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Private Prisons Bilk $13 million From Florida; State Awards More Contracts

by David M. Reutter

Florida's Correctional Privatization Commission (CPC) consistently failed to safeguard the State's interests in its role as steward of privately operated correctional facilities," causing Florida's taxpayers to pay $12.7 million in questionable and excessive of cost. That conclusion was arrived at in a scathing report of the CPC by Florida's Inspector General.
The audit, issued on June 30, 2005, comes a year after the Florida Legislature abolished the CPC and turned its operation and management of private prison contracts over to the Department of Management Services (DMS).

Florida contracts with two vendors to operate five prisons in the state. Gadsden, Bay, and Lake City prisons are operated by Corrections Corporation of America (CCA) while GEO Group, formerly Wackenhut Corrections, operates Moore Haven and South Bay prisons. Combined, these prisons warehouse 5,290 male prisoners.

The audit said that CPC records and contract documentation showed CPC consistently made questionable contract concessions to the vendors." That statement comes as no surprise to those familiar with the cronyism and infestation of the CPC by those who are in the vendors' pockets. That story as told in Private Capitol Punishment: The Florida Model, by Ken Kopczynski, reviewed in PLN, December 2004, pg. 19.

CPC's failures allow the private vendors to increase their profit at taxpayer expense. The vendors saved $290,000 from a CPC blanket waiver of staffing requirements. Under the contracts, the vendors were required to provide designated services staff with qualified employees in accordance with the staffing pattern provided in the vendors' proposal. Vacancies for non-security positions must be filled within forty-five days. The waivers were granted without the vendors even requesting them. Instead, CPC's Executive Director was advised the vendors were encountering difficulties recruiting Registered Nurses and vocational and academic instructors at all prisons. It appears that the blanket waivers were granted in order to allow facilities to avoid monetary deductions for vacant non-security positions," the audit said.

GEO Group pocketed $3.4 million for overcharging the State for Competitive Area Differential (CAD) pay, which is authorized by the State for specific positions within a State Agency when the agency can demonstrate that the additive is based on geographical, localized recruitment, turnover, or competitive pay problems. The South Bay prison is in Palm Beach County, which allows State employees in the county to receive the salary additive.
The 1995 contract for South Bay authorized CAD for that prison's employees. Originally each guard at South Bay received $6,300 per year in CAD pay, billed to the State by GEO. In 1999, the State reduced CAD pay to $4,400 a year. From 2000 to current, it was reduced to $2,500. GEO, however, continued to build the CPC at the original rate, overcharging the State $3.4 million. CPC discovered this overcharge in June 2002, but took no action to recoup any of the overpayments.

The CDC also authorized $1.57 million for the South Bay facility to pay tax burdens from CAD salaries for the Federal Unemployment Tax Act, State Unemployment Tax Act, and Federal Insurance Contributions Act. The audits could find no statutory authority to pay such a burden and questioned why the CPC would authorize the payment of any portion of the vendor's taxes.
Finally, South Bay profited by submitting invoices in the amount of $104,000 for CAD payments for employees who were no longer employed at the prison. These invoices covered 73 employees who were terminated, but were reflected on CAD invoices for about 19 weeks, or 4 monthly billing cycles. CPC never reviewed the invoices for accuracy.

South Bay's abuse of CAD payments came in the audit's sixth finding, which found the CAD was being used to supplement below-market starting salaries to South Bay employees. Guards at Moore Haven are paid $27,000 per year to start. Meanwhile, guards at South Bay, received $28,371; subtract a $6,300 CAD payment, and South Bay's starting pay is $22,071. The audit concluded that it becomes apparent that the vendor has created its own competitive pay' problem by paying artificially lower starting salaries and using the CAD to offset the difference in its own payroll.

The Inspector General also found the Gadsden prison profited $2.85 million from a per diem for each of the prison's first 768 prisoners for maintenance and repair of the prison. For the first 768 prisoners, Gadsden received a per diem of $2.68 or $645,000 annually. Rather than expend that amount for repairs and maintenance, Gadsden placed in its corporate coffers all but an average of $170,000. No explanation was given why Gadsden received this per diem when other private prisons did not.

Each private prison contract requires the vendor to place into the Inmate Trust Fund" all proceeds from canteen sales and collect telephone calls by prisoners. Those funds may only be used to provide unique and innovative programs for inmates' reintegration into society and that such expenditures do not include any program contemplated in the contract." Gadsden, however, used $987,617 to pay for salaries of programs required by the vendor's contract, such as Chaplain, Administrative Chaplain Clerk, Librarian, Library Aide, and Education Counselor.

Each of the above fraudulent overcharges makes it impossible to determine each private prison's actual per diem per prisoner. This is critical, for Florida law requires that private prisons achieve a seven percent savings in expense over public owned prisons. The result is it is impossible to adequately measure whether or not the public is achieving this savings.
Despite these overcharges and apparent corruption, Florida's private prison industrial complex is set to continue its growth. In July, 2005, it was announced CCA will build a 1,515 the bed medium security prison in Southwest Ranches.

The GEO Group was the prevailing bidder to build a 1,500 bed medium to maximum prison in Jackson County near Graceville. GEO expects that contract to generate $21 million in revenue. In announcing the contract award, Colleen Englert, a spokeswoman for DMS said, We will offer a $10 million savings over a like public prison over the term of the contract. This is a financial benefit for the state.

Kopczynski asks how the $10 million savings was calculated, asking for GEO's financing plan. That's how you determine what the true cost is going to be," Kopczynski said. This is where you get into lies, damned lies, and statistics.

Gov. Jeb Bush, meanwhile, vetoed a bill passed by Florida's Republican-controlled Legislature, which not only established more controls over state procurement procedures, but also created a Center for Efficient Government to keep tabs on state-private-contractor relationships.
As Florida's experiments into privatization shows, corporate profits and partisan politics are more important than safeguarding the public purse and protecting the public's interests. The Audit Report, number 2005-61 is available at and

Additional Sources: Tallahassee Democrat; Sun Sentinel; The Ledger Palm Beach Post."

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