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Texas Audits Private Prison and Substance Abuse Treatment Contract Monitoring

by Matt Clarke

In March 2010, the Texas State Auditor’s Office released a report on a performance audit of the Private Facilities Contract Monitoring and Oversight Division (PFCMOD).

The PFCMOD monitors private prisons and private substance abuse treatment programs under contract with the Texas Department of Criminal Justice (TDCJ). Texas has more prisoners in private prisons than any other state. The audited private contractors were responsible for 26,798 prisoners in a variety of settings – including 13 private prisons, 5 private state jails, 4 private Intermediate Sanctions Facilities, 9 private Substance Abuse Felony Punishment Facilities, two In-Prison Therapeutic Communities, a Multiple Program Treatment Facility, 19 private Substance Abuse Treatment Facilities, one In-Prison Driving While Intoxicated Treatment Program, two County Jail Work Release Programs and 8 private halfway houses.

The contracts for those services exceeded $255 million in FY 2009, up from around $235 million in FY 2008. The audit covered the PFCMOD’s activities for FY 2008 and 2009.

The Texas Board of Criminal Justice approved the creation of the PFCMOD in 2007. In FY 2009, the PFCMOD had a budget of around $53 million and a staff of 40 contract monitors to oversee 68 contracts with 33 different companies. The 2009 contracts were for a total of 20,722 beds and 6,855 treatment slots.

The state auditors noted a lack of performance standards in some contracts that would make it impossible for the TDCJ to hold companies accountable for non-compliance. The report found that the TDCJ did not consistently include financial reporting requirements in its contracts for substance abuse treatment programs and did not include all of the essential contract provisions required by the State of Texas Contract Management Guide in all of its contracts. The TDCJ also allowed some contractors to conduct their own criminal background checks on their employees without controls to ensure that the checks were properly performed.

The audit noted that responsibility for the private contracts for substance abuse programs was divided between the PFCMOD, the Parole Division and the Rehabilitation Programs Division without clear definitions of the divisions’ responsibilities. This caused lapses in oversight functions.

The TDCJ further failed to maintain documentation to justify contract renewals, and some contractors failed to document the qualifications of their employees. The PFCMOD did not document all of its monitoring visits to halfway houses and substance abuse programs.

Additionally, the audit noted some security problems. The TDCJ had no documented policies and procedures for processing contractor payments, which resulted in some payment irregularities and improper payment documentation. Many contractor employees unnecessarily had access to and the ability to change reports that track the arrival, departure and transfer of prisoners. Some former contractor employees continued to have such access, which could compromise the security of the prison system. The PFCMOD was improperly designated as having primary responsibility for managing security and user access to the computerized payment Authorization Management System. This should have been assigned to the Information Technology Division. Also, contractor workers were not required to sign security agreements.

The PFCMOD agreed with the audit’s recommendations to correct the identified deficiencies. See: The Department of Criminal Justice’s Oversight of Selected Providers that Deliver Residential Services and Substance Abuse Treatment Programs, Texas State Auditor Report No. 10-025 (available at and on PLN’s website).

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