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Hawaii State Auditor Blasts Private Prison Contracting; State Renews Contract Anyway

On December 29, 2010, the State Auditor of Hawaii released a report highly critical of the way the Hawaii Department of Public Safety (DPS) contracts for private prison beds on the U.S. mainland.

The report found that the DPS overstated the cost of housing prisoners in Hawaii while understating the cost of incarcerating them at private prisons in Arizona operated by Corrections Corporation of America (CCA). The audit also determined that the DPS used a sham inter-governmental contract with the City of Eloy, Arizona to circumvent open-bid procurement procedures that were required had the DPS contracted with CCA directly. The report noted that DPS personnel had been uncooperative and tried to obstruct the audit.

Hawaii has an unusual prison system in that the DPS runs the state police, state prisons and local jails. The state’s prisons have an operational capacity of 3,327 beds, leaving Hawaii more than 2,000 beds short of the number needed to house its prisoner population.

To address this persistent problem, beginning in 1995 the DPS started sending Hawaiian prisoners to privately-operated facilities on the mainland. Although introduced as a temporary measure to alleviate prison overcrowding, the outsourcing of prisoners to private facilities has become institutionalized and now encompasses 34% of Hawaii’s prison population. Housing prisoners on the mainland has caused a great deal of hardship for both the prisoners and their families, who strain to maintain their relationships.

In 2006, the state legislature authorized ten permanent civil service positions to monitor out-of-state prison contracts. Known as the Mainland/FDC Branch of the DPS, the office is responsible for overseeing contractual compliance by the private prisons and the Federal Detention Center (FDC) in Honolulu, where the DPS contracts for jail beds.
Accompanying the branch officials on a quarterly inspection tour of the CCA-operated Saguaro Correctional Center in Arizona, which holds around 1,800 Hawaiian prisoners, auditors found the branch officials merely took CCA’s word that they were in compliance with the contract. They did no independent checking of CCA’s paperwork or log books.

Acting on instructions from the DPS director, the warden at Saguaro refused to provide the state auditors with copies of any documents. The DPS director questioned the auditors’ legal authority to conduct the state audit, while the DPS’s Institutions Division administrator sent an advisory email to all wardens instructing them to submit any response to the auditors’ inquiries to DPS management for approval.

When documents requested by the auditors were provided, they were often delayed, provided piecemeal and filtered through DPS management. The deputy director of administration for DPS questioned the auditors’ need for the requested information, maintaining that it was outside the scope of the audit. DPS’s management information system administrator was instructed not to answer questions regarding the agency’s automated prisoner tracking program, Offendertrak, and not to meet with the auditors’ analysts to discuss the program. The auditors had to speak with a Motorola engineer who had installed Offendertrak to gain knowledge about the system’s capabilities. Such obstructionism delayed the audit and compromised its effectiveness.

The state auditors found several flaws in DPS’s method of calculating the costs of incarcerating prisoners in Hawaii and at private prisons on the mainland. For example, the DPS calculated the cost of in-state prison beds for fiscal year 2009 at $139 per prisoner per day, while the cost at FDC was $87 and only $77 at private prisons on the mainland. However, the indirect general administrative costs associated with all prisoners were taxed solely to DPS facilities. For prisoners held on the mainland this included costs for accounting, finance and training, amounting to $4.7 million annually.

Also not included in the mainland incarceration costs were expenses for serious medical needs and the cost of treatment for HIV and hepatitis C. The DPS pays all medical expenses for prisoners held at the FDC; however, those costs were not included in the FDC cost analysis. Indeed, the cost of serious medical expenses for mainland prisoners and all FDC prisoner medical expenses were incorporated into the cost analysis for DPS in-state prisons, disingenuously raising the apparent cost of DPS facilities while lowering the apparent cost of incarcerating prisoners at FDC and on the mainland.

The cost of housing prisoners in privately-operated facilities was also skewed by the selection process for prisoners sent out-of-state. The Hawaii prisoners held at CCA facilities in Arizona were all medium-security males with no major health problems, no major disciplinary problems, no outstanding criminal charges and a lot of time left to do on their sentences. Those are some of the least-expensive prisoners to house, regardless of the location. Removing such prisoners from the DPS population shifted the average DPS incarceration costs higher while lowering the average mainland costs.

Further, in determining the per diem cost at in-state prisons, the DPS used operational capacity instead of the actual number of prisoners. This distorted the calculation. DPS officials did not seem to understand that the legislature needed accurate cost comparison information, and the deputy director of administration explained that the calculation of incarceration costs was a “quick and dirty” approach used solely to answer the legislature’s inquiries.

“[DPS] management chooses to report artificial cost figures derived from a calculation based on a flawed methodology, designed entirely on what is easiest for the department to report,” the auditors wrote.

The audit report also mentioned that the DPS “circumvented the competitive procurement process and ignored its responsibilities to oversee the contracting for out-of-state prison beds by blindly treating CCA as a government agent, instead of a private vendor operating for a profit.” The DPS contracted with the City of Eloy instead of directly with CCA. The mayor of Eloy, who signed the contract, is a CCA employee. The city received none of the funds from the contract, which were paid directly to CCA, and provided none of the prison-related services. Further, no contract for services existed between Eloy and CCA.

Thus, the intergovernmental agreement (IGA) with the City of Eloy was a sham that allowed the DPS to contract with CCA without undergoing required competitive bidding. This was especially egregious because the DPS had developed a request-for-proposals-based competitive bidding process for private prisons seeking to house female state prisoners in 2005. CCA was awarded that contract, worth $3.6 million in FY 2009, to house female prisoners in Kentucky. Those prisoners were later returned to Hawaii following a sex abuse scandal involving CCA employees. [See: PLN, Oct. 2009, p.40].

The IGA with the City of Eloy to house male Hawaiian prisoners was valued at $56.7 million in FY 2009. It was renewed in June 2011 for three more years, despite the findings by the state auditors and Governor Neil Abercrombie’s expressed desire to return out-of-state prisoners to Hawaii, likely because there were few other options due to an inadequate number of in-state prison beds.

DPS director Jodie Maesaka-Hirata, who was appointed after the audit was conducted, said she was “perplexed by the lack of cooperation” the auditors received. Nonetheless, she largely defended the contracting procedures and cost calculations used by the DPS while agreeing to make some changes.

Generally there is only one reason for obstructing an audit – having something to hide. Although there should be an investigation into the questionable IGA arrangement involving CCA and the City of Eloy, given the lack of cooperation by the DPS and an apparent lack of interest by Hawaii lawmakers, that is unlikely to occur.

Meanwhile a number of problems have surfaced at the CCA-operated Saguaro Correctional Center. Two Hawaiian prisoners – Bronson Nunuha and Clifford Medina – were murdered in February and June 2010, respectively; a CCA guard was injured during a fight involving dozens of prisoners; and 18 Hawaiian prisoners filed suit against CCA and state officials in December 2010, claiming they were beaten, kicked and threatened by CCA staff, including the warden.

“The violence involving Hawaii inmates at Saguaro Correctional Facility underscores why we need to stop sending prisoners out of state,” said Governor Abercrombie. “We are facing many challenges in the state and we need to work together to find solutions that include bringing our inmates home.”

Sources: Management Audit of the Department of Public Safety’s Contracting for Prison Beds and Services (Report No. 10-10),,,

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