangeherd (cattle) operations include the sale of
calves and proceeds on the sale of breeding cattle
which are culled from the herds.

FY95

Garment Factory operations produce numerous items
including aprons, laundry bags, socks, bath towels,
dish towels, boxer shorts, shirts, wash cloths and
jackets.

FY95

Operations include Administration, Accounting,
Warehouse, etc.

FY95

767

Agriculture

Winn
Correctional
Center
Winnfield, LA

Manufacturing

PE
Headquarters
Baton Rouge, LA

Support
Operations

Total
Source: Prepared by legislative auditor’s staff using information provided by PE.

C.4

APPENDIX D: SUMMARY OF 1997 PERFORMANCE AUDIT
REPORT ON LOUISIANA PRISON ENTERPRISES
ISSUED APRIL 1997
Findings

Prison Enterprises (PE) should document its
claims of saving the state millions of dollars
annually. The agency has some examples of
individual instances, but no cumulative figure.
By developing a cumulative figure, PE can
illustrate how effective it is at saving the state
money.

PE achieved part of its mission of being selfsupporting for fiscal year 1995. However,
some individual operations were not selfsupporting, particularly agriculture operations.

Some of the Department of Corrections
(DOC) policies may make it difficult for PE to
reach one of its goals of teaching marketable
skills and good work habits. Several PE
industries that teach marketable skills are
housed at Louisiana State Penitentiary at
Angola, a maximum security prison. The
inmates housed at this facility usually receive
lengthy sentences. Thus, inmates learning
skills at these industries may never use them
in the private sector or these skills may be
obsolete when the inmate is released.

The agency’s last long-range strategic
business plan covered fiscal years 1989 to
1993. Since then, PE has developed shortterm plans. These short-term plans do not
include formally developed performance
measures. As a result, management does not
measure and document whether goals and
objectives are achieved.

Recommendation(s)

PE should establish formal procedures to measure and
document the cost effectiveness of its operations (1997
Recommendation 2.1).

DOC should review its policies that may lessen the
impact of PE’s efforts to teach marketable skills (1997
Recommendation 2.2).
PE should review its goals to determine if the goals are
realistic or conflicting (1997 Recommendation 2.3).

PE should formally develop and document performance
measures for its operations. These performance
measures should reflect PE’s mission and goals (1997
Recommendation 2.4).
PE should develop a strategic business plan that
addresses short-term and long-term goals that are in
agreement with the mission statement. The planning
process should provide a means to change and alter the
business plan to meet changes in the environment (1997
Recommendation 2.5).

D.1

Evaluation of Operations

Appendix D

Findings

Recommendation(s)

PE should use its computer software to price its
products (1997 Recommendation 3.1).
5.

PE formalized its methodology to price
documents in November 1996. In our test of
this methodology, we found that some
products may be underpriced or over-priced.

The legislature may wish to consider legislation that
clarifies R.S. 15:1153(A)(1). This clarification should
state whether its intent is for PE to conduct all
operations at cost or to provide each product or service
at cost (1997 Matter for Legislative Consideration 3.1).
Based on clarification by the legislature, PE should
examine the selling prices of its products to provide the
lowest possible price (1997 Recommendation 3.2).

PE developed its last marketing plan in fiscal
year 1990. It developed a sales plan in the
middle of fiscal year 1996 in response to
decreasing sales, but the plan only covered six
months.

PE has two public/private partnerships. One
is a federal Prison Industries Enhancement
(PIE) program. Inmate workers in this
program have contributed more than $180,000
in taxes, room and board, and victims’
compensation. The other is a cooperative
endeavor agreement. Inmates in this program
can earn regular incentive wages or a
reduction in their sentence at double the
normal rate, also known as double good time.
However, these inmates do not pay taxes,
room and board, or victims’ compensation.

Using the direction provided by an updated strategic
business plan, PE should develop formal sales and
marketing plans documenting the needs of all of PE’s
product lines. Management should communicate the
plan to the entire agency and the role personnel will play
in achieving sales and marketing objectives (1997
Recommendation 3.3).
DOC and PE should consider the overall benefits of its
public/private partnerships before engaging in any
future ones. Consideration should be given to
partnerships that benefit both the public and inmates
(1997 Recommendation 4.1).
The legislature may wish to consider legislation that
provides for a portion of the wages of inmate workers
(not exceeding the federal limitations) in the PIE
program to go toward family support (1997 Matter for
Legislative Consideration 4.1).
The legislature may wish to consider legislation that
enhances the public benefit of public/private
relationships between DOC and the private sector. In
doing so, the legislature may wish to require the
department and PE to engage only in partnerships that
are under the PIE program or the Louisiana Restitution
Industries program (1997 Matter for Legislative
Consideration 4.2).
Alternatively, the legislature may wish to consider
legislation that clearly establishes the types of
agreements and partnerships into which PE may engage.
This legislation should require that the agreements
specify the objectives to be achieved and clearly identify
the desired public benefit. The agreements should also
include ways to determine if these objectives are
achieved and if public benefit is realized (1997 Matter
for Legislative Consideration 4.3).

Source: Prepared by legislative auditor’s staff using report found at
https://lla.la.gov/PublicReports.nsf/D4B512B51DF4B38986256FF80067E151/$FILE/00000960.pdf.

D.2

APPENDIX E: SELECTED BEST PRACTICES FROM THE
CORRECTIONAL INDUSTRIES: A GUIDE TO REENTRY‐FOCUSED
PERFORMANCE EXCELLENCE
Best Practice

Description Summary
Post-release employment services connect individual offenders who were trained in
Correctional Industries (CI) to long-term employment. Offenders should be engaged in
activities in order to promote retention, help with re-employment in the event of job
loss, and assist with advancement opportunities.
The goal of post-release employment services is ultimately to reduce recidivism. The
approach is as follows:

Provide Post Release
Employment Services

Replicate Private Industry
Environment



To increase employment opportunities available to CI trained offenders who
are trying to successfully reintegrate and remain crime-free by gaining and
retaining employment



To encourage employers to make individualized determinations about a
person's specific qualifications, including the relevance of a criminal record,
rather than having restrictions or bans against hiring people with criminal
records.

The replication of private sector industries and environments CI operations includes
work processes, procedures, equipment, training, certification, and associated
methodologies.
A CI program should create a work environment that emulates real world work
experience and effectively trains and prepares offenders for the transition to private
sector employment upon release.
Employment readiness encompasses several areas including soft skills, cognitive skills
and industry-recognized training and certifications employers expect from qualified
applicants. Employment readiness/employability pertains to the offender's ability to
both obtain and retain a job. CI programs should focus on both. The ability to gain
employment and the ability to retain employment are two very different skill sets the
offender must acquire to be successful in the workplace.

Create a Culture of Offender
Employment Readiness and
Retention

CI work assignments should mirror the community workplace, including: job
applications, job interviews, orientation (to include workforce expectations and worker
engagement), ongoing training and regular work evaluations, termination for
unacceptable performance or conduct and opportunities for performance-based pay
raises. Creating a culture of offender employment readiness and retention includes
work readiness assessment conducted at entry, at periodic points during employment
and at the end of employment with CI.
In addition, every position in CI should be identified by its Standard Occupational
Classification (SOC) code found at the Department of Labor's "O*Net" website. This is
essential in linking CI work with work in the community, and it is the first step in
developing a workforce development culture within CI.

E.1

Evaluation of Operations

Appendix E

Best Practice

Description Summary
Soft skills are characteristics that are behavioral in nature and include factors such as
attitude, work ethic, critical thinking, flexibility and the desire to learn and be trained.
Soft Skills include: a strong work ethic, a positive attitude, communication skills,
decision-making skills, problem solving skills, social skills, time management,
flexibility/adaptability, capability to accept and learn from criticism, getting along with
others and understanding team concepts.

Implement Certificate-Based
Soft Skills Training

CI will benefit from offenders participating in soft skills programs. As offenders learn
these soft skills, which are necessary to excel in a post-release work environment, there
will also be a positive impact realized in their CI work assignment and institutional
behavior.
Soft skills programs support the development of personal responsibility that is highly
valued by employers. CI should develop partnerships that reinforce the significance of
soft skills training. These include potential employers, community-based and nonprofit organizations such as Dress for Success, YWCA, etc.
Certified Technical Skills that lead to professional certification, trade certification, or
professional designation, often called simply certification, is a designation earned by a
person to assure their qualifications in performing a job or task. Certifications are
portable, evidence based credentials that measure essential workplace skills and are a
reliable predictor of workplace success.

Provide Certified Technical
Skills Training

Many offender certification programs are created, sponsored, or affiliated with the
Department of Labor (DOL), professional associations, trade organizations, or private
vendors interested in raising standards.
Consult with the DOL in your state to determine the current and projected
skill/employment needs. The DOL can provide current and relevant data to assist in
deciding where certification programs will have the greatest impact. Conduct
independent research with employers to determine their specific technical skills they are
seeking. Consult employers in the geographic areas where offenders will be released.
CI programs offer a system that promotes the learning, development of skills, values,
behaviors and motivation for offenders to make changes in their lives that assist them in
a successful transition into the community. CI programs accomplish this through the
context of work.

Maximize Offender Job
Opportunities

In an effort to take full advantage of the impact of industry programming, the
maximization of offender job opportunities is critical in assisting a correctional
organization with its reentry initiatives. This is accomplished using a systems approach
that includes the strategic evaluation of resources and programming resulting in a
comprehensive plan.
A key to sustainable growth is maximizing offender job opportunities. The process of
achieving sustainable growth requires a systems approach including the evaluation of
current operations, the identification of long term goals, and the strategies to reach those
goals.
The evaluation of current CI skill development is necessary to determine if what is
currently offered is relevant to the needs of the current job market. Given the rapidly
changing nature of the job market, it is imperative that leaders access, understand,
evaluate, and make existing and new business program decisions based upon labor
market information.

E.2

Evaluation of Operations

Appendix E

Best Practice

Description Summary
Financial sustainability is the generation of sales revenue to cover all costs and financial
obligations associated with CI operations. The concept of a triple bottom line has
emerged in CI which focuses not only on the needs of customers, but also the funding
of the social mission and value provided by the organization to offenders for successful
reentry.

Maintain Financial
Sustainability

There may be business units that are not financially self-sufficient but employ
numerous offenders or offer valuable work skills. CIs can balance the benefits and
maintain this business unit with a more lucrative business unit that can offset the
financial loss. If long-term unsustainable conditions occur, a reduction of offender
work opportunities, DOC/Correctional Industries staff, and closure of entire operations
can result.
CI should maintain positive cash flow. Revenue streams are the channels through
which money flows into an organization. CI is self-supporting and must rely primarily
on sales of products and services. These streams can be direct sales or contracts.
Maintain sufficient operating funds needed to pay monthly bills and to purchase raw
materials and goods to efficiently run its business operations.

E.3

APPENDIX F: PRISON ENTERPRISES REVENUES, EXPENDITURES,
AND NET INCOME BY INDUSTRY
FISCAL YEARS 2016 THROUGH 2018
Categories
Revenues
Operating Revenues
Interdepartmental Revenues
Total Revenues
Expenditures
Cost of Goods Sold
Operating Expenditures
Other Expenses & Income
Transfers to General Fund
DOC Incentive Wages
Total Expenditures
FY16 Net Income
Revenues
Operating Revenues
Interdepartmental Revenues
Total Revenues
Expenditures
Cost of Goods Sold
Operating Expenditures
Other Expenses & Income
Transfers to General Fund
DOC Incentive Wages
Total Expenditures
FY17 Net Income

Manufacturing

$8,177,468
216,658
8,394,126
5,576,884
2,303,419
(50,514)
7,829,790
$564,336

$10,522,938
325,549
10,848,487
7,037,874
2,089,913
(114,920)
9,012,867
$1,835,620

Wholesale
Services
FISCAL YEAR 2016
$14,179,558
14,179,558

Agriculture

Support*

Total

$2,805,894
2,805,894

$3,446,421
62,884
3,509,305

$28,609,340
279,542
28,888,882

11,752,630
1,769,361
1,833,456
993,415
(16,942)
(4,493)
13,569,145
2,758,283
$610,413
$47,611
FISCAL YEAR 2017

4,175,890
687,774
227,267
5,090,931
($1,581,626)

331,106
1,225,375
1,556,481
($1,556,481)

23,271,205
5,821,626
155,318
331,106
1,225,375
30,804,630
($1,915,747)

$2,943,124
2,943,124

$2,499,190
63,691
2,562,881

$27,895,219
389,240
28,284,459

9,754,995
1,752,882
1,829,624
934,914
(17,891)
(16,201)
11,566,728
2,671,595
$363,239
$271,529
FISCAL YEAR 2018

3,006,004
514,547
148,065
3,668,616
($1,105,735)

1,076,327
1,076,327
($1,076,327)

21,549,244
5,371,508
(947)
1,076,327
27,996,133
$288,326

$11,929,967
11,929,967

Revenues
Operating Revenues
$9,079,261 $12,168,928 $3,215,202
$3,273,034
- $27,736,426
Interdepartmental Revenues
176,624
48,922
225,546
Total Revenues
9,255,885
12,168,928
3,215,202
3,321,956
27,961,971
Expenditures
Cost of Goods Sold
5,969,879
9,838,993
1,807,538
3,579,632
21,193,401
Operating Expenditures
2,138,956
1,886,965
1,094,820
318,766
5,442,148
Other Expenses & Income
(46,581)
(17,636)
(16,459)
543,731
463,056
Transfers to General Fund
DOC Incentive Wages
1,098,454
1,098,454
Total Expenditures
8,062,255
11,708,323
2,885,898
4,442,129
1,098,454
28,197,059
FY 18 Net Income
$1,193,630
$460,605
$329,304 ($1,120,173) ($1,098,454)
($235,087)
*Support operations include PE Headquarters operations, Transportation, Sales and Marketing Department, etc. and are not
revenue generating. Related expenses are allocated to the revenue-generating operations.
Note: Total amounts do not match due to rounding.
Source: Prepared by legislative auditor’s staff using information from PE’s Income Statements for FY16 through FY18.

F.1

APPENDIX G: PRISON ENTERPRISES EXPENDITURES
FISCAL YEARS 2016 THROUGH 2018
Expense Category
Cost of Goods Sold
Cost of Sales
Factory Overhead
Personnel Expenses
Total Cost of Goods Sold
Operating Expenses
Personnel Expenses
Inmate Incentive Wages
Travel
Operating Services
Rentals
Utilities
Insurance
Miscellaneous Services
Licenses, Fees, and Commissions
Telephone
Freight
Other Operating Services
Total Operating Services
Operating Supplies
Fertilizer
Feed
Repair Parts – Tractor & Equipment
Seed
Gas and Oil -Autos & Trucks
Miscellaneous Operating Supplies
Gas and Oil - Tractor & Equipment
Food
Repair Parts - Auto & Trucks
Herbicides
Repair Parts - Buildings and Facilities
Medicine
Household
Other Operating Supplies
Total Operating Supplies
Professional Services
Other Charges
Non-Capitalized Outlays
Deferred Expenses
Total Operating Expenses
Other Expenses & Income
Transfers to General Fund
DOC Incentive Wages
Total Expenses

FY16

FY17

FY18

Total

$20,215,340
350,749
2,705,116
$23,271,205

$18,554,425
406,600
2,588,219
$21,549,244

$18,096,807
424,840
2,671,754
$21,193,401

$56,866,573
1,182,188
7,965,089
$66,013,850

$4,623,831
55,890
39,059

$4,036,986
60,229
27,217

$4,213,344
61,683
39,167

$12,874,162
177,803
105,444

149,818
243,131
182,951
265,010
51,255
64,517
54,929
146,116
1,157,727

416,949
286,613
226,398
94,186
63,715
57,590
63,883
129,557
1,338,890

424,993
294,627
259,602
109,389
70,710
54,686
53,713
171,808
1,439,528

991,760
824,371
668,951
468,585
185,680
176,793
172,525
447,481
3,936,145

464,687
479,935
356,089
248,193
222,437
231,621
129,386
161,636
157,002
163,384
203,211
92,782
56,416
284,851
3,251,627
39,929
539,856
73,568
(3,959,863)
5,821,624
155,318
331,106
1,225,375
$30,804,630

342,195
377,442
353,320
247,190
201,559
190,345
157,475
134,393
136,384
132,810
110,130
84,807
55,626
290,664
2,814,340
27,782
569,277
40,188
(3,543,402)
5,371,509
(947)
1,076,327
$27,996,133

375,162
308,556
376,988
265,379
213,004
163,810
179,757
140,298
138,131
124,830
101,132
85,949
52,564
242,881
2,768,440
28,939
626,656
54,924
(3,790,534)
5,442,148
463,056
1,098,454
$28,197,059

1,182,044
1,165,932
1,086,396
760,761
637,000
585,776
466,617
436,326
431,516
421,025
414,473
263,539
164,606
818,395
8,834,408
96,650
1,735,789
168,680
(11,293,799)
16,635,282
617,428
331,106
3,400,156
$86,997,821

Note: Total amounts do not match due to rounding.
Source: Prepared by legislative auditor’s staff using information from PE’s Income Statements for FY16 through
FY18.

G.1