Arizona Department of Corrections,
Rehabilitation and Reentry

Capital Projects Funding and Department Finances
Department spending we reviewed was consistent with statutory and
other requirements, but the Department has received a small percentage
of its requested capital funding and has not addressed outstanding
reconciliations of inmate account and bank statement balances

Performance Audit
October 2020
Report 20-109

A Report to the Arizona Legislature

Lindsey A. Perry
Auditor General

ARIZONA _ __

AuditorGeneral
Making a Positive Difference

The Arizona Office of the Auditor General’s mission is to provide independent and impartial information and
specific recommendations to improve the operations of State and local government entities. To this end, the
Office provides financial audits and accounting services to the State and political subdivisions, investigates
possible misuse of public monies, and conducts performance audits and special reviews of school districts,
State agencies, and the programs they administer.

The Joint Legislative Audit Committee
Representative Anthony T. Kern, Chair

Senator Rick Gray, Vice Chair

Representative John Allen

Senator Lupe Contreras

Representative Timothy M. Dunn

Senator Andrea Dalessandro

Representative Mitzi Epstein

Senator David C. Farnsworth

Representative Jennifer Pawlik

Senator David Livingston

Representative Rusty Bowers (ex officio)

Senator Karen Fann (ex officio)

Audit Staff
Dale Chapman, Director

Robin Hakes, Team Leader

Jeremy Weber, Manager

Ricardo Carrillo

Cathy Clark, Manager

Jessika Hallquist

Kaylee Arteaga, Graphics Coordinator

Patrick Jennett
Karen McCann

Contact Information
Arizona Office of the Auditor General
2910 N. 44th St., Ste. 410
Phoenix, AZ 85018-7271
(602) 553-0333
contact@azauditor.gov
www.azauditor.gov

LINDSEY A. PERRY
AUDITOR GENERAL

ARIZONA
AUDITOR GENERAL

MELANIE M. CHESNEY
DEPUTY AUDITOR GENERAL

October 9, 2020

Members of the Arizona Legislature
The Honorable Doug Ducey, Governor
Mr. David Shinn, Director
Arizona Department of Corrections, Rehabilitation and Reentry
Transmitted herewith is the Auditor General’s report, A Performance Audit of the Arizona Department
of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances. This
report is in response to a September 19, 2018, resolution of the Joint Legislative Audit Committee.
The performance audit was conducted as part of the sunset review process prescribed in Arizona
Revised Statutes §41-2951 et seq. I am also transmitting within this report a copy of the Report
Highlights to provide a quick summary for your convenience.
As outlined in its response, the Arizona Department of Corrections, Rehabilitation and Reentry
agrees with the finding and plans to implement all the recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
Sincerely,

Lindsey Perry, CPA, CFE
Auditor General

2910 N 44 th St., Ste. 410 • PHOENIX, AZ

85018-7271 • (602) 553-0333 • WWW.AZAUDITOR.GOV

Report Highlights

Arizona Auditor General
Making a positive difference

Arizona Department of Corrections, Rehabilitation and
Reentry
Capital Projects Funding and Department Finances

Department spending we reviewed was consistent with statutory and
other requirements, but the Department has received a small percentage
of its requested capital funding and has not addressed outstanding
reconciliations of inmate account and bank statement balances.
Audit purpose
To review the Department’s revenues and expenditures, capital projects funding, and management of inmate monies.

Key findings
•

Department annually spends more than $1 billion—primarily State General Fund monies—to operate the State prison
system. Its largest expenditures are for staffing; contracted services such as private prisons, inmate healthcare, and
inmate food services; and other operating expenditures, including rent and utilities.

•

Department expenditures and transfers we reviewed were for supported and allowable purposes.

•

Department has received less than 5 percent of its requested capital funding, resulting in increased safety and
security risks and at least $125 million in deferred maintenance costs. Arizona has provided less capital funding for
its corrections department than other states we reviewed.

•

The project to replace locks and make other upgrades at the Lewis and Yuma prison complexes has been revised,
increasing its cost by almost $9 million and delaying its completion until August 2022.

•

Although most deductions from inmate accounts we reviewed were accurate and supported, the Department has
not reconciled inmate account and bank statement balances since November 2019 because of data issues related
to its new inmate management system, which increases the risk of incorrect balances or unaccounted-for monies.
In addition, the Department has not yet resolved approximately 480 reconciliation items dating from at least January
2015 through January 2019 with an absolute dollar value of approximately $992,400.

Key recommendations
The Department should:
•

Continue to resolve its data issues and complete inmate account reconciliations for those months that have not been
reconciled.

•

Develop and implement a strategy and time frame to resolve the outstanding unreconciled items from previous
reconciliations, working with the Arizona Department of Administration as needed.

•

Retain all historical supporting documentation for each monthly reconciliation in accordance with its record retention
policy.

See Performance Audit Report 20-109, October 2020, at www.azauditor.gov.

TABLE OF CONTENTS

Introduction

1

Chapter 1: Department has received 2 to 4 percent of requested funding to address capital

needs, resulting in increased safety and security risks and $125 million in deferred
maintenance costs

6

Department’s reported capital needs have exceeded its appropriated funding
Underfunding capital needs increases safety and security risks and has resulted in at least $125 million
in deferred maintenance costs
Department has limited monies available to support larger capital funding appropriations

Chapter 2: Although most inmate trust account (ITA) deductions we reviewed were accurate

and supported, Department has not reconciled ITA and bank statement balances since
November 2019, which increases the risk of incorrect ITA balances or unaccounted-for monies

12

Department is custodian of inmate monies and manages them through ITAs
Most deductions we reviewed were accurate and supported
Department has not reconciled ITA and bank statement balances since November 2019, which increases
the risk of incorrect ITA balances or unaccounted-for monies
Recommendations

Chapter 3: Questions and answers

17

Question 1: Has the Department expended monies only for allowable purposes?
Question 2: How does Arizona’s capital funding for the Department compare to other states?
Question 3: What is the status of the Department fixing the nonfunctioning locks at the Lewis prison
complex?
Question 4: What is Arizona Correctional Industries (ACI)?
Question 5: How does ACI account for its financial activity?
Question 6: How are ACI labor partnerships developed?
Question 7: How are inmates selected for ACI positions?
Question 8: How much are Arizona inmates paid for work and how does this compare to other states?
Question 9: How much are Arizona inmates charged for phone use and how does it compare to other
states?
Question 10: How much is Arizona’s inmate medical copay and how does it compare to other states?

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
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andDepartment
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TABLE OF CONTENTS

Question 11: How much is Arizona’s inmate utility fee and how does it compare to other states?
Question 12: What fees do Arizona offenders pay after release to community corrections?
Question 13: How are prices for the Department’s inmate commissary items set?
Question 14: How are prices for vending machines in Department prison visitation areas set?
Question 15: Are Arizona inmates allowed to market and sell inmate-made goods?

Summary of recommendations: Auditor General makes 3 recommendations to the
Department

30

Appendix A: Summary of Department funds

a-1

Appendix B: Examples of Department contracts

b-1

Appendix C: Department funds that contribute monies to the Building Renewal Fund and/or
can be used for capital needs

c-1

Appendix D: Inmate trust account (ITA) deductions

d-1

Appendix E: Objectives, scope, and methodology

e-1

Department response
Figures
1

Department’s largest expenditures by category
Fiscal years 2016 through 2019 (averages)
(Unaudited)

5

2

Annual process for requesting capital improvement funding

7

3

Comparison of Department’s capital funding requests, ADOA’s and the Governor’s recommended
funding, and amounts appropriated
Fiscal years 2016 to 2020
(In millions)
(Unaudited)

8

4

Department’s old sliding door and new swinging door

20

5

The 5 ACI enterprises and 5 labor partners with the highest average number of inmate laborers
Fiscal year 2019
(Unaudited)

21

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
Fundingand
andDepartment
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TABLE OF CONTENTS

Tables
Schedule of revenues, expenditures, transfers, and changes in fund balances
Fiscal years 2016 through 2019
(Unaudited)

2

Amounts deposited into ITAs and numbers of inmates receiving 1 or more deposits by deposit type
Fiscal year 2019
(Unaudited)

13

Arizona’s corrections capital funding compared to 4 other states, in total dollars and dollars per capita
based on state population
Fiscal years 2016 to 2020
(Unaudited)

18
19
22
24
25
26
27

10 Arizona’s inmate utility fee compared to 4 other states

28

11 Schedule of General Fund revenues, expenditures, and transfers
Fiscal years 2016 through 2019
(Unaudited)

a-2

12 Schedule of Corrections Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-4

13 Schedule of Prison Construction and Operations Fund revenues, expenditures, transfers, and
changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-6

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
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andDepartment
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14 Schedule of Special Services Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-7

15 Schedule of Federal Grants Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-9

16 Schedule of Inmate Store Proceeds Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

a-11

17 Schedule of Building Renewal Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-13

18 Schedule of Revolving Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-15

19 Schedule of Transition Program Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
a-17
20 Schedule of State Charitable, Penal and Reformatory Institutions Land Fund revenues, expenditures,
transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-18

21 Schedule of Penitentiary Land Fund revenues, expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-19

22 Schedule of Interagency Services Agreement Fund revenues, expenditures, transfers, and
changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-20

23 Schedule of Indirect Cost Recovery Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

a-21

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
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andDepartment
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24 Schedule of State Education Fund for Correctional Education revenues, expenditures, and changes
in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-23

25 Schedule of Alcohol Abuse Treatment Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

a-24

26 Schedule of Community Corrections Enhancement Fund revenues, expenditures, transfers, and
changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-25

27 Schedule of Risk Management Revolving Fund revenues, expenditures, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
a-27
28 Schedule of Employee Recognition Fund revenues, expenditures, and changes in fund balance
Fiscal year 2019
(Unaudited)

a-28

29 Schedule of Donations Fund revenues, expenditures, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

a-29

30 Examples of Department-contracted services
Fiscal year 2019

b-1

31 Summary information about 7 Department funds that contribute monies to the Building Renewal
Fund and/or can be used for capital needs
Fiscal years 2016 through 2021
(In millions)
(Unaudited)

c-2

32 Amounts deducted from ITAs and numbers of inmates with 1 or more deductions by deduction type
Fiscal year 2019
(Unaudited)

d-2

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
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andDepartment
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INTRODUCTION

The Arizona Auditor General has released the first in a series of 3 performance audit reports on the Arizona
Department of Corrections, Rehabilitation and Reentry (Department).1 This report focuses on the Department’s
capital projects funding and finances. The second report will focus on inmate programs and their effect on
recidivism, and the final report will provide responses to the statutory sunset factors. For this audit, we reviewed the
Department’s (1) revenues and expenditures for fiscal years 2016 through 2019, (2) requested and appropriated
funding for capital and building renewal projects for fiscal years 2016 through 2021, and (3) management of
inmate trust accounts. We also provide additional information about the Department and Arizona Correctional
Industries in a question-and-answer format. This report primarily presents information that may be of specific
legislative and public interest but has 3 recommendations for the Department in Chapter 2 (see pages 12 through
16).

Department overview
The Department operates 10 State prison complexes
and contracts for 6 private or privately managed
prisons located throughout the State to house Arizona
inmates. The Department also oversees offenders
conditionally released to the community through its
community corrections program.2,3 As of August 31,
2020, the Department was responsible for 39,153
inmates in Arizona’s State and private prisons and
5,189 offenders on community supervision.

Department mission
To serve and protect the people of Arizona by
securely incarcerating convicted felons, by providing
structured programming designed to support
inmate accountability and successful community
reintegration, and by providing effective supervision
for those offenders conditionally released from prison.
Source: Department website, retrieved May 2020.

Department spends more than $1 billion annually to operate State
prison system
Department is primarily funded by State General Fund appropriations but also relies on other monies—Table 1
(see pages 2 through 3) provides a summary of Department revenues and expenditures for fiscal years 2016
through 2019. As shown in the table, the Department spent more than $1 billion annually to operate the State
prison system in those years. State General Fund appropriations accounted for more than 90 percent of all
Department revenues and expenditures. The Department also received and spent other revenues deposited in
various Department funds established or authorized by statute. In total, the Department administers 21 funds,
including both appropriated and nonappropriated funds, that have specific revenue streams and purposes for
which they can be spent. Table 1 includes all Department funds except as noted in footnote 1 to the table.
Financial information about individual Department funds is presented in Appendix A, pages a-1 through a-29.
1
2

3

Prior to January 2020, the Department was called the Arizona Department of Corrections.
Inmates are conditionally released from prison through parole and community supervision. Parole is a period of conditional supervised release
outside of prison before an entire prison term is completed. It is granted by the Arizona Board of Executive Clemency after an inmate has served
a portion of his/her sentence and has applied for release on parole. Parole eligibility dates are calculated in accordance with the provisions of
the committing offense and the laws in effect at the time the offense was committed. Only inmates who committed offenses before January 1,
1994, are eligible for parole. Community supervision is a portion of a felony sentence and is served consecutive to an inmate’s period of
imprisonment. The term of community supervision is a period equal to 1 day for every 7 days of the sentence and is imposed on the convicted
person by the court at the time of sentencing. Thus, inmates can serve up to 15 percent of imposed sentences under community supervision.
Community supervision replaced parole for offenses after January 1, 1994.
For more information on fees the Department charges to offenders on community supervision, see Chapter 3, pages 28 through 29.

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
Fundingand
andDepartment
DepartmentFinances
Finances| |October
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2020| |
Report 20-109
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Table 1
Schedule of revenues, expenditures, transfers, and changes in fund balances1
Fiscal years 2016 through 2019
(Unaudited)
Revenues and transfers in2
State General Fund appropriations
Luxury taxes3
Commissions4
Fines, forfeits, and penalties
Investment income
State Automation Projects Fund5
Rental income
Intergovernmental
Charges for goods and services
Other
Total revenues
Transfers from Arizona Correctional Industries
Revolving Fund6
Total net revenues
Expenditures and transfers out
Payroll and related benefits
Payroll
State prisons
Central office
Other7
Total payroll
Related benefits
Total payroll and related benefits
Professional and outside services
Medical services8
Institutional care9
Other10
Total professional and outside services
Travel
Food and related expenditures11
Aid to individuals12
Other operating
Rent
Utilities
Operating supplies
Information technology services
Payments to inmates
Other13
Total other operating
Capital and noncapital purchases
Building improvements
Equipment
Adult Inmate Management System (AIMS)
replacement5
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the State General Fund14
Transfers to the State Automation Projects Fund5
Transfers to the Arizona Health Care Cost
Containment System (AHCCCS) for inmate
medical services
Arizona Auditor General

2016

2017

2018

2019

$1,031,411,815
36,552,094
10,409,122
13,760,205
3,041,824
4,239,382
2,617,334
1,463,624
539,230
2,281,076
1,106,315,706

$1,039,187,307
35,192,470
14,560,794
13,372,976
3,416,550
8,068,088
2,275,498
2,170,887
544,474
1,627,350
1,120,416,394

$1,065,472,013
35,812,005
12,608,049
12,521,064
3,831,824
955,000
2,411,926
1,794,205
652,138
2,468,123
1,138,526,347

$1,097,814,345
36,052,001
15,075,039
12,296,822
4,445,355
2,367,800
2,246,354
1,993,414
599,942
1,264,924
1,174,155,996

1,000,000

1,000,000

2,450,000

1,000,000

1,107,315,706

1,121,416,394

1,140,976,347

1,175,155,996

366,752,633
29,808,945
13,421,834
409,983,412
210,938,771
620,922,183

365,815,282
30,974,665
13,775,050
410,564,997
203,369,546
613,934,543

364,363,324
32,066,682
14,647,165
411,077,171
221,715,666
632,792,837

364,246,421
32,754,024
13,773,352
410,773,797
230,625,639
641,399,436

146,810,713
142,749,102
10,503,481
300,063,296
437,375
41,837,160
176,552

146,972,789
145,831,526
12,292,852
305,097,167
532,275
40,705,018
162,271

149,635,194
147,927,035
10,884,953
308,447,182
796,750
40,255,130
153,960

170,870,441
147,478,851
11,444,839
329,794,131
931,294
40,713,345
150,320

25,152,486
27,466,942
19,262,509
11,206,767
9,759,080
23,641,126
116,488,910

34,367,896
27,284,651
18,639,529
11,107,898
10,030,654
25,922,266
127,352,894

42,418,807
27,020,243
19,425,485
10,821,801
10,166,925
24,866,195
134,719,456

42,702,831
27,523,934
20,901,454
10,818,285
10,420,499
26,207,406
138,574,409

5,282,292
2,914,476

4,743,705
7,977,736

8,430,829
3,898,204

7,289,489
3,930,807

4,371,826

4,593,609

2,052,781

1,930,329

2,861,111
15,429,705
1,095,355,181
8,572,000

3,415,538
20,730,588
1,108,514,756

1,782,452
16,164,266
1,133,329,581
1,000,000

2,519,399
15,670,024
1,167,232,959
2,525,200

1,595,287

1,195,541

7,445,300
1,913,803

1,488,127

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE 2

Table 1 continued
Transfers to the other agencies15
Total transfers out
Total expenditures and transfers out
Net change in fund balances
Fund balances, beginning of year
Fund balances, end of year
1

2

3

4

5

6

7

8
9
10

11

12

13

14
15

2016
241,907
10,727,710
1,106,082,891
1,232,815
43,094,075
$ 44,326,890

2017
606,764
9,540,191
1,118,054,947
3,361,447
44,326,890
$ 47,688,337

2018
3,325,412
5,920,699
1,139,250,280
1,726,067
47,688,337
$ 49,414,404

2019
4,740,240
8,460,981
1,175,693,940
(537,944)
49,414,404
$ 48,876,460

This table includes financial activity from all Department funds except for (1) the Prisoner Spendable Accounts Fund, also referred to as inmate
trust accounts, because these monies are held for inmates and are not available for the Department’s use (see Chapter 2, pages 12 through 16,
for information on these accounts), and (2) the Arizona Correctional Industries (ACI) Revolving Fund because ACI is managed as a selfsupporting operation (see Chapter 3, pages 20 through 24, for more information).
The table does not include monies the Department collected that were directly remitted to the State General Fund. Specifically, the Department
received monies in fiscal years 2016, 2017, and 2019 from the U.S. Department of Justice for the State Criminal Alien Assistance Program
(SCAAP) for a grant that provides federal payments to states and localities that incur correctional officer costs for incarcerating undocumented
criminal aliens with at least 1 felony or 2 misdemeanor convictions for violations of state or local law, and who were incarcerated for at least 4
consecutive days. The Department remitted between $5.2 and $5.9 million of the monies received in fiscal years 2016, 2017, and 2019 directly
to the State General Fund, and the remaining monies were deposited in the Department’s Indirect Cost Recovery Fund (see Table 23, pages
a-21 through a-22, footnote 1, for additional information). In addition, the Department collected between $3.9 million and $4.9 million annually in
fiscal years 2016 through 2019 that were remitted directly to the State General Fund in accordance with statute. Most of these monies were
collected from inmates for room and board as required by Arizona Revised Statutes (A.R.S.) §31-254(E)(4) and remitted to the State General
Fund in accordance with A.R.S. §41-1674(B)(3).
Luxury taxes are a portion of taxes collected on alcohol and tobacco products and deposited into the Department’s Corrections Fund and
Revolving Fund (see pages a-4 through a-5 and a-15 through a-16, respectively, for additional information about these funds).
The Department received a portion of commissary revenues and commissions from the sale of phone minutes to inmates. The Department
contracts with a vendor to operate prison commissaries that sell various items to inmates and receives 17 percent of all sales revenues.
Similarly, the Department contracts with a vendor to provide phone services to inmates and receives 75.3 percent commission on all phone
revenues. (See Chapter 3, pages 25 through 26, for more information about inmate phone services.)
The Department received monies from the State Automation Projects Fund to replace its Adult Inmate Management System (AIMS). Beginning
in fiscal year 2018, the Department’s General Fund also contributed monies to replace AIMS (see Table 11, pages a-2 through a-3). In fiscal
year 2017, the Department was required to transfer $7 million to the State Automation Projects Fund in accordance with Laws 2016, Ch. 117,
§158(B), for the AIMS replacement, and an additional $1 million from its ACI Revolving Fund. The AIMS replacement capital and noncapital
expenditures are presented in the table; however, the project also incurred expenditures from other categories not specifically identified, such
as payroll and related benefits, professional and outside services, and other operating expenditures. As of June 30, 2019, AIMS replacement
expenditures were approximately $16.5 million for all expenditure categories.
Transfers from the ACI Revolving Fund were made to the Department’s Building Renewal Fund in accordance with A.R.S. §41-1624(B) and Laws
2017, Ch. 305, §143.
Other payroll expenditures were payments to Department employees who work at various locations such as ACI, community corrections offices,
parole offices, private prisons, and the Correctional Officer Training Academy.
Medical services expenditures were for inmate healthcare costs, including substance abuse and behavioral modification programs.
Most of the institutional care expenditures were payments to private prison providers.
Other professional and outside services expenditures include various external services such as inmate education and training, legal services,
project consultants for the Governor’s initiative to reduce waste and defects and the Department’s AIMS replacement, drug testing, behavioral
modification and substance abuse programs, recovery housing, electronic monitoring, and veterinary services.
Food and related expenditures were primarily contracted food services for inmates and offenders; however, it also includes about 1 percent for
contracted food services for the correctional officer cadets at the Correctional Officer Training Academy.
Aid to individuals expenditures were for the costs of discharging inmates, such as paying for release clothing and gate fees and reimbursing
private prison providers for similar costs.
Other operating expenditures comprised various expenditures, including insurance, repair and maintenance, officer uniforms, and inmate
clothing costs.
Transfers to the State General Fund in accordance with Laws 2015, Ch. 8, §133(5) and Laws 2018, Ch. 276, §§139 and 140(5).
Transfers to other agencies include monies expended by the Arizona Department of Administration from the Corrections Fund (see page a-4 for
additional information). Fiscal years 2018 and 2019 include transfers to the Arizona Department of Administration and Arizona Criminal Justice
Commission (see Table 20, footnote 3, page a-18, and Table 21, footnote 3, page a-19, for additional information).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
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Statute and State appropriations provide some flexibility in Department’s use of funds—The
Department has flexibility in determining which fund will pay for a particular expenditure when multiple funds may
be used to do so. For example, the Department has used both Inmate Store Proceeds Fund monies and Special
Services Fund monies to pay for inmate satellite television services.4 Department staff reported that this flexibility
is important for helping the Department manage monies from more restricted funds, maintain fund balances, and
stay within its appropriations.
In addition, State laws have appropriated monies from at least 1 Department fund for purposes not specified in
the fund’s authorizing statute. Specifically, State laws have appropriated Corrections Fund monies—which are
statutorily authorized for capital-related expenditures—to help pay for the Department’s operating costs, and the
Department has used these appropriated monies to pay for inmate food services.

Department’s largest expenditures were for staffing, contracted services, and other operating
expenditures—As shown in Figure 1 (see page 5), the following categories accounted for more than 98 percent
of the Department’s fiscal years 2016 through 2019 average expenditures:
•

Payroll and related benefits—Almost 56 percent of the Department’s expenditures were for employee
payroll and related benefits, such as medical and dental insurance and retirement contributions. The
Department had 9,556 appropriated full-time equivalent (FTE) positions in fiscal year 2019 and reported that
7,857 positions were filled as of the end of the fiscal year.

•

Professional and outside services and contracted food and related services—Approximately 31
percent of the Department’s expenditures were for (1) professional and outside services (primarily contracted
services) and (2) contracted food and related services. For example, the Department contracts for 6 private
or privately managed prisons, and many inmate services, including healthcare, food services, educational
and vocational services, and counseling services. See Appendix B, pages b-1 through b-2, for examples of
the Department’s contracted services.

•

Other operating expenditures—More than 11 percent of the Department’s expenditures were for various
expenditures, including rent, utilities, supplies, officer uniforms and inmate clothing, and inmate wages for
prison jobs.

Department’s total fund balances ranged from approximately $44.3 million to $49.4 million in
the years we reviewed—As shown in Table 1 (see pages 2 through 3), the Department’s end-of-year total

fund balances ranged from approximately $44.3 million to $49.4 million for fiscal years 2016 through 2018 and
were approximately $48.9 million as of the end of fiscal year 2019. The total fund balances comprise the individual
fund balances in the Department’s funds, which vary in amount. For example, as of the end of fiscal year 2019,
the Arizona Correctional Industries Revolving Fund had a fund balance of approximately $14.5 million, the Special
Services Fund had a fund balance of approximately $8.7 million, and the Community Corrections Enhancement
Fund had a fund balance of $345,276.
The Department does not maintain a fund balance for its State General Fund appropriations as its authority to use
unspent State General Fund appropriations lapses at the end of the fiscal year and cannot be carried forward to
future years for other needs. However, the Department used nearly all its State General Fund appropriations in
fiscal years 2016 through 2019, with between $1.8 million and $7.5 million remaining unspent each year.

4

The Inmate Store Proceeds Fund is a nonappropriated fund that can be used for inmate activities and other purposes. The Special Services
Fund is a nonappropriated fund that can be used for inmates’ benefit, education, and welfare. See Appendix A, pages a-11 through a-12 and
a-7 through a-8, for more information about these funds.

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Figure 1
Department’s largest expenditures by category
Fiscal years 2016 through 2019 (averages)
(Unaudited)
Capital and noncapital purchases,
travel, and aid to individuals
$17,833,845
1.6%
Food and related services
$40,877,663
3.6%
Other operating expenses
$129,283,835
11.5%

Total: $1,126,108,037

Professional and
outside services
$310,850,444
27.6%

Payroll and related
benefits
$627,262,250
55.7%

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

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CHAPTER 1

Department has received 2 to 4 percent of
requested funding to address capital needs,
resulting in increased safety and security risks and
$125 million in deferred maintenance costs
Department’s reported capital needs have exceeded its appropriated
funding
The Department annually reported capital needs
ranging from $164 million to $295 million for fiscal years
2016 through 2020 and was appropriated monies for
2 to 4 percent of its total capital funding requests.5
The Department requests capital funding for various
projects through an annual capital improvement
process, as summarized in Figure 2 (see page 7).
Specifically:

Key terms for this discussion

•

Capital projects—Buildings, structures, facilities, and
areas constructed for the use or benefit of the State.
Capital projects generally involve new construction,
such as new buildings, building additions, or
infrastructure, as well as extensive remodeling.

•

The Department submits an annual CIP to the
Arizona Department of Administration (ADOA)
to request capital funding for a prioritized list of
both capital and building renewal projects.6 For
example, some projects in the Department’s
fiscal year 2020 CIP included approximately $36.3
million for repairing and replacing locking and
door control systems, $31.3 million for replacing
fire alarm systems, and $6.2 million for upgrading
security lighting and perimeter alarm systems at
multiple prison complexes.
ADOA reviews the CIPs for the State agencies
it oversees, including the Department, and
develops a separate CIP based on State agencies’
submitted CIPs, which it submits to the Governor
and Legislature for consideration. For each of fiscal

Capital funding—For the purposes of this chapter,
capital funding refers to monies appropriated to pay
for capital projects and building renewal projects
through the State budget process. This definition
excludes other types of capital purchases such as
vehicles, furniture, and equipment.

Building renewal projects—Major activities that
involve the repair or reworking of a building and its
supporting infrastructure that will result in maintaining
the building’s expected useful life. Building renewal
does not include new building additions, new
infrastructure additions, landscaping and area
beautification, routine preventive maintenance, or
demolition and removal of a building.
Capital improvement plan (CIP)—A plan that
assesses capital facility needs using a multi-year
planning horizon.
Source: Auditor General staff review of A.R.S. §41-790 and
Department Order 401.

5
6

In a 2011 performance audit (Report No. 11-07), we similarly reported that the Department received minimal capital funding in fiscal years 2008
through 2012. Specifically, it received 0 to 3.7 percent of its total capital funding requests in those fiscal years.
According to the Department, projects remain in the CIP from year to year until they are addressed or no longer applicable.

Arizona Auditor General

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years 2016 through 2020, ADOA recommended that the Department receive between $29.7 million and $37.8
million for capital and building renewal projects.7

Figure 2
Annual process for requesting capital improvement funding

1

Governor
proposes
capital funding
recommendations
to the Legislature,
and both approve
funding bills

Department submits an
annual CIP to ADOA to
request capital funding

2

Annual capital
improvement
process

ADOA reviews
CIPs from the
agencies it
oversees

4
ADOA develops a separate
CIP and submits it to the
3
Governor and Legislature

Source: Auditor General staff analysis of the annual capital improvement process.

•

The Governor proposes capital funding recommendations to the Legislature in the executive budget. Capital
appropriations are ultimately approved by the Legislature and Governor through the State budget process.
Consistent with the Governor’s executive budget recommendations, the Department was appropriated a
fraction of its capital funding requests for fiscal years 2016 through 2020, and less than the amounts ADOA
recommended. Specifically, the Department was appropriated monies for capital projects only in fiscal year
2018 ($1.45 million) and approximately $5.5 million to $6.9 million annually for building renewal projects.
These monies were appropriated from the Department’s Building Renewal Fund (see pages 9 through 10 for
more information). Further, the building renewal appropriations were well below the amounts recommended
by the State’s statutory building renewal formula. ADOA reported that per the formula, the Department’s
building renewal needs ranged between approximately $17.6 million and $24.3 million for fiscal years 2016
through 2020.

Figure 3 (see page 8) compares the Department’s capital funding requests, ADOA’s and the Governor’s
recommended funding, and the amounts appropriated for fiscal years 2016 through 2020.

7

According to ADOA management and ADOA’s CIPs, ADOA prioritizes the requests from the agencies whose buildings it oversees—giving
priority to fire and life safety projects—and uses the State’s statutory building renewal formula to develop its recommended building renewal
appropriations. Specifically, A.R.S. §41-793.01(A) establishes a uniform funding formula for ADOA’s building renewal recommendations that
considers the replacement value and the age of each building. According to ADOA, the State has not fully funded the building renewal formula
in ADOA’s building system since fiscal year 1988, although 99 percent of the formula was funded in fiscal year 1999.

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Figure 3
Comparison of Department’s capital funding requests, ADOA’s and the Governor’s
recommended funding, and amounts appropriated
Fiscal years 2016 to 2020
(In millions)
(Unaudited)
$295.2

$290.1

$99.2

$104.4

$269.7

$267.3

$106.3

$87.7

$196.0

$185.7

$179.6

$164.5
$91.2

$163.4

$73.3

$5.5 $5.5

$5.5 $5.5

2016

[■

2017

Department’s requested
capital project funding

■

Department’s requested
building renewal project
funding

$37.8

$35.6

$32.5

$31.7

$29.7

$11.2 $6.9

2018
ADOA’s recommended

■ funding

$6.9 $6.9

$5.5 $5.5

2019
Governor’s

■ recommended funding

2020

•

Amount
appropriated

Source: Auditor General staff analysis of the Department’s and ADOA’s CIPs, Governor’s executive budgets for fiscal years 2016 through 2020,
and appropriations bills for fiscal years 2016 through 2020.

Based on its fiscal year 2021 CIP, the Department proposed a 10-year plan to address its entire backlog of capital
needs and requested a total of more than $400 million for more than 200 capital and building renewal projects.
The Department estimated that it would need approximately $40 million per year for 10 years to address these
needs. For fiscal year 2021, Laws 2020, Ch. 57, §1, appropriated approximately $5.5 million to the Department for
building renewal projects only. In addition, Laws 2020, Ch. 57, §2, appropriated $30 million for facility upgrades at
the Lewis and Yuma prison complexes, which are classified as building renewal projects (see Chapter 3, pages
19 through 20, for additional information about these upgrades).8

8

To see how Arizona’s capital funding compares to 4 other states we contacted, see Chapter 3, page 18.

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I

Underfunding capital needs increases safety and security risks and
has resulted in at least $125 million in deferred maintenance costs
Underfunding capital needs limits the Department’s ability to address those needs, which increases prison safety
and security risks to Department staff, inmates, and potentially the general public. For example, the Department’s
fiscal year 2021 CIP requests:
•

Almost $69 million to replace or upgrade locks in multiple prison complexes. This included the Lewis prison
complex, where, in April 2019, multiple media stories reported that nonfunctioning cell locks had contributed
to assaults/injuries of inmates and Department staff. A report on the subsequent investigation of the situation
indicated that repairing the locking systems at the Lewis prison complex was included in the Department’s
fiscal years 2011 through 2013 CIPs, but not in the Department’s fiscal years 2014 through 2020 CIPs.
However, the assaults at Lewis illustrate the importance of functional locks to safety and security.9,10

•

Approximately $24 million to address security issues, such as replacing perimeter fencing and alarm systems
and security lighting. The Department reported that fencing, alarm systems, and lighting at multiple prisons
are obsolete, have reached the end of their service life, or are deteriorating badly due to age and weather,
which increases security risks.

•

Almost $98 million to upgrade fire systems in various prison complexes State-wide. Specifically, the Department
reported that the fire alarm equipment at all 10 State prison complexes is outdated and obsolete, and most
of the systems do not function.11 The Department also reported that in the event of a fire, the nearest fire
department can be up to an hour away, which is a life safety issue for Department staff and inmates, and
that correctional officers must regularly inspect prison units for smoke or fire, which is a strain on an already
stretched staff and not an efficient use of these resources.

Further, underfunding capital needs results in increased maintenance costs. ADOA reported that for fiscal years
2011 through 2020, the Department accumulated more than $125 million in deferred maintenance costs as a
result of underfunding the building renewal formula.12 According to CGL Companies—a U.S. criminal justice
consulting firm that specializes in facility planning, design, maintenance, and operations—deferred maintenance
has multiple potential impacts, including increased utility costs, increased future maintenance costs due to
inflation, lost productivity and inefficient operation, noncompliance with building codes and regulatory standards,
increased insurance and liability risks, overburdened maintenance staff, and excessive repair costs.13

Department has limited monies available to support larger capital
funding appropriations
Department’s Building Renewal Fund has insufficient monies to support larger appropriations—
The State established the Department’s Building Renewal Fund (BR Fund) in 2011 to appropriate building
renewal monies directly to the Department.14 As stated previously, the Department’s building renewal monies
have been appropriated from monies available in this fund. The BR Fund generally receives annual revenues of
9

10
11
12

13
14

Following the media reports, the Governor requested 2 former Arizona Supreme Court justices to investigate and report on the lock situation at
the Lewis prison complex. According to this report, there was internal disagreement at the Department as to whether the locks were
malfunctioning or not working because of inmate tampering. For the full report, see Berch, R.W., & McGregor, R.V. (2019). Report to the
Governor: The effectiveness of locks at Lewis prison. Retrieved 8/15/2019 from https://azgovernor.gov/sites/default/files/corrections_report.pdf.
See Chapter 3, pages 19 through 20, for information about facility upgrades at the Lewis and Yuma prison complexes.
See Chapter 3, pages 19 through 20, for information about facility upgrades at the Lewis and Yuma prison complexes.
Deferred maintenance is not only a Department issue but a State-wide issue as well. ADOA reported that as of October 2019, its building
system has amassed $686 million (adjusted for inflation) of deferred capital maintenance as a result of underfunding the building renewal
formula.
CGL Companies. (n.d.). Deferred maintenance crisis—Predicting negative effects. Retrieved 8/9/2019 from https://www.cglcompanies.com/
knowledge-center/#whitepapers.
See Appendix A, pages a-13 through a-14, for more information about the BR Fund.

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approximately $5.6 million, mostly as transfers from
other Department funds (see textbox).

Statutorily required transfers to the BR Fund

Statute requires annual transfers of monies from the
However, the fund balance is declining. In fiscal
following Department funds:
years 2016 through 2019, the BR Fund’s annual
expenditures generally exceeded its annual revenues.
• $2.5 million from the Corrections Fund
In addition, State laws required the Department to
• $1 million from the Arizona Correctional Industries
transfer $2 million in BR Fund monies to the State
Revolving Fund
General Fund during this time period to help support
• $500,000 from the Inmate Store Proceeds Fund
and maintain State agencies. As a result, the fund
• $500,000 from the Special Services Fund
balance decreased from approximately $5 million
Source: A.R.S. §§41-1604.02, 1604.03, 1624, and 1641.
at the end of fiscal year 2016 to approximately $3
million at the end of fiscal year 2019. The Department
projects that the fund balance will be less than $450,000 by the end of fiscal year 2021.
Without additional revenues, the BR Fund may not have enough monies to support historical appropriation levels
or any increased appropriations, such as if the State fully funded the statutory building renewal formula or the $40
million per year proposed in the Department’s fiscal year 2021 CIP.

Limited monies are available in other Department funds for capital project needs—Monies

in 7 other Department funds can be used for capital projects, and the State has appropriated monies from
most of these funds for this purpose (see Appendix C, pages c-1 through c-4, for summary information about
these 7 funds). For example, Laws 2017, Ch. 305, §143, transferred an additional $1.45 million from the Arizona
Correctional Industries Revolving Fund to the BR Fund in fiscal year 2018, and Laws 2017, Ch. 306, §9, appropriated
this amount from the BR Fund for replacement locking systems at prisons. Additionally, in accordance with an
interagency agreement, the Department transferred a total of $10 million to ADOA from the Arizona Correctional
Industries Revolving Fund and Inmate Store Proceeds Fund in fiscal year 2019 to pay for facility upgrades at the
Lewis and Yuma prison complexes (see Chapter 3, pages 19 through 20, for more information about this project).
Laws 2020, Ch. 57, §2, appropriated another $19 million in fiscal year 2021 from 6 of the 7 funds, as well as $11
million from the State General Fund, for this same project.
However, the monies available in these funds are limited because they are used for other purposes and their
combined fund balance is declining. Specifically, the Department has used monies in these 7 funds consistent
with their authorizing statutes or other State laws. For example, in fiscal years 2016 through 2019, the Department
used monies from these funds to pay for private prisons, inmate healthcare, inmate food services, and other
operating expenses. During these same years, State laws also directed the Department to transfer monies from
the 7 funds to other State funds or external entities for various purposes. For example, State laws required the
Department to periodically transfer monies from some of these funds to the State General Fund to support
State agencies and to the State Automation Projects Fund to pay for replacing the Department’s Adult Inmate
Management System. If additional monies from these funds were used for capital needs, alternative funding
sources would be needed to pay for the operating expenses they have been used for.
Further, the 7 funds’ combined fund balance is declining. As of the end of fiscal year 2019, the funds had a
combined fund balance of approximately $42 million, and the Department estimates that this combined fund
balance will decline to less than $11.4 million by the end of fiscal year 2021. The majority of this expected fund
balance decline results from the $19 million appropriation in fiscal year 2021 for the facility upgrades at the Lewis
and Yuma prison complexes.

Department lacks authority to use its unspent State General Fund appropriations for capital
projects—As discussed in the Introduction (see page 1), State General Fund appropriations are the Department’s
primary revenue source. However, by State law, the Department’s authority to use any unspent State General
Fund appropriations lapses at the end of the fiscal year and cannot be carried forward to future years for other

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needs.15 The Department reported that although its unspent State General Fund appropriations could be used for
capital or building renewal projects, by the time it knows what monies might be available, it is generally not able
to spend the monies before its appropriation lapses because of the time needed to first obtain Joint Committee
on Capital Review (JCCR) approval and procure contractor services.16 The Department’s combined total unspent
State General Fund appropriations for fiscal years 2016 through 2019 was approximately $15.2 million.

15

16

Per A.R.S. §§35-190 and 191, State General Fund appropriations end, and any remaining appropriated monies may only be used to pay
obligations incurred during the applicable fiscal year or to fulfill contract terms, which requires ADOA approval if paid within 1 year and
legislative approval if paid between 1 and 4 years after the end of the fiscal year.
The JCCR is a legislative oversight body whose responsibilities include reviewing the scope, purpose, and cost of capital projects before
releasing appropriations, and recommending capital appropriations to the Legislature. The capital outlay bill for each fiscal year indicates that
the Department is to provide semi-annual reports to the JCCR on the status of all building renewal projects and expenditures.

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CHAPTER 2

Although most inmate trust account (ITA)
deductions we reviewed were accurate and
supported, Department has not reconciled ITA and
bank statement balances since November 2019,
which increases the risk of incorrect ITA balances or
unaccounted-for monies
Department is custodian of inmate monies and manages them
through ITAs
The Department is responsible for creating and maintaining financial accounts—called ITAs—for all inmates. The
Department creates an ITA when an inmate is admitted to prison, and the ITA is assigned to the inmate for life.17
As of June 30, 2019, the ITAs had a combined balance of more than $19.7 million for the approximately 42,300
inmates in prison at that time.
The Department’s responsibilities for managing ITAs include depositing monies received on inmates’ behalf and
applying required deductions, as applicable. Specifically:
•

Deposits—The Department collects and deposits monies into ITAs. These monies consist of various deposit
types, including electronic funds transfers, such as contributions from inmates’ families and friends; inmates’
wages from employment/work opportunities; and business or government checks, such as checks for back
wages or tax refunds. As shown in Table 2, page 13, the Department received and deposited more than $75
million into ITAs in fiscal year 2019.

•

Deductions—Statutes, Department orders, and court orders require or authorize 32 various deductions
from ITAs. Some of the deductions are automated and occur when money is deposited into an ITA, such
as deductions from inmate wages for community transition services or court-ordered child support. Other
deductions, such as utility fees and commissary purchases, would be charged either monthly or when an
inmate makes a purchase.18 The Department deducted approximately $81.2 million from ITAs in fiscal year
2019 (see Appendix D, pages d-1 through d-2, for more information regarding fiscal year 2019 ITA deductions).

17
18

When an inmate is released, the Department pays the inmate any monies owed from the ITA. If an inmate is readmitted to the Department’s
custody, the inmate’s ITA will be reactivated upon re-admittance.
For more information about how the Department sets commissary prices and our test work regarding a sample of commissary items, see
Chapter 3, page 29.

Arizona Auditor General

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Table 2
Amounts deposited into ITAs and numbers of inmates receiving 1 or more deposits by
deposit type
Fiscal year 2019
(Unaudited)
Deposit type

Amount deposited

Number of inmates

$45,241,954
24,803,431
2,894,513
2,390,368
$75,330,266

49,297
50,930
1,223
48,737

Deposit

Electronic funds transfers
Inmate wages
Government/business checks
Other1
Total
1

Includes error corrections and refunds.

Source: Auditor General staff analysis of ITA transactions for fiscal year 2019 obtained from Department records.

Most deductions we reviewed were accurate and supported
Our review of a stratified random sample of 179 transactions for 60 inmates across 16 different deduction
types found that the Department accurately deducted the correct amount of money for 178 transactions.19,20
In addition, the Department had supporting documentation or justification for charging an inmate for 177 of the
179 deductions.21 For example, the Department had documentation to show that an inmate had a qualifying
appliance when it charged a utility fee.22
Finally, for the almost 348,000 fiscal year 2019 deductions involving specified fee amounts (i.e., the $2.00 utility
fee and $4.00 medical copay), the Department charged inmates the correct fee amount for all but 9 deductions.23
Specifically, of the 261,331 utility deductions, 2 were higher than the $2.00 fee, and of the 86,468 medical copays,
7 were higher than the $4.00 fee. The Department corrected 3 of the errors in fiscal year 2019 and corrected the
other 6 errors after we reported them to the Department.24

19

20

21

22
23
24

We selected ITAs for 60 inmates and tested the first 3 transactions in which an applicable deduction occurred. One randomly selected ITA had
only 2 transactions for a deduction type. In total, we reviewed 179 of the 4,833,774 total deductions in fiscal year 2019 across 16 of the 32 total
deduction types.
For 1 transaction involving a deduction of $5.04 for an inmate’s donation to a fundraiser, we were not able to determine if this amount was
correct because the Department was not able to provide the inmate’s request for withdrawal. The Department maintained documentation for the
other 11 transactions we reviewed where inmates donated to a fundraiser.
As mentioned in footnote 20, the Department was unable to provide supporting documentation to show evidence that the inmate had requested
1 fundraiser donation. In addition, the Department was unable to provide supporting documentation to show evidence that an inmate should
have been charged a $4 medical copay for a medical appointment on September 10, 2018.
A.R.S. §31-239 requires the Department to establish a utility fee that does not exceed $2.00 per month and to only charge inmates who have a
qualifying appliance, such as a television or blow dryer.
For more information about how Arizona’s utility fee and medical copay compare to 4 other states we contacted, see Chapter 3, pages 26
through 28.
All 9 errors we found were caused by human error, such as typing in the wrong deduction code or other similar mistakes. In addition to
correcting the errors, the Department reported that it provided additional training to staff and enhanced its staff supervision.

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Department has not reconciled ITA and bank statement balances
since November 2019, which increases the risk of incorrect ITA
balances or unaccounted-for monies
Although the Department performs various weekly and monthly reconciliations of ITA transactions, it has not
complied with State requirements for reconciling ITA accounting records to bank statement balances. This
noncompliance increases the risk of undetected errors, fraud, theft, or loss, which could affect the amount of
monies available for inmates to spend or that are paid to them when released from prison. Specifically, we
identified the following 3 issues:
•

Department has not reconciled ITA accounting records to bank statements since November
2019—The Department reported that it has not completed monthly reconciliations of overall ITA balances to
bank statement balances since November 2019 after transitioning to its new inmate management system.
According to the Department, it has not completed these reconciliations because of issues related to data
converted from the prior inmate management system to its new inmate management system. Specifically,
the Department reported that reconciled transactions in the prior system were inaccurately converted to
unreconciled transactions in the new system, thus affecting the Department’s ability to complete new
reconciliations until it addresses the inaccurate data. However, State policy requires monthly reconciliations
of accounting records to bank balances, and this reconciliation is an important financial control to help
protect inmate monies. Not performing this monthly reconciliation can increase the risk of undetected errors,
fraud, theft, or loss related to inmate monies. As of August 2020, the Department reported that it was in the
process of cleaning up the inaccurately converted data in order to complete the outstanding and future
monthly reconciliations. The Department also reported it was performing partial reconciliations. For example,
the Department has compared some cleared payments and deposits from its ITA bank statements to its ITA
financial records. In addition, the Department’s Chief Financial Officer reported that she performs some highlevel reviews, such as comparing payroll information to inmate wage deposits in ITAs, although she does not
document these reviews.

•

Department has not timely resolved reconciliation items—State policy requires that anomalies,
deficiencies, imbalances, and errors detected through reconciliations should be resolved generally within
30 days. However, as of the November 2019
reconciliation, the Department had listed
Key terms for this discussion
approximately 480 items dating from at least
Positive dollar values—Represent adjustments for
January 2015 through January 2019 that it had
unreconciled items where the bank statement balance
yet to reconcile. This includes unreconciled
is less than the ITA accounting records.
items with both positive and negative dollar
values—ranging from approximately $(67,700)
Negative dollar values—Represent adjustments for
to $54,100—and a total absolute dollar value
25
unreconciled items where the bank statement balance
of approximately $992,400.
According to
is greater than the ITA accounting records.
Department staff, these items were not timely
reconciled because of staff turnover and the loss
Absolute dollar value—The sum of the dollar values
of the staff position dedicated to performing the
irrespective of whether they are positive or negative.
reconciliation. The Department reported that it
plans to research and resolve the unreconciled
Net dollar value—The sum of the positive and
items on this list, if possible, but that doing so may
negative dollar values.
require extensive research and has been a lower
Source: Auditor General staff review of the November 2019 ITA
priority compared to other responsibilities, such
reconciliation.
as implementing the new inmate management
system and cleaning up the converted data.

25

The total net dollar value of these unreconciled items is approximately $130,900.

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However, the Department may lack or not be able to locate the documentation needed to research and
resolve all the unreconciled items. For example, we requested documentation for a judgmental sample of 14
unreconciled items with a total absolute dollar value of approximately $368,100.26 The Department located
and provided documentation for 4 of these items but could not readily locate documentation for the remaining
10 items. For the 4 items for which it located documentation, the Department determined that 3 items related
to check payments the Department made on inmates’ behalf but that the recipients did not cash and 1
item related to a check that was improperly deposited into an ITA. The Department reported that additional
research would be needed to fully resolve these 4 items. This additional research and the documentation the
Department provided should allow for this resolution, and the resolution should not affect individual inmate
account balances. The Department reported that additional research was needed to locate documentation
and identify the issues for and resolve the other 10 items, but that it may not be able to resolve the 6 oldest
items, which date back to at least 2015, because the Department has very limited information about them to
inform its research, such as the month/year and dollar value.27 The Department has limited information for
at least 64 of the approximately 480 unreconciled items—with a total absolute dollar value of approximately
$315,400— which may make them difficult for the Department to research and resolve.28 Additionally, the
Department’s records retention policy—which requires the Department to retain ITA records for 5 years—
could affect efforts to research and reconcile the older items if the Department followed its policy and no
longer possesses the records.
State policy does not provide guidance on how to address unreconcilable items, which illustrates the
importance of timely resolving them. Additionally, by not fully resolving these unreconciled items, individual
ITA balances may be understated or overstated, such as if monies are missing or deposits were incorrectly
posted to an inmate’s account. Unreconciled items can also be an indicator of past fraud, theft, or loss,
particularly if the documentation needed to reconcile the items cannot be located or has not been retained.
•

Department has not retained some historical information used for prior reconciliations—According
to State policy, agencies should retain documentation that supports their reconciliations in accordance with
their record retention policies, and the Department has a 5-year record retention policy for ITA records. As part
of the monthly reconciliation process, the Department used spreadsheets to reconcile outstanding deposits.
However, the Department continuously updated these spreadsheets without saving historical versions to
maintain supporting documentation for prior reconciliations, which does not comply with its record retention
policy. Although reconciliations we reviewed received supervisory review and approval, without maintaining
historical versions of the spreadsheets, the accuracy of prior reconciliations cannot be verified without
recreating the spreadsheets. If errors occurred in prior reconciliations, they could have contributed to the
unreconciled items discussed previously and would make resolving the items difficult.

Recommendations
To ensure compliance with State policy, the Department should:
1. Continue to resolve its data conversion issues and complete the reconciliations for those months that have
not been fully reconciled.
2. Develop and implement a strategy and time frame to resolve the outstanding unreconciled items from
previous reconciliations and resolve them in accordance with this strategy and time frame. The Department
should work with ADOA, as needed, to determine how to address unreconcilable items. Going forward, the
Department should ensure that it resolves anomalies, deficiencies, imbalances, and errors detected through
reconciliations generally within 30 days.

26
27
28

We selected 8 items with the largest absolute dollar value and 6 items with the oldest dates. The total net dollar value of these 14 items is
approximately $65,200.
The absolute dollar value of these 10 unreconciled items is approximately $185,500, with the 6 oldest items accounting for approximately
$7,800 of this amount.
The total net dollar value of the 64 items is approximately $(70,600).

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3. Retain all historical supporting documentation for each monthly reconciliation in accordance with its record
retention policy.
Department response: As outlined in its response, the Department agrees with the finding and will implement
the recommendations.

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CHAPTER 3

Questions and answers
Table of contents
Question

Page no.

Question 1:

Has the Department expended monies only for allowable purposes?

17

Question 2:

How does Arizona’s capital funding for the Department compare to other states?

18

Question 3:

What is the status of the Department fixing the nonfunctioning locks at the Lewis prison
complex?

19

Question 4:

What is Arizona Correctional Industries (ACI)?

20

Question 5:

How does ACI account for its financial activity?

22

Question 6:

How are ACI labor partnerships developed?

23

Question 7:

How are inmates selected for ACI positions?

23

Question 8:

How much are Arizona inmates paid for work and how does this compare to other states?

24

Question 9:

How much are Arizona inmates charged for phone use and how does it compare to other
states?

25

Question 10: How much is Arizona’s inmate medical copay and how does it compare to other states?

26

Question 11: How much is Arizona’s inmate utility fee and how does it compare to other states?

27

Question 12: What fees do Arizona offenders pay after release to community corrections?

28

Question 13: How are prices for the Department’s inmate commissary items set?

29

Question 14: How are prices for vending machines in Department prison visitation areas set?

29

Question 15: Are Arizona inmates allowed to market and sell inmate-made goods?

29

Question 1: Has the Department expended monies only for
allowable purposes?
Department expenditures and transfers we reviewed were supported and allowable. Specifically, our high-level
review of the Department’s fiscal year 2019 expenditures and transfers found that the Department’s use of its funds’
monies appeared consistent with their statutory purposes, other legal requirements, or allowable uses of State
appropriations. Our more detailed review of 88 judgmentally selected expenditures from (1) various expenditure
categories, including payroll, professional and outside services, travel, food, capital and noncapital equipment,
and other operating expenses, and (2) purchasing card (p-card) and central travel account (CTA) transactions
found they were properly reviewed, supported, and approved, and were generally allowable expenditures from
the funds to which they were charged.29 In addition, the Department’s financial controls over expenditures—
such as policies and procedures for obtaining supporting documentation, conducting supervisory review, and
29

We identified some p-card and CTA expenditures that were allowed but misclassified in the State’s accounting system. Specifically, for the 7
CTA expenditures tested, the expenditures were misclassified as other operating rather than travel. Similarly, for 1 p-card transaction, an
expenditure at a retail store was misclassified as travel rather than other operating. In addition, we identified 1 p-card expenditure of $200 that
was erroneously charged to an unallowed fund. However, the Department corrected the errors to address these issues.

Arizona Auditor General

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andDepartment
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segregating duties—were consistent with required State practices. See Appendix E, pages e-1 to e-2, for more
information about our methods for these reviews.

Question 2: How does Arizona’s capital funding for the Department
compare to other states?
The 4 other states we contacted provide more capital funding for their corrections departments than Arizona. As
shown in Table 3, Ohio, Texas, Virginia, and Washington each provided more capital funding, in terms of both
actual dollars and per capita spending based on state population, than Arizona in fiscal years 2016 through
2020.30

Table 3
Arizona’s corrections capital funding compared to 4 other states, in total dollars and dollars
per capita based on state population1
Fiscal years 2016 to 2020
(Unaudited)
2016
Total/per capita

2017
Total/per capita

2018
Total/per capita

2019
Total/per capita

2020
Total/per capita

Arizona
$5,464,300/
$0.80

$5,464,300/
$0.79

$6,914,300/
$0.98

$5,464,300/
$0.76

$6,864,300/
$0.94

$65,000,000/
$5.59

$75,425,784/
$6.48

$75,425,784/
$6.47

$110,012,037/
$9.42

$110,012,037/
$9.41

$67,286,698/
$2.45

$57,329,753/
$2.05

$68,520,668/
$2.42

$29,629,114/
$1.03

$37,139,333/
$1.28

$49,769,155/
$5.95

$12,308,371/
$1.46

$21,289,681/
$2.52

$28,786,472/
$3.39

$26,242,472/
$3.07

$18,435,000/
$2.57

$18,435,000/
$2.53

$24,479,000/
$3.30

$24,479,000/
$3.25

$31,699,500/
$4.16

Ohio2

Texas

Virginia

Washington3

1

2

3

The per capita amounts are based on each state’s census estimates for fiscal years 2016 through 2020 retrieved on 4/13/2020 from https://
www.census.gov/newsroom/press-kits/2019/national-state-estimates.html.
Ohio appropriates capital funding every 2 years. For example, for fiscal years 2015-2016, the total appropriation is $130,000,000. For this
table, the total appropriation is divided by 2 to arrive at the amount appropriated for each year in the 2-year cycle.
Washington appropriates capital funding every 2 years. For example, for fiscal years 2020 and 2021, the total appropriation is $63,399,000.
For this table, the total appropriation is divided by 2 to arrive at the amount appropriated for each year in the 2-year cycle.

Source: Auditor General staff analysis of the states’ budget bills and related documentation and interviews with other states’ corrections and
budget personnel, and annual population estimates for fiscal years 2016 through 2020 retrieved on 4/13/2020 from https://www.census.gov/
newsroom/press-kits/2019/national-state-estimates.html.
30

We selected Ohio, Texas, Virginia, and Washington for comparison based on several factors (both for similarities and differences), including
overall prison population, prison population per 100,000 state residents, state spending on corrections agency, and regional location.

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Question 3: What is the status of the Department fixing the
nonfunctioning locks at the Lewis prison complex?
As of June 2020, the Department was in the process of installing new cell doors at the Lewis prison complex. In
June 2019, the Department requested and was granted JCCR’s approval to use $17.7 million in nonappropriated
Department funds to begin a 3-phase project to replace locking, fire, and evaporative cooler systems at the Lewis
and Yuma prison complexes. Phase I includes replacing locking and fire systems at the Lewis prison complex;
phase II includes replacing evaporative cooling systems at the Lewis prison complex; and phase III includes
replacing locking, fire, and evaporative cooling systems at the Yuma prison complex. As discussed in Table 4,
in April 2020, the Department proposed to change the original scope of the project. Specifically, the changes
include (1) installing swinging doors instead of electronic sliding doors (see Figure 4, page 20), (2) replacing the
evaporative coolers with air-conditioning units instead of new evaporative coolers at Lewis and Yuma, and (3)
making additional facility upgrades, such as replacing porcelain toilets with stainless steel toilets and upgrading
light fixtures. The Department estimates that using swinging doors instead of sliding doors will save approximately
$20 million, which will help pay for phase II and the additional facility upgrades. Overall, the proposed changes
would increase the total project cost from $51.4 million to $60 million and extend the completion date from May
2021 to August 2022. For fiscal year 2021, the Department was appropriated $30 million for the project.

Table 4
Change of scope to the facility upgrades project at the Lewis and Yuma prison complexes
As of April 2020
Project scope

Original
project cost

Revised
project cost

Phase I—Replacing locking and fire systems at the Lewis prison complex.
The revised scope will install a less expensive locking system that uses a
simpler swing door system, which requires less maintenance and fewer
moving parts. The original proposed electronic sliding doors cost $16,400
per door. The Department estimates the new locking system will cost $2,741
per door. Also, the Department plans to convert the existing sliding doors
to swinging doors and modify the doors to include a food trap/cuff port.1

$25,890,000

$5,706,700

Phase II—Installing air-conditioning units at the Lewis prison complex.
The revised scope will replace the existing evaporative coolers with airconditioning units instead of new evaporative coolers. The Department
prefers to install air-conditioning units because they do not introduce added
moisture into the buildings, thus increasing facility longevity, and providing
more reasonable temperatures, which will improve staff morale and inmate
behavior.

11,610,000

26,730,700

Phase III—Replacing locking and fire systems and installing air-conditioning
units at the Yuma prison complex.

13,900,000

14,736,600

Other work—Replacing porcelain sinks and toilets with stainless steel ones
and upgrading cell lighting. The Department believes these new fixtures are
safer and less prone to tampering.

N/A

3,300,000

Additional costs—Costs incurred from the original scope that carry forward
(i.e., originally purchased locks that will be repurposed and potential
cancellation penalties).

N/A

9,554,500

Total Project Costs
1

$51,400,000

$60,028,500

According to the Department, a food port is an opening in the cell door through which items such as food, books, and clothing are given to
the inmate. A handcuff (or cuff) port is an opening through which inmates can be handcuffed before opening the cell door. The Department
reported that the swinging doors will have a food port that can double as a cuff port.

Source: Auditor General staff review of April 29, 2020, JCCR meeting and agenda/minutes and Department-provided information.

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Figure 4
Department’s old sliding door and new swinging door
Sliding cell door

Swinging cell door

Source: Photos courtesy of the Department.

Question 4: What is Arizona Correctional Industries (ACI)?
ACI is a self-funded program that provides inmates with training and work experience to help prepare them for
successful reentry and employment after release. ACI manages 2 types of inmate work programs:
•

Owned and operated enterprises—ACI owns and operates businesses that use inmate labor to manufacture
products and provide services. In fiscal year 2019, ACI operated 24 enterprises in various industries, including
a bakery that sells baked goods to prisons and jails across the State, license plate manufacturing, and a fish
farm that raises tilapia for local markets.31 According to ACI-provided data, an average of 744 inmates across
8 prison complexes labored in ACI enterprises in fiscal year 2019. Per Department Order 903, inmates who
work in an ACI-owned and operated enterprise make between $0.20 to $0.80 per hour.32,33

•

Labor partners—ACI contracts with private businesses and government agencies for inmate labor (see
page 23 for more information about how labor contracts are developed). In fiscal year 2019, ACI managed
inmate labor contracts with 33 labor partners, such as Hickman’s Egg Ranch and Taylor Farms.34 According
to ACI-provided data, an average of 1,081 inmates from 11 different prison complexes provided labor for
ACI labor partners during fiscal year 2019. A.R.S. §31-254(A) requires inmates whose labor is connected to
an ACI contract with a private person, firm, corporation, or association to be compensated at a minimum of
$2.00 per hour. For the 4 ACI contracts we reviewed, inmates earned between $4.25 and $5.25 per hour and
received overtime compensation at 1.5 times their normal wage for any overtime hours worked.35,36

31

32
33
34

35

36

According to ACI staff, ACI’s main considerations in deciding what types of businesses to operate include whether inmates are available,
whether the Department would approve the business, whether there is demand for the product or service, and whether ACI can provide the
product or service at a competitive price and generate a profit.
Per A.R.S. §31-254(A), inmate compensation shall be in accordance with a graduated schedule based on the quantity and quality of work
performed and skill required for its performance but shall not exceed $1.50 per hour.
See Chapter 3, pages 24 through 25, for more information about Arizona’s inmate wages and how they compare to other states’ inmate wages.
Of the 33 labor partners, 2 are under the prison industry enhancement certification program (PIECP), which is a federal program that requires
labor contracts to meet certain federal requirements. In Arizona, inmates are hired for PIECP jobs such as welding or fabrication of custom
trailers.
We reviewed contracts and contract amendments for the following 4 labor partners: Hickman’s Egg Ranch, Inc.; Keefe Commissary Network,
LLC; Common Market Equipment Company Inc. (also known as Swift); and Taylor Farms Southwest. These 4 partners represented the
contracts with the highest number of inmate labor hours, inmate workers, and ACI revenue in fiscal year 2019.
The $4.25 to $5.25 inmate wage scale was added as a contract amendment going into effect the pay period beginning January 4, 2020, for the
4 contracts we reviewed. ACI staff indicated that this amendment was in the process of being added to other active contracts with private
company labor partners that are not under the PIECP. Under the PIECP, inmates must be paid at a rate that is not less than the rate paid for
similar work in the local private sector.

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Figure 5 shows the 5 ACI enterprises and 5 labor partners with the highest average number of inmate laborers
in fiscal year 2019. According to ACI’s fiscal year 2019 annual report, inmates laboring in both types of ACI work
programs earned $12.7 million in wages during the fiscal year.37

Figure 5
The 5 ACI enterprises and 5 labor partners with the highest average number of inmate
laborers
Fiscal year 2019
(Unaudited)
Hickman’s Egg Ranch

221

Inmates care for chickens, provide farm maintenance, and package eggs

Bakery

Inmates prepare, bake, and wrap baked goods for use in Arizona prisons and jails

Metal Fabrication

Inmates bend, cut, weld, and powder coat steel and aluminum to
create institutional and outdoor products

Common Market Equipment Company (Swift)

85

Inmates cut and package fruit and produce for
sale

Keefe Commissary Network

77

Inmates work in a warehouse and package
inmate commissary items

Wood Shop

Inmates fabricate custom furniture and
cabinets

Hometown Hero Project

Inmates work in a call center selling
advertising

Sewing

114

93

Inmates provide repair services for semi-tractors and
trailers

Taylor Farms Southwest

147

72

70

49

Inmates make inmate
clothing

Print Shop

Inmates create graphic
files and run industrial
printing operations

-

41

Owned and operated

- Labor partner

Average number of inmate laborers

Source: Auditor General staff review of ACI documents and website.
37

Per A.R.S. §31-254(J), inmates with ACI jobs are not considered employees of the labor partner or the Department.

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Question 5: How does ACI account for its financial activity?
Because ACI operates like a business, its financial activity is accounted for in a similar manner as private
businesses. As shown in Table 5, ACI had sales between approximately $41.5 million and $48 million in fiscal
years 2016 through 2019. As allowed by statute, most of ACI’s sales are used to pay for the costs of acquiring
or manufacturing products, including labor and materials. After accounting for these costs, selling, and general
administrative costs, ACI’s net income was between approximately $3 million and $6.5 million in fiscal years 2016
through 2019.
Although ACI can retain some of its operating income, it is required to transfer some of its operating income to
other funds and for other purposes. Specifically, ACI had accumulated more than $14.5 million, primarily from its
operating income, as of June 30, 2019, that is available for its operations in future years. Additionally, A.R.S. §411624(B) requires an annual transfer of $1 million from ACI operating income to the Department’s BR Fund. Other
laws also required transfers to the BR Fund, State General Fund, and State Automation Projects Fund in fiscal
years 2016 through 2019. Further, in accordance with an interagency agreement, the Department transferred $6.5
million to ADOA in fiscal year 2019 for facility upgrades—including upgrades to locking systems and fire and
HVAC systems—at the Lewis and Yuma prison complexes.

Table 5
Schedule of ACI Revolving Fund revenues, expenses, and changes in net position
Fiscal years 2016 through 2019
Sales
Cost of goods sold
Gross profit
Operating Expenses
Selling
General and administrative
Total operating expenses
Operating income
Nonoperating revenue (expenses)
Investment earnings
Gain on disposal of assets
Loss on disposal of assets
Total nonoperating revenues (expenses)
Income before transfers
Nonoperating revenue (expenses)
Transfers to the Building Renewal Fund1
Transfers to the Arizona Department of
Administration2
Transfers to the State General Fund3
Transfers to the State Automation Projects Fund4
Total transfers
Changes in net position
Net position, beginning of year
Restatement5
Net position, end of year
1

2

3
4

2016
$41,585,608
(32,535,870)
9,049,738

2017
$43,606,697
(32,861,846)
10,744,851

2018
$44,584,776
(32,379,375)
12,205,401

2019
$47,977,618
(35,746,615)
12,231,003

801,534
5,205,533
6,007,067
3,042,671

866,652
5,384,706
6,251,358
4,493,493

726,980
5,146,443
5,873,423
6,331,978

862,158
5,120,818
5,982,976
6,248,027

32,519

42,257
63,943

83,357
49,441

189,620
27,050

(27,359)
5,160
3,047,831

106,200
4,599,693

132,798
6,464,776

216,670
6,464,697

1,000,000

1,000,000

2,450,000

1,000,000
6,500,000

500,000

1,500,000

1,500,000
1,547,831
11,960,480

1,000,000
2,000,000
2,599,693
13,508,311

$13,508,311

$16,108,004

2,450,000
4,014,776
16,108,004
(3,077,182)
$17,045,598

9,000,000
(2,535,303)
17,045,598
$14,510,295

Transfers to the BR Fund were made in accordance with A.R.S. §41-1624(B). In fiscal year 2018, Laws 2017, Ch. 305, §143, required an
additional $1.45 million transfer to the BR Fund.
Transfers to ADOA were made in June 2019 as stipulated in an interagency agreement to pay for part of the costs of locking, fire, and HVAC
upgrades at the Lewis and Yuma prison complexes. See Chapter 3, pages 19 through 20, for more information about facility upgrades at the
Lewis and Yuma prison complexes.
Transfers to the State General Fund were required by Laws 2015, Ch. 8, §133(5), and Laws 2018, Ch. 276, §140(5).
Transfers to the State Automation Projects Fund were required by Laws 2016, Ch. 117, §158(B)(5). In addition, an additional $73,700 was
transferred from the ACI Revolving Fund in fiscal year 2017 as required by Laws 2016, Ch. 117, §130(C)(D); however, the amount was not
included in the audited financial statements.

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Table 5 continued
5

A restatement impacting the beginning fund balance was made in fiscal year 2018 because of a change in accounting principles that required
measuring and recognizing certain financial activity that reduced the fund’s net position.

Source: Auditor General staff analysis of the Department of Corrections Arizona Correctional Industries Financial Statements audited by other
auditors and the Arizona Financial Information System Accounting Event Transaction File for fiscal years 2016 through 2019.

Question 6: How are ACI labor partnerships developed?
ACI labor partnerships involve a contract for inmate labor between ACI and the labor partner. ACI uses various
strategies to identify and recruit potential labor partners, and ACI staff said the majority of its labor partners are
identified through word of mouth by current labor partners. Once a labor partner has been identified, the contract
for inmate labor is developed.38 Contracts can be amended as needed, including to address changes to security,
safety, or inmate wages.39
Per the contracts, labor partners pay the following costs to ACI:
•

The inmates’ wages, including overtime wages if applicable. This cost is a reimbursement to ACI for ACI’s
payment of inmate wages from the ACI Revolving Fund.

•

The wages for industry program specialists (IPS), who are security personnel ACI hires to oversee the inmates
while they are being transported or working.

•

An ACI administrative fee of 11 percent of the total gross wages paid to inmates and IPS. ACI considers this
fee to be the minimum gross profit it should make on the labor contracts.

•

A minimum wage surcharge, if applicable.40 ACI reported incorporating this surcharge into its contracts to
help ensure fair market practices because the labor partners generally pay less than minimum wage for
inmate labor. The surcharge is retained by ACI and not paid to the inmates.

According to ACI, the labor contracts benefit both the labor partners and ACI. Specifically, the labor partners
benefit from access to a trained workforce (i.e., they can train the inmates to their specific business needs
while in prison and then hire them after their release from prison as skilled workers) and qualify for a federal tax
credit if they hire inmates within 1 year of their release.41 The contracts benefit both ACI and the Department by
generating revenue for each. For example, as stated previously, ACI is statutorily required to transfer $1 million
annually from its revolving fund to the Department’s BR Fund.

Question 7: How are inmates selected for ACI positions?
Designated Department staff select inmates for positions with ACI based on an application process to assess
qualifications.42 According to Department Order 903, these Department staff post ACI job openings, and interested
inmates apply for the positions.43 Department staff then review inmates’ applications against standardized
requirements, such as having had no minor disciplinary offenses/convictions in the previous 3 months (see
textbox, page 24, for examples), and determine if the inmates qualify for an ACI position. According to the
Department, qualified inmates are selected in order of application.
38
39
40
41

42
43

The labor contract is mainly standardized and is drafted and executed by the Department’s procurement staff.
Contracts with the potential to be renewed are renewed through amendments at intervals specified in the contract.
The minimum wage surcharge is applicable if the hourly cost paid by the labor partner is less than the State or federal minimum wage,
whichever is higher. The minimum wage surcharge amount is the difference between the minimum wage and the hourly costs.
According to the Internal Revenue Service, the Federal Work Opportunity Tax Credit is available to employers that hire individuals from certain
targeted groups who have consistently faced significant barriers to employment. This targeted group includes “qualified ex-felons,” who are
persons hired within 1 year of being convicted of a felony or being released from prison for the felony.
According to Department Order 903, the labor partner can request and conduct interviews of qualified inmates prior to their assignment.
Department staff reported these requests are rare.
According to Department Order 903, the job posting should include the specific position(s); rate of pay; shift; minimum qualifications; and
specific job duties.

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Example requirements for ACI jobs
Inmates must have/be:
•
•
•
•
•
1

A high school diploma or equivalent.1
No major convictions in the previous 6 months.
No removals from previous work positions during their current incarceration.
In minimum custody.
Within 10 years of their earliest valid release date.
According to ACI staff, the Department requires inmates to have completed their high school equivalent (HSE) diploma. However, since there
are more inmates signed up for an HSE course than class openings, an inmate can still be placed with an ACI job as long as the inmate is on
the waiting list for the HSE course. Once the inmate is admitted to the course, he/she is required to leave his/her ACI job and must complete
the course before returning to an ACI job.

Source: Auditor General staff review of Department Order 903.

Question 8: How much are Arizona inmates paid for work and how
does this compare to other states?
In Arizona, inmate wages vary depending on the work program for which an inmate performs labor (see Table 6).

Table 6
Inmate pay ranges by work program
As of May 2020
Inmate work programs

ACI labor contracts—ACI contracts with private companies or government entities
to hire inmates, such as call center or commissary employees.
ACI-owned-and-operated businesses—ACI businesses hire inmates to make products and provide services, such as in bakeries or print shops.
Prison industry enhancement certification program (PIECP)—Federal program
that requires labor contracts to meet certain federal requirements.2 Inmates are hired
for jobs such as welding or fabrication of custom trailers.
Intergovernmental agreements (IGAs)—IGAs between the Department and other
public entities to provide services, such as cleaning crews.
Work incentive pay plan (WIPP)—Department-run program for various prison jobs,
such as kitchen workers or maintenance crews.
1

2

3

Pay range

Minimum of $2.00 per hour1
$0.20 to $0.80 per hour
At least the minimum wage
established by federal law
Maximum of $1.50 per hour1
$0.10 to $0.50 per hour3

The exact inmate wages are agreed upon in the individual contracts, but statute establishes the minimum wage for the ACI labor contracts and
the maximum wage for IGA contracts. For the 4 ACI contracts we reviewed, inmates earn between $4.25 and $5.25 per hour.
In Arizona, ACI oversees the federal PIECP, and it is considered a subset of the ACI labor partner contracts. The PIECP’s inmate wage
requirements differ from other ACI labor contracts.
Per A.R.S. §31-229(F), inmates may not receive a wage above the lowest wage paid in a job scale before reaching the functional literacy level.
A.R.S. §31-229(I) states that the functional literacy level, as measured by standardized assessment testing, for inmates committed to the
Department after September 30, 1995, shall be an eighth-grade literacy level. Per Department Order 903, the $0.10 per hour applies only to
those inmates who have not yet met the functional literacy standard. For all others, the lowest starting pay is $0.15 per hour.

Source: Auditor General staff review of statutes, Department Order 903, and information provided by Department staff.

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PAGE 24

Our comparison of Arizona’s inmate wages to 4 other states found that they are about the same or lower than
these other states’ wages for correctional industry jobs (owned and operated businesses) and noncorrectional
industry jobs (i.e., WIPP or similar program), except for Texas, which does not pay inmates (see Table 7). The other
states reported they did not have a labor contracts program similar to the Department’s within their correctional
industries; however, Washington reported that it is contemplating developing such a program.

Table 7
Arizona’s inmate pay ranges for correctional industry and noncorrectional industry jobs
compared to 4 other states
State

Correctional industry jobs
(owned and operated)

Noncorrectional industry jobs
(WIPP or similar program)

$0.20 to $0.80 per hour

$0.10 to $0.50 per hour

$0.23 to $1.35 per hour

$6.00 to $24.00 monthly

Does not pay inmates

Does not pay inmates

$0.55 to $0.80 per hour

$0.27 to $0.45 per hour

$0.65 to $2.70 per hour

$0.30 to $0.42 per hour (not to
exceed $55.00 per month)

Arizona

Ohio

Texas

Virginia

Washington

Source: Auditor General staff interviews with 4 other states’ corrections staff and review of supporting documentation, as applicable, between
February and June 2020.

Question 9: How much are Arizona inmates charged for phone use
and how does it compare to other states?
The Department sells phone minutes to inmates at a cost of $0.12 per minute for local calls, $0.21 per minute for
interstate calls, and $0.40 per minute for international calls. According to the Department’s contract for inmate
phone services, the Department receives a 75.3 percent commission on all phone revenues. In fiscal year 2019,
the Department received a total of $8,274,270 in commissions.
Our comparison of Arizona’s inmate phone use rates to 4 other states found that Arizona had the highest phone
minute rates for domestic calls (see Table 8, page 26).

Arizona Auditor General

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Table 8
Arizona’s inmate phone use rates compared to 4 other states
State
Arizona

Ohio

Phone use cost
$0.12 per minute (local calls)
$0.21 per minute (other domestic calls)
$0.40 per minute (international calls)
$0.05 per minute (domestic calls)
Between $0.22 and $3.00 per minute
(international calls)

Texas1
$0.06 per minute (domestic calls)
Virginia1
$0.04 per minute (domestic calls)
Washington
$0.11 per minute (domestic calls)
$1.63 per minute (international calls)

1

Texas’ and Virginia’s inmate phone systems do not allow international calls, although Virginia inmates can make international calls on a limited
basis from an administrative phone system.

Source: Auditor General staff interviews with 4 other states’ corrections staff and review of supporting documentation, as applicable, between
February and June 2020.

Question 10: How much is Arizona’s inmate medical copay and how
does it compare to other states?
The Department charges inmates a $4.00 medical copay for medical visits. The Department reported that it does
not charge inmates multiple copays for treatment of the same issue, nor does it charge a copay for prescriptions
or use of medical equipment, such as bandages, nebulizers, or glucose tests. The Department also reported that
an inmate who cannot afford the copay will still receive medical services, but the inmate’s account will retain a
negative balance for the copay and the inmate is responsible for paying the copay when he/she is able to.
Our comparison of Arizona’s medical copay to 4 other states found that it is within the range of medical copays
charged by these other states (see Table 9, page 27).

Arizona Auditor General

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PAGE 26

Table 9
Arizona’s inmate medical copay compared to 4 other states
State

Medical costs

Arizona
$4.00 medical copay
Ohio
$2.00 or $3.00 medical copay1
Texas
$13.55 medical copay
(not to exceed $100.00 per state fiscal year)
Virginia
No medical copay2
Washington
$4.00 medical copay

1

2

Ohio charges a $2.00 medical copay for medical services initiated by an inmate through an appropriate health services request and a $3.00
copay if an inmate requests an emergency medical service and medical staff determine that a medical emergency did not exist.
Effective January 1, 2020, the Virginia Department of Corrections stopped charging inmates a medical copay. Prior to January 1, 2020, inmates
were charged a $5.00 medical visit fee.

Source: Auditor General staff interviews with 4 other states’ corrections staff and review of supporting documentation, as applicable, between
February and June 2020.

Question 11: How much is Arizona’s inmate utility fee and how does
it compare to other states?
The Department charges inmates a $2.00 per-month utility fee, which is the maximum rate allowed by statute.44
Specifically, A.R.S. §31-239(A) requires the Department to establish a reasonable utility fee that does not exceed
$2 per month. The fee is charged to inmates who possess a qualifying appliance, such as a television or hair dryer.
Statute requires the Department to use the monies collected from the fee to offset the cost of the Department’s
utility expenses.
Our comparison of Arizona’s utility fee to 4 other states found that only Arizona and Washington charge a utility
fee, and Arizona’s fee was higher than Washington’s fee (see Table 10, page 28).45

44
45

The Department reported that the utility fee was established at $1.00 per month in 2006 but increased to $2.00 per month in August 2009 as
part of a larger State and Department strategy to address budget shortfalls.
Our review of other states’ policies found that the other states we contacted also allow inmates to possess personal appliances, such as hair
dryers, televisions, and radios.

Arizona Auditor General

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PAGE 27

Table 10
Arizona’s inmate utility fee compared to 4 other states
State
Arizona

Utility fee
$2.00 per month for any
qualifying appliance

Ohio
No utility fee
Texas
No utility fee
Virginia
No utility fee
Washington
$0.50 per month fee for television

Source: Auditor General staff interviews with 4 other states’ corrections staff and review of supporting documentation, as applicable, between
February and June 2020.

Question 12: What fees do Arizona offenders pay after release to
community corrections?
The Department has the authority to charge several community corrections fees, including a community
supervision fee, an interstate compact transfer application fee, electronic monitoring costs, and drug testing
fees.46 However, according to Department management, it primarily charges offenders for the following fees,
which are collected by third-party vendors and transferred to the Department:
•

46
47

48

49

Community supervision fee—According to A.R.S. §31-418(A), offenders are charged a community
supervision fee of $65 each month, depending on the offender’s ability to pay.47 In fiscal year 2019, the
Department collected approximately $1.1 million in community supervision fees. The Department is
required to deposit 70 percent of the community supervision fees collected into the Arizona Criminal Justice
Commission’s (ACJC) Victim Compensation and Assistance Fund.48 The Department is required to deposit
the remaining 30 percent in its Community Corrections Enhancement Fund, which shall be used by the
Department to pay for costs related to community corrections.49

According to Department staff, the Department does not charge any drug testing fees. In addition, it charges some electronic monitoring fees/
GPS fees when offenders can afford to pay them.
A.R.S. §31-418(A) allows the Department to require a lesser amount if the offender is unable to pay the fee. According to Department staff, the
Department has the ability to reduce or suspend fees if it is determined from a review of an offender’s financial records, and based on the U.S.
Department of Health and Human Services federal poverty level guideline, that the offender does not have the ability to pay the fee.
A.R.S. §41-2407(A) establishes the Victim Compensation and Assistance Fund that the ACJC administers. Per A.R.S. §41-2407(B), subject to
legislative appropriation, the ACJC allocates monies in the fund to public and private agencies for the purpose of establishing, maintaining, and
supporting programs that compensate and assist victims of crime.
See Appendix A, pages a-25 through a-26, for more information about the Community Corrections Enhancement Fund.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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PAGE 28

•

Interstate compact transfer application fee—A.R.S. §31-467 et seq establishes Arizona’s participation in
the Interstate Compact for the Supervision of Adult Offenders. The Interstate Commission for Adult Offender
Supervision (ICAOS) oversees the interstate compact agreement, and ICAOS rules allow states to charge
offenders a fee for each application requesting a transfer to another state. In Arizona, offenders are charged
a $200 application fee when they apply to transfer community supervision to another state through the
interstate compact program. Monies collected for this fee are also deposited into the Community Corrections
Enhancement Fund. In fiscal year 2019, the Department collected approximately $13,400 in application fees.

Question 13: How are prices for the Department’s inmate
commissary items set?
A.R.S. §41-1604.02 requires prices of commissary items available for sale to
The commissaries sell various
inmates to be no higher than similar retail items available to the public (see
items to inmates such as food,
textbox). In December 2016, the Department contracted with a private vendor
toiletries, electronics such as
to operate inmate commissaries at each of its prison complexes and worked
television sets and electric
with the vendor to initially develop a list with all approved commissary items
shavers, phone cards, and arts
and prices. All subsequent proposed changes to commissary items and
and crafts supplies.
their prices must be approved by the Department. The Department reported
that when there are proposed price increases to commissary items, it will search retail locations such as Circle
K, Walgreens, Fry’s, or Walmart to ensure that similar retail items at these stores are equal or higher in price. The
Department reported that if it cannot identify an equal or higher price, it will deny the price increase.
Our comparison of 10 inmate commissary items’ prices, such as food, personal hygiene items, over-the-counter
medication, shoes, and batteries, to prices at 3 different retail stores that sell those items, such as Circle K,
Walmart, Walgreens, and Fry’s, found that the commissary items were generally priced lower than similar items
at retail stores.50

Question 14: How are prices for vending machines in Department
prison visitation areas set?
The Department does not establish prices for vending machines in its prison
visitation areas (see textbox). The Department entered into an interagency
service agreement with the Arizona Department of Economic Security
(ADES) that provides job opportunities for legally blind individuals to operate
vending services at the Department through ADES’ Business Enterprise
Program. ADES oversees the vendor, which is required by its contract with
ADES to set prices in accordance with the average market value of the same
or like product plus an allowed markup.51

Vending machines, with items
such as beverages and snacks,
are available for visitors’ use
in Department prison complex
visitation areas. Visitors may
purchase items for their own
consumption or may share them
with inmates during their visit.

Question 15: Are Arizona inmates allowed to market and sell inmatemade goods?
Department policy does not allow inmates to market and sell inmate-made goods. Per A.R.S. §31-261, products
of inmate enterprise, hobby, craft, or art may be marketed to the public pursuant to rules established by the
Department Director. According to Department staff, in previous years, inmates had the ability to sell their goods
to the public through the Arizona Arts and Trade Outlet; however, the outlet closed in August 2015 primarily
because it was not financially viable. Department Order 906, which became effective in September 2016, formally
disallowed the sale of inmate-made goods.
50
51

For 3 items, the commissary prices were lower than the prices for similar items in 2 of the 3 retail stores.
According to ADES staff, the allowed markup varies depending on the product type/category. The markup is not necessarily a fixed percentage
but is generally 2 to 4 times a product’s wholesale cost.

Arizona Auditor General

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Report 20-109
PAGE 29

SUMMARY OF RECOMMENDATIONS
FINDING/CHAPTER X

Auditor General makes 3 recommendations to the Department
To ensure compliance with State policy, the Department should:
1. Continue to resolve its data conversion issues and complete the reconciliations for those months that have
not been fully reconciled (see Chapter 2, pages 12 through 16, for more information).
2. Develop and implement a strategy and time frame to resolve the outstanding unreconciled items from
previous reconciliations and resolve them in accordance with this strategy and time frame. The Department
should work with ADOA, as needed, to determine how to address unreconcilable items. Going forward, the
Department should ensure that it resolves anomalies, deficiencies, imbalances, and errors detected through
reconciliations generally within 30 days (see Chapter 2, pages 12 through 16, for more information).
3. Retain all historical supporting documentation for each monthly reconciliation in accordance with its record
retention policy (see Chapter 2, pages 12 through 16, for more information).

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
Fundingand
andDepartment
DepartmentFinances
Finances| |October
October2020
2020| |
Report 20-109
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PAGE 30

APPENDIX A

Summary of Department funds
This appendix provides summary information for individual Department funds, including a schedule of each fund’s
revenues, expenditures, transfers, and changes in fund balance for fiscal years 2016 through 2019. Information
about the Prisoner Spendable Accounts Fund, also called inmate trust accounts, is excluded from this appendix
but is presented in Chapter 2 (see pages 12 through 16). Similarly, information about the Arizona Correctional
Industries Revolving Fund is also excluded from this appendix but is summarized in Chapter 3 (see pages 22
through 23). See Table 1 in the Introduction (pages 2 through 3) for a summary schedule of the Department’s
combined revenues, expenditures, transfers, and changes in fund balance.

Table of contents
Fund name

Arizona Auditor General

Page no.

General Fund

a-2

Corrections Fund

a-4

Prison Construction and Operations Fund

a-6

Special Services Fund

a-7

Federal Grants Fund

a-9

Inmate Store Proceeds Fund

a-11

Building Renewal Fund

a-13

Revolving Fund

a-15

Transition Program Fund

a-17

State Charitable, Penal and Reformatory Institutions Land Fund

a-18

Penitentiary Land Fund

a-19

Interagency Services Agreement (ISA) Fund

a-20

Indirect Cost Recovery Fund

a-21

State Education Fund for Correctional Education

a-23

Alcohol Abuse Treatment Fund

a-24

Community Corrections Enhancement Fund

a-25

Risk Management Revolving Fund

a-27

Employee Recognition Fund

a-28

Donations Fund

a-29

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
Fundingand
andDepartment
DepartmentFinances
Finances| |October
October2020
2020| |
Report 20-109
Report 20-109
PAGE a-1

General Fund
The Department’s General Fund is an appropriated fund supported by State General Fund appropriations
that accounts for expenditures of those appropriations. The Department’s State General Fund appropriations
accounted for nearly 94 percent of all Department revenues and expenditures for fiscal years 2016 through 2019.
As shown in Table 11, the Department received over $1 billion annually from the State General Fund in these fiscal
years. During this period, the Department also collected and remitted certain revenues to the State General Fund,
primarily monies from a U.S. Department of Justice grant for federal reimbursement of costs for incarcerating
undocumented criminal aliens.
As also shown in Table 11, the Department expended or transferred over $1 billion during fiscal years 2016
through 2019. Most expenditures were for payroll and related benefits for Department employees. Professional
and outside services expenditures was the second largest expenditure category and was mostly for medical
services paid to third-party vendors for inmate healthcare and private prisons. The Department also transferred
monies to the Arizona Health Care Cost Containment System for inmate medical services.

Table 11
Schedule of General Fund revenues, expenditures, and transfers
Fiscal years 2016 through 2019
(Unaudited)
Revenues1
State General Fund appropriations
Expenditures and transfers
Payroll and related benefits
Payroll
State prisons
Central office
Other2
Total payroll
Related benefits
Total payroll and related benefits
Professional and outside services
Medical services
Institutional care3
Other4
Total professional and outside services
Travel
Food and related expenditures5
Aid to individuals6
Other operating
Rent
Utilities
Operating supplies
Payments to inmates
Information technology services
Insurance and related
Repair and maintenance
Officer uniforms and inmate clothing
Other
Total other operating
Capital and noncapital purchases

Arizona Auditor General

2016

2017

2018

2019

$1,031,411,815

$1,039,187,307

$1,065,472,013

$1,097,814,345

366,481,192
29,293,176
13,421,834
409,196,202
210,621,660
619,817,862

365,390,382
30,430,696
13,775,050
409,596,128
202,960,822
612,556,950

363,914,111
31,424,185
14,647,165
409,985,461
221,242,199
631,227,660

363,364,324
32,282,118
13,773,352
409,419,794
230,006,300
639,426,094

133,721,845
118,434,700
6,743,872
258,900,417
350,086
35,579,930
176,552

130,803,716
121,420,914
7,899,472
260,124,102
425,112
35,598,793
162,271

135,085,484
119,970,518
9,379,298
264,435,300
569,846
33,935,456
153,960

154,551,409
119,420,382
7,142,067
281,113,858
729,375
36,727,124
150,320

25,039,363
27,466,930
16,927,678
9,761,343
8,717,131
7,931,564
5,845,178
6,593,415
1,530,639
109,813,241

34,253,383
27,134,850
16,961,455
9,992,687
9,244,253
7,970,262
6,810,934
6,973,219
1,902,017
121,243,060

42,307,136
26,856,737
17,072,608
10,166,925
8,634,505
7,703,727
5,538,133
6,226,002
4,028,881
128,534,654

42,593,375
27,357,902
18,432,618
10,406,133
8,753,225
7,702,905
7,075,741
6,174,282
2,598,559
131,094,740

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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Table 11 continued
Vehicles
Equipment
Adult Inmate Management System (AIMS)
replacement
Building improvements
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the Arizona Health Care Cost
Containment System (AHCCCS) for inmate
medical services
Transfers to other agencies7
Total transfers out
Total expenditures and transfers out
1

2

3
4

5

6

7

2016
1,316,160
2,367,834

2017
2,135,869
4,152,352

2018
1,214,483
2,724,005

2019
1,980,502
2,658,690

467,844

1,930,329

432,683
624,739
4,741,416
1,029,379,504

330,115
789,167
7,407,503
1,037,517,791

126,288
319,806
4,852,426
1,063,709,302

244,515
336,169
7,150,205
1,096,391,716

1,913,803

1,488,127

1,595,287

1,195,541

118,508
2,032,311
$1,031,411,815

181,389
1,669,516
$1,039,187,307

167,424
1,762,711
$1,065,472,013

227,088
1,422,629
$1,097,814,345

The table does not include monies the Department collected that were directly remitted to the State General Fund. Specifically, the Department
received monies in fiscal years 2016, 2017, and 2019 from the U.S. Department of Justice for the State Criminal Alien Assistance Program
(SCAAP) for a grant that provides federal payments to states and localities that incur correctional officer costs for incarcerating undocumented
criminal aliens with at least 1 felony or 2 misdemeanor convictions for violations of state or local law, and who were incarcerated for at least 4
consecutive days. The Department remitted between $5.2 and $5.9 million of the monies received in fiscal years 2016, 2017, and 2019 directly
to the State General Fund, and the remaining monies were deposited in the Department’s Indirect Cost Recovery Fund (see Table 23, page
a-21, footnote 1, for additional information). In addition, the Department collected between $3.9 million and $4.9 million annually in fiscal years
2016 through 2019 that were remitted directly to the State General Fund in accordance with statute. Most of these monies were collected from
inmates for room and board as required by A.R.S.§31-254(E)(4) and remitted to the State General Fund in accordance with A.R.S. 41-1674(B)
(3).
Other payroll expenditures were payments to Department employees who work at various locations such as ACI, community corrections offices,
parole offices, private prisons, and the Correctional Officer Training Academy.
Nearly all the institutional care expenditures were payments to private prison providers.
Other professional and outside services include various external services such as legal services, project consultants for the Governor’s initiative
to reduce waste and defects and the Department’s AIMS replacement, drug testing, substance abuse programs, electronic monitoring, and
veterinary services.
Food and related expenditures are primarily contracted food services for inmates and offenders; however, it also includes contracted food
services for the correctional officer cadets at the Correctional Officer Training Academy.
Aid to individuals’ expenditures were for the costs of discharging inmates, such as paying for release clothing and gate fees and reimbursing
private prison providers for similar costs.
Transfers to other agencies primarily comprises transfers to ADOA; however, fiscal year 2019 also includes transfers to the Governor’s Office.
These transfers helped pay for positions within the agencies that perform duties for the Department such as a procurement officer at ADOA.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

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PAGE a-3

Corrections Fund
The Corrections Fund is an appropriated fund established by A.R.S. §41-1641. Although the Department
administers the fund and makes most of the fund expenditures, ADOA was also appropriated fund monies during
fiscal years 2016 through 2019. Fund monies may be spent for:
•

Major maintenance, construction, lease, purchase, renovation, or conversion of corrections or State-operated
juvenile facilities, subject to prior Joint Committee on Capital Review (JCCR) and legislative approval.

•

Minor maintenance and operation of corrections and State-operated juvenile facilities, subject to prior
legislative approval.

•

A required $2.5 million transfer to the Department’s Building Renewal Fund.

The fund receives a portion of luxury taxes collected on alcohol and tobacco products. Specifically, 20 percent
of monies collected on spirituous liquor, 50 percent of monies collected on vinous and malt liquors, and 50
percent of most general tax rate collections on tobacco products are deposited into the fund. As shown in Table
12, these deposits totaled more than $31 million annually for fiscal years 2016 through 2019. Additionally, State
law required the transfer of $2.8 million to the fund from other Department funds in fiscal year 2017 to purchase
replacement radios.
As shown in Table 12, the Department largely spent fund monies for institutional care, primarily for payments
to private prison providers. In addition, $2.5 million was transferred annually from the Corrections Fund to the
Building Renewal Fund, as required by statute. Transfers were also made to the State General Fund and State
Automation Projects Fund as required by law. The remaining monies were spent for operating costs, primarily
contracted food services for inmates, as permitted by a $3,000,800 appropriation each year from the Corrections
Fund for operations.

Table 12
Schedule of Corrections Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)
Revenues and transfers in
Luxury taxes
Transfers from the Inmate Store Proceeds Fund1
Transfers from the Revolving Fund1
Transfers from the State Charitable, Penal and
Reformatory Institutions Land Earnings Fund1
Transfers from the Special Services Fund1
Transfers from the Penitentiary Land Earnings Fund1
Total transfers in
Total revenues and transfers in
Expenditures and transfers out
Professional and outside services – institutional
care2
Inmate food and related
Other operating
Capital and noncapital purchases – equipment3
Total Department expenditures
Expended by the Arizona Department of
Administration4
Total Corrections Fund expenditures
Arizona Auditor General

2016

2017

2018

2019

$32,812,672

$31,442,840
1,000,000
500,000

$31,968,457

$32,160,153

32,812,672

400,000
400,000
2,800,000
34,242,840

31,968,457

32,160,153

22,977,860

23,070,203

25,556,224

25,616,321

2,516,323
162

2,996,472

2,996,019

25,494,345

2,774,418
244,849
2,483,193
28,572,663

28,552,696

28,612,340

123,399

425,375

407,988

513,152

25,617,744

28,998,038

28,960,684

29,125,492

500,000

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Table 12 continued
Transfers to the Building Renewal Fund5
Transfers to the State General Fund5
Transfers to the State Automation Projects Fund5
Total transfers out
Total expenditures and transfers out
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1
2
3

4
5

2016
2,500,000
1,250,000
3,750,000
29,367,744
3,444,928
3,704,603
$7,149,531

2017
2,500,000

2018
2,500,000

6,800
2,506,800
31,504,838
2,738,002
7,149,531
$9,887,533

2,500,000
31,460,684
507,773
9,887,533
$10,395,306

2019
2,500,000
1,500,000
4,000,000
33,125,492
(965,339)
10,395,306
$9,429,967

Transfers in from these funds were made in accordance with Laws 2016, Ch. 117, §160, to purchase replacement radios.
Nearly all institutional care expenditures were payments to private prison providers.
Capital and noncapital purchases involved the purchase of replacement radios from monies transferred into the Corrections Fund (see footnote
1 for additional information).
Amount expended by ADOA from its appropriation from the Corrections Fund.
Transfers to the Building Renewal Fund were made in accordance A.R.S. §41-1641(E). In addition, in fiscal years 2016 and 2019, the
Department was required to transfer monies from the Corrections Fund to the State General Fund in accordance with Laws 2015, Ch. 8, §133(5)
and Laws 2018, Ch. 276, §140(5), and to the State Automation Projects Fund in accordance with Laws 2016, Ch. 117, §130(C)&(D).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-5

Prison Construction and Operations Fund
The Prison Construction and Operations Fund is an appropriated fund established by A.R.S. §41-1651. The fund
receives assessments ranging from $500 to $1,500 charged to persons convicted of offenses for being under
the influence of intoxicating liquor or drugs while operating boats, vehicles, or aircraft. For example, A.R.S §5395.01(A)(4) established a $500 assessment for first offenses of operating a motorized watercraft while under
the influence, and A.R.S. §28-1383(J)(4) established a $1,500 assessment for aggravated driving while under the
influence.
According to statute, fund monies shall be used for any costs related to prison overcrowding and Department
support and maintenance. Additionally, State laws appropriated $10 million annually in fund monies for contracted
inmate healthcare services in fiscal years 2016 through 2019.52 State laws also appropriated nearly $3.7 million
in fiscal years 2016 and 2017 and $2.5 million in fiscal years 2018 and 2019 for operations, including food and
related expenditures. As shown in Table 13, the Department spent fund monies primarily for medical services and
food and related expenditures in fiscal years 2016 through 2019, in accordance with its appropriations.

Table 13
Schedule of Prison Construction and Operations Fund revenues, expenditures, transfers,
and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
Revenues
Assessments1
Expenditures and transfers
Professional and outside services – medical
services
Inmate food and related
Other operating – information technology services
Total expenditures
Transfers to the State Automation Projects Fund2
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

2016

2017

2018

2019

$11,917,415

$11,291,814

$10,519,207

$10,348,656

8,000,000

8,776,565

6,690,632

10,000,000

3,684,382
1,263
11,685,645

2,273,011

2,415,170

11,049,576
5,000
11,054,576
237,238
1,287,988
$1,525,226

9,105,802

10,000,000

9,105,802
1,413,405
1,525,226
$2,938,631

10,000,000
348,656
2,938,631
$3,287,287

11,685,645
231,770
1,056,218
$1,287,988

Assessments were charges ranging from $500 to $1,500 from persons convicted of offenses for being under the influence of intoxicating liquor
or drugs while operating boats, vehicles, or aircraft, in accordance with statutes.
Transfers to the State Automation Projects Fund in fiscal year 2017 were made in accordance with Laws 2106, Ch. 117, §130(C)&(D).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

52

As shown in Table 13, the Department did not spend its entire $10 million appropriation in fiscal years 2016 through 2018. Unspent amounts
remain in the fund but require another appropriation to be spent in future years.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-6

Special Services Fund
The Special Services Fund is a nonappropriated fund established by A.R.S.§41-1604.03. The fund receives
revenues primarily from the sale of phone minutes to inmates. The Department contracts with a vendor to provide
telephone services to inmates and receives 75.3 percent commission on all phone revenues (see Chapter 3, pages
25 through 26, for more information). The fund also receives investment income. Statute requires the Department
to transfer $500,000 of fund monies annually to the Department’s Building Renewal Fund. Any remaining monies
may be used for inmates’ benefit, education, and welfare and to pay for the costs of implementing, operating,
and maintaining technologies and programs for inmate use.
As shown in Table 14, in fiscal years 2016 through 2019, the Department primarily used fund monies to pay for
inmate education and training, recovery housing, and behavior modification programs. Beginning in fiscal year
2018, the Department also began using fund monies to pay for inmate satellite television services, which were
previously paid from the Department’s Inmate Store Proceeds Fund. The Department also transferred $500,000
annually to its Building Renewal Fund, as required by statute.

Table 14
Schedule of Special Services Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues
Telephone system commissions1
Investment income
Other
Total revenues
Expenditures and transfers
Payroll and related benefits
Professional and outside services
Inmate education and training
Behavior modification programs and recovery
housing
Other
Total professional and outside services
Travel
Other operating
Satellite television2
Books, subscriptions, and publications
Operating supplies
Repair and maintenance
Other
Total other operating
Capital and noncapital purchases
Building improvements
Equipment
Software
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the Building Renewal Fund3
Transfers to the Corrections Fund4

Arizona Auditor General

2016

2017

2018

2019

$5,006,449
182,819
105
5,189,373

$8,036,182
240,083

$7,377,591
375,099

$8,274,270
691,605

8,276,265

7,752,690

8,965,875
191,029

3,006,491

3,034,078

105,005
3,111,496

86,148
3,120,226

117,430
59,167

146,106
98,858
145,244
7,505
397,713

72,685
249,282

1,928

1,928
3,362,706
500,000

148,503
67,293
10,724
226,520
3,744,459
500,000
400,000

34,128

3,567,072

1,957,587

2,081,573

87,787
2,079,502

108,569
5,757,214
984

1,977,368
93,756
67,939

1,915,638
127,920
8,855

24,071
2,163,134

91,728
2,144,141

287,547
2,722

504,005
37,253

61,035
351,304
4,593,940
500,000

1,255
542,513
8,635,881
500,000

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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Table 14 continued
Transfers to the State General Fund4
Transfers to the State Automation Projects Fund4
Total transfers
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

3
4

2016
2,000,000
2,500,000
5,862,706
(673,333)
8,252,161
$7,578,828

2017
4,000,000
4,900,000
8,644,459
(368,194)
7,578,828
$7,210,634

2018
1,000,000
1,500,000
6,093,940
1,658,750
7,210,634
$8,869,384

2019
25,200
525,200
9,161,081
(195,206)
8,869,384
$8,674,178

The Department received 75.3 percent of all phone services revenues related to its contract with a vendor to provide these services to inmates.
See Chapter 3, pages 25 through 26, for more information.
Beginning in fiscal year 2018 the Department began using its Special Services Fund instead of the Inmate Store Proceeds Fund to pay for
inmate satellite television.
Transfers to the Building Renewal Fund were made in accordance with A.R.S. §41-1604.03(B).
The Department was required to transfer monies to the State General Fund, Corrections Fund, and State Automation Projects Fund in fiscal
years 2016 through 2019 in accordance with Laws 2015, Ch. 8, §133(5); Laws 2016, Ch. 117, §§158(B)(7) and 160(4); and Laws 2018, Ch. 276
§§139(3) and 140(5).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

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PAGE a-8

Federal Grants Fund
The Federal Grants Fund is authorized by A.R.S. §35-131(H) and is not subject to appropriation. The fund is used
to account for federal monies the Department receives. The Department received monies from various federal
grants during fiscal years 2016 through 2019, including:
•

Crime Victim Assistance to provide financial support for services to crime victims by eligible crime victim
assistance programs.

•

Second Chance Act Reentry Initiative to support efforts to reduce recidivism and improve outcomes for
people returning to the community from incarceration.

•

Title I State Agency Program for Neglected and Delinquent Children and Youth to provide educational
continuity for neglected and delinquent children and youth in State-run institutions and allow for a successful
transition to school or employment once released.

•

Special Education Grants to States to assist states in providing special education and related services to all
children with disabilities.

As shown in Table 15, fund expenditures in fiscal years 2016 through 2019 included paying for employee payroll
and related benefits; travel; employee education, training, and conference attendance; purchases of books,
subscriptions, and publications; purchases of software and software support and maintenance; repair and
maintenance; and purchases of equipment. The types and amounts of expenditures varied each fiscal year,
which occurs depending on the amount and purpose of grant monies received each year.

Table 15
Schedule of Federal Grants Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues
Federal grants
Expenditures and transfers
Payroll and related benefits
Professional and outside services
Education and training
Medical services
Other
Total professional and outside services
Travel
Food
Other operating
Books, subscriptions, and publications
Software support and maintenance
Operating supplies
Repair and maintenance
Conference attendance fees
Employee education and training
Rent
Other
Total other operating
Capital and noncapital purchases
Arizona Auditor General

2016

2017

2018

2019

$ 966,402

$1,612,170

$1,723,451

$1,422,681

187,581

197,155

328,638

631,508

84,132

93,908

17,554
101,686
71,035
56,525

1,172
95,080
50,648
50,368

323,305
19,436
24,440
367,181
118,671
36,313

193,355
12,317
36,698
242,370
172,423
28,521

43,776
37,273
27,515
81,063
56,787

31,881
184,651
19,026
143,396
91,145

3,288
76,715
30,614

1,736
573
248,723

11,838
1,769
483,706

16,466
5,155
195,982

316,181
181,568
118,328
110,137
107,331
93,190
36,690
21,344
984,769

63,744

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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Table 15 continued
Equipment
Software
Building improvements
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the Indirect Cost Fund1
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance (deficit), end of year2
1
2

2016
212,778
189,789
585
403,152
1,068,702
45,511
1,114,213
(147,811)
139,145
$
(8,666)

2017
357,472
78,454
94,546
14,630
545,102
1,422,059
1,422,059
190,111
(8,666)
$ 181,445

2018
187,827
60,135
10,341
258,303
1,305,088
68,162
1,373,250
350,201
181,445
$ 531,646

2019
138,683
3,448
4,619
146,750
2,206,341
146,991
2,353,332
(930,651)
531,646
$ (399,005)

Transfers to the Indirect Cost Recovery Fund were for the administrative portion of federal programs.
Timing differences occur for when federal monies are received and when they are spent; consequently, deficit balances occurred between fiscal
years. Specifically, federal grants are often established on a reimbursement basis, meaning the Department would be required to expend the
money prior to receiving a reimbursement, thereby creating a deficit balance for the grant.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-10

Inmate Store Proceeds Fund
The Inmate Store Proceeds Fund is a nonappropriated fund authorized by A.R.S.§41-1604.02. The fund receives
revenues primarily from the sale of goods in the Department’s prison commissaries. The Department contracts
with a vendor to operate prison commissaries that sell various items to inmates, such as food, toiletries, electronics
(e.g., television sets and electric shavers), phone cards, and stationery supplies. Per contract, the Department
receives 17 percent of all sales revenue.53 As shown in Table 16, the fund also receives rental revenue for space
its prison commissary vendor occupies and other revenues (see footnote 2 in Table 16). The Department is
required to transfer $500,000 annually from the fund to its Building Renewal Fund. Any remaining fund monies
may be used for inmate activities, incentive pay increases for correctional officers, equipment to enhance safety
for Department personnel and inmates, and other official needs.
As shown in Table 16, the fund was primarily used to pay for various other operating expenditures in fiscal years
2016 through 2019. For example, over half of the fund’s expenditures in fiscal year 2019 were for operating
supplies such as janitorial and maintenance supplies, block ice, and audio-visual-equipment-related supplies.
In fiscal years 2016 and 2017, the Department also paid for inmate satellite television services from the fund,
although it began paying for these services from its Special Services Fund beginning in fiscal year 2018 (see
pages a-7 through a-8).
The Department transferred $500,000 annually to its Building Renewal Fund, as required by statute. Other laws
also required transfers to the Corrections Fund, State General Fund, and State Automation Projects Fund during
fiscal years 2016 and 2017 and to the Arizona Criminal Justice Commission in fiscal year 2018. The Department
also transferred $3.5 million to ADOA in fiscal year 2019 to pay for facility upgrades—including upgrades to
locking systems and fire and HVAC systems—at the Lewis and Yuma prison complexes.
In addition to the monies the Department received as shown in Table 16, the State’s private prisons also manage
monies that are used to benefit inmates. Specifically, the private prisons receive profits from inmate stores,
vending machines, yard sales, and snack bars that can be used for inmate activities, inmate storekeepers’
salaries, and other expenditures used for inmates’ recreational benefit, education, and welfare. The private
prisons are required to submit monthly financial reports to the Department for its review that present the revenues
and expenditures of the monies and bank reconciliations. The monies from these accounts are not included in
Table 16 because the Department does not manage them. According to private prison reports, fiscal year 2019
revenues totaled approximately $1.5 million, and expenditures totaled approximately $1.3 million. As of June 30,
2019, the private prisons reported a balance of $2.7 million in these private prison accounts.

Table 16
Schedule of Inmate Store Proceeds Fund revenues, expenditures, transfers, and changes
in fund balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues
Commissions1
Rental charges1
Other2
Total revenues
Expenditures and transfers
Payroll and related benefits
Professional and outside services
Other operating
53

2016

2017

2018

2019

$5,402,673
546,588
55,505
6,004,766

$6,524,612
450,013
58,671
7,033,296

$5,230,458
601,249
84,299
5,916,006

$6,800,769
603,680
43,631
7,448,080

2,000

2,000

29,785

146,880
2,887

A July 2019 contract amendment reduced this percentage to 16.68 percent from August 1, 2019 to June 30, 2020.

Arizona Auditor General

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Table 16 continued
Operating supplies3
Books, subscriptions, and publications
Officer uniforms and inmate clothing
Information technology services, including
satellite television4
Repair and maintenance
Other5
Total other operating
Capital and noncapital purchases
Equipment
Buildings and building improvements
Vehicles
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the Building Renewal Fund6
Transfers to the Corrections Fund7
Transfers to the State General Fund7
Transfers to the State Automation Projects Fund7
Transfers to other State agencies8
Total transfers
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

3

4

5

6
7

8

2016
1,504,465
72,416
141,612

2017
1,372,328
208,770
179,413

2018
1,678,273
135,737
162,113

2019
2,208,269
325,585
156,969

2,432,360

1,823,120

196,515

136,574

27,967
256,607
4,435,427

66,666
291,169
3,941,466

103,687
438,256
2,714,581

15,515
839,063
3,681,975

135,968

262,232

165,636
117,425

342,803

816
263,048
4,206,514
500,000
1,000,000

1,036
284,097
3,028,463
500,000

3,821
346,624
4,178,366
500,000

5,240
18,751
159,959
4,597,386
500,000
2,500,000

1,353,500
3,000,000
7,597,386
(1,592,620)
5,035,040
$3,442,420

2,853,500
7,060,014
(26,718)
3,442,420
$3,415,702

750,000
1,250,000
4,278,463
1,637,543
3,415,702
$5,053,245

3,500,000
4,000,000
8,178,366
(730,286)
5,053,245
$4,322,959

The Department received 17 percent of all commissary sales revenues related to its contract with a vendor to operate prison commissaries. In
addition, the Department received rental income from the vendor operating the prison commissaries, who pays rent for the space it occupies.
The Department reported that the other revenues were primarily from inmate fees for photos taken alone or with family members during
visitation on specified days. According to Department policy, the fees are intended to cover the cost of the photos. In addition, according to the
Department, fiscal year 2018 other revenues include approximately $33,000 for the reinstatement of expired payment warrants related to fiscal
year 2016 payments.
Operating supplies comprised various supplies purchases. For example, in fiscal year 2019, the Department purchased ramada shades, block
ice, audio-visual-related supplies, and janitorial, building, and plumbing supplies.
Information technology services expenditures decreased substantially beginning in fiscal year 2018 when the Department began using its
Special Services Fund instead of the Inmate Store Proceeds Fund to pay for inmate satellite television.
The other category of other operating expenditures comprised various types of expenditures that benefit inmates. For example, in fiscal year
2019, the Department paid for licensing to allow showing of movies to inmates, movie rentals, audio-visual-related equipment, video game
consoles and related equipment, ping pong tables, and barbeque equipment.
Transfers to the Building Renewal Fund were made in accordance with A.R.S. §41-1604.02.
The Department was required to transfer monies to the State General Fund, Corrections Fund, and State Automation Projects Fund in fiscal
years 2016 and 2017 in accordance with Laws 2015, Ch. 8, §133(5) and Laws 2016, Ch. 117, §§130(C)&(D), 158(B)(6), and 160(1).
The Department was required to transfer $750,000 to the Arizona Criminal Justice Commission in fiscal year 2017 in accordance with Laws
2017, Ch. 286(A)(3). In addition, the Department transferred $3.5 million to ADOA in fiscal year 2019 in accordance with an interagency
agreement to pay for facility upgrades at the Lewis and Yuma prison complexes, including locking, fire, and HVAC system upgrades.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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PAGE a-12

Building Renewal Fund
The Building Renewal Fund is an appropriated fund established by A.R.S. §41-797. As shown in Table 17, the
fund’s primary revenue source is transfers from other Department funds in accordance with statute and laws.
Inmate deposit fees and visitor background check fees are also deposited into the fund in accordance with
statute and Department Orders.
As permitted by A.R.S. §41-797, fund monies must be used for building renewal projects that repair or rework
buildings and supporting infrastructure and that result in maintaining a building’s expected useful life, and up to
8 percent per year of the fund’s annual expenditures are allowed for routine preventative maintenance. During
fiscal years 2016 through 2019, the Department primarily used fund monies to pay for building improvements.
The Department also transferred fund monies to the State General Fund in accordance with various laws.

Table 17
Schedule of Building Renewal Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)
2016
Revenues and transfers in
Inmate deposit fees1
Visitor background check fees2
Total revenues
Transfers from the Corrections Fund3
Transfers from the Arizona Correctional Industries
Fund3
Transfers from the Inmate Store Proceeds Fund3
Transfers from the Special Services Fund3
Total transfers in
Total revenues and transfers in
Expenditures and transfers
Professional and outside services – engineering
and architect fees
Other operating

2018

2019

$544,519
558,421
1,102,940
2,500,000

$547,841
565,561
1,113,402
2,500,000

$578,490
576,506
1,154,996
2,500,000

$599,942
572,625
1,172,567
2,500,000

1,000,000

1,000,000

2,450,000

1,000,000

500,000
500,000
4,500,000
5,602,940

500,000
500,000
4,500,000
5,613,402

500,000
500,000
5,950,000
7,104,996

500,000
500,000
4,500,000
5,672,567

256,151

61,836

Repair and maintenance

347,659

281,695

Operating supplies

248,419

4,443

596,078

286,138

448
202,317

4,849,609
547,402

4,319,044

7,509,973

6,117,084

317,024
4,636,068
4,984,042

690,214
8,200,187
8,402,504

378,386
6,495,470
6,495,470
500,000
6,995,470
(1,322,903)
4,311,036
$2,988,133

Other
Total other operating
Capital and noncapital purchases
Building improvements
Other improvements
Equipment
Total capital and noncapital purchases
Total expenditures
Transfers to the State General Fund4
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2017

5,397,011
6,249,240
1,500,000
7,749,240
(2,146,300)
7,125,484
$4,979,184

4,984,042
629,360
4,979,184
$5,608,544

201,869

8,402,504
(1,297,508)
5,608,544
$4,311,036

Inmate deposit fees comprise 1 percent of deposits into inmate accounts, including inmate wages and money received through the mail, as
permitted by A.R.S. §31-230(D) and established by Department Order 905.

Arizona Auditor General

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Table 17 continued
2

3

4

Visitor background check fees comprise a one-time $25 fee paid by persons visiting inmates for background checks as permitted by A.R.S.
§41-1604(B)(3) and established in Department Order 911.
Transfers during fiscal years 2016 through 2019 were made in accordance with A.R.S. §§41-1604.02, 1604.03(B), 1624(B), and 1641(E). In fiscal
year 2018, Laws 2017, Ch. 305, §143, required an additional $1.45 million to be transferred from the Arizona Correctional Industries Revolving
Fund.
Transfers to the State General Fund were required by Laws 2015, Ch. 8, §133(5) and Laws 2018, Ch. 276, §140(5).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

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PAGE a-14

Revolving Fund
The Revolving Fund is a nonappropriated fund established by A.R.S. §42-3106. The fund receives a portion of
taxes assessed on liquor products established by A.R.S. §42-3052(1) through (4). Fund monies must be used
for the following purposes:
•

Implementing provisions of A.R.S. §31-411.01 that relate to parole and community supervision for persons
who were previously convicted of possession or use of marijuana, a dangerous drug, or a narcotic drug.
Specifically, a person released under this statute must participate in an appropriate drug treatment or
education program as a condition of parole or community supervision.

•

Offender participation in appropriate drug treatment programs.

•

Reentry, education, or mental health assistance programs.

As shown in Table 18, the fund received nearly $4 million annually in fiscal years 2016 through 2019 from liquor
tax revenues. In these years, the Department spent fund monies for professional and outside services, including
reentry, education, mental health, and substance abuse services. The Department also used fund monies to pay
for various operating expenditures for the Maricopa Reentry Center, which provides various services such as
substance abuse treatment to offenders under community supervision. In addition, fund monies were transferred
annually to the Transition Program Fund (see page a-17) and to other Department and State funds, as required
by various laws.

Table 18
Schedule of Revolving Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues
Luxury taxes1
Expenditures and transfers
Professional and outside services
Reentry, education, mental health, and substance
abuse treatment services
Drug screening
Electronic monitoring
Total professional and outside services
Offender food and related
Other operating2
Utilities
Operating supplies
Repair and maintenance
Rent
Information technology services
Other
Total other operating
Capital and noncapital purchases
Equipment
Vehicles
Furniture
Other
Total capital and noncapital purchases
Arizona Auditor General

2016

2017

2018

2019

$3,739,422

$3,749,630

$3,843,548

$3,891,848

1,839,940

3,236,119

1,426,455

978,579

139,992

279,332
59,929
3,575,380
8,428

211,794

246,111

1,638,249
82,026

1,224,690
99,558

149,627
97,198
42,350
6,530
10,333
5,264
311,302

163,472
47,786
13,995
9,342
1,876
5,780
242,251

165,795
55,859
16,083
10,377
5,040
3,340
256,494

34,587
33,580
56,704

2,745

5,784

1,344
64
4,153

2,496

1,979,932

961
961

124,871

8,280

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-15

Table 18 continued
Total expenditures
Transfers to the Transition Program Fund3
Transfers to the Corrections Fund4
Transfers to the State General Fund4
Transfers to the State Automation Projects Fund4
Total transfers
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1
2

3

4

2016
1,980,893
1,335,877

2017
4,019,981
1,515,754
500,000

2018
1,966,679
1,664,419

2019
1,589,022
1,908,573

1,664,419
3,631,098
212,450
1,352,580
$1,565,030

1,908,573
3,497,595
394,253
1,565,030
$1,959,283

1,072,000
2,407,877
4,388,770
(649,348)
4,321,133
$3,671,785

33,100
2,048,854
6,068,835
(2,319,205)
3,671,785
$1,352,580

The fund receives a portion of taxes on liquor products as established by A.R.S. §42-3052(1) through (4).
The Department pays for operating costs, including utilities, for the Maricopa Reentry Center, which provides various services such as
substance abuse treatment to offenders under community supervision. In fiscal year 2019, utilities comprised nearly 65 percent of the fund’s
other operating costs.
The Department transferred monies to the Transition Program Fund in fiscal years 2016 through 2019, in accordance with A.R.S. §31-285(C)
(see page a-17).
Various laws required fund monies be transferred to other Department or State funds during fiscal years 2016 and 2017. Specifically, Laws 2015,
Ch. 8, §133(5) required transfers to the State General Fund in fiscal year 2016, and Laws 2016, Ch. 117, §§130(C)&(D) and 160(2) required
transfers to the Corrections Fund and State Automation Projects Fund in fiscal year 2017.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-16

Transition Program Fund
The Transition Program Fund is an appropriated fund established by A.R.S. §31-284. As shown in Table 19, this
fund receives (1) a portion of earnings from every inmate not convicted of a driving-under-the-influence (DUI)
offense and (2) transfers from the Revolving Fund for cost savings from implementing a transition program, as
calculated by statute. The Transition Program provides eligible inmates with transition services in the community
for up to 90 days. Fund monies may be spent for any costs related to administering the Transition Program and
for Transition Program services. In fiscal years 2016 through 2019, the Department primarily used fund monies to
obtain professional services for nonviolent drug offenders.
The Transition Program and this fund were scheduled to terminate effective July 1, 2020, unless the State extended
the date. However, the Legislature adjourned because of the COVID-19 pandemic prior to extending the Transition
Program and fund; therefore, the Governor signed Executive Order 2020-46 on July 1, 2020, extending both
through March 31, 2021.

Table 19
Schedule of Transition Program Fund revenues, expenditures, transfers, and changes in
fund balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues and transfers in
Inmate wages1
Transfers from the Revolving Fund2
Total revenues and transfers in
Expenditures and transfers out
Professional and outside services – medical
services3
Other operating
Total expenditures
Transfers to the State Automation Projects Fund4
Total expenditures and transfers out
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

3
4

2016

2017

2018

2019

$1,061,666
1,335,877
2,397,543

1,049,980
1,515,754
2,565,734

1,093,604
1,664,419
2,758,023

1,153,109
1,908,573
3,061,682

1,534,443

2,399,722

2,400,100

1,260,101

3,262
1,537,705

374
2,400,096
1,500
2,401,596
164,138
1,406,970
$1,571,108

2,400,100

1,260,101

2,400,100
357,923
1,571,108
$1,929,031

1,260,101
1,801,581
1,929,031
$3,730,612

1,537,705
859,838
547,132
$1,406,970

A.R.S. §31-254(D)(3) requires inmates who were not convicted of DUI offenses to pay 5 percent of their wages, if available after other
obligations, to the Transition Program Fund.
A.R.S. §31-285(C) requires cost savings from the implementation of a transition program, as calculated by statute, to be transferred from the
Revolving Fund to the Transition Program Fund. The monies transferred were from a portion of liquor tax revenues.
Professional and outside services expenditures were primarily for obtaining transitional services for nonviolent drug offenders.
The transfer to the State Automation Projects Fund in fiscal year 2017 was made in accordance with Laws 2016, Ch. 117, §130(C)&(D).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-17

State Charitable, Penal and Reformatory Institutions Land Fund
The State Charitable, Penal and Reformatory Institutions Land Fund is an appropriated fund established by A.R.S.
§37-525. The Department is 1 of 3 beneficiaries that receive proceeds from specific lands granted to the State by
the United States, property donated by individuals for like purposes, and the sale of natural products or property
from lands granted or donated, in accordance with statute. Fund monies can be used for the Department’s
benefit and support.
As shown in Table 20, the fund received rental and investment income during fiscal years 2016 through 2019
from lands granted to the State. In those years, the Department primarily spent fund monies for medical services
and institutional care paid to Arizona counties for housing inmates. The Department also spent fund monies for
inmate food in fiscal years 2018 and 2019. Additionally, the Department was required to transfer fund monies in
fiscal years 2017 and 2018 to the Corrections Fund, State Automation Projects Fund, and the Arizona Criminal
Justice Commission, in accordance with various laws.

Table 20
Schedule of State Charitable, Penal and Reformatory Institutions Land Fund revenues,
expenditures, transfers, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
Revenues
Investment income
Rental income
Total revenues
Expenditures and transfers out
Professional and outside services
Medical services
Institutional care1
Total professional and outside services
Inmate food and related
Other operating
Repair and maintenance
Books and subscriptions
Operating supplies
Information technology services
Total other operating
Capital and noncapital purchases – furniture and
equipment
Total expenditures
Transfers to the Corrections Fund2
Transfers to the State Automation Projects Fund2
Transfers to other State agencies3
Total transfers
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1
2

3

2016

2017

2018

2019

$1,929,925
763,770
2,693,695

$2,115,164
614,445
2,729,609

$2,268,642
636,317
2,904,959

$2,422,923
446,410
2,869,333

1,500,000
357,342
1,857,342

1,500,000
361,209
1,861,209

1,500,000
368,543
1,868,543
789,693

1,500,000
379,648
1,879,648
781,420
94,421
44,980
15,237

1,165
1,165

154,638
260,037

1,858,507

1,858,507
835,188
3,600,263
$4,435,451

1,861,209
500,000
1,016,100
1,516,100
3,377,309
(647,700)
4,435,451
$3,787,751

2,658,236

3,075,743

1,000,000
1,000,000
3,658,236
(753,277)
3,787,751
$3,034,474

500,000
500,000
3,575,743
(706,410)
3,034,474
$2,328,064

Institutional care expenditures were payments to Arizona counties for housing inmates.
Transfers to the Corrections Fund and State Automation Projects Fund in fiscal year 2017 were required by Laws 2016, Ch. 117, §§130(C)&(D),
158(B)(8), and 160(3).
The fiscal year 2018 transfer was to the Arizona Criminal Justice Commission as required by Laws 2017, Ch. 286. The fiscal year 2019 transfer
was to ADOA for transfer to Yavapai County as required by Laws 2018, Ch. 342.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.
Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-18

Penitentiary Land Fund
The Penitentiary Land Fund is an appropriated fund established by A.R.S. §37-525. Similar to the State Charitable,
Penal and Reformatory Institutions Land Fund shown in Table 20 (page a-18), the Department receives proceeds
from specific lands granted to the State by the United States, property donated by individuals for like purposes,
and the sale of natural products or property from lands granted or donated, in accordance with statute; however,
the lands in the trust are different than the lands in the State Charitable, Penal and Reformatory Institutions Land
Fund, and the Department is the only beneficiary of these monies. Fund monies can be used for the Department’s
benefit and support.
As shown in Table 21, the fund received rental and investment income during fiscal years 2016 through 2019
from lands granted to the State. In those years, the Department primarily spent fund monies for institutional
care paid to private prison providers. Additionally, the Department was required to transfer fund monies in fiscal
years 2017 and 2018 to the Corrections Fund, State Automation Projects Fund, and the Arizona Criminal Justice
Commission, in accordance with various laws.

Table 21
Schedule of Penitentiary Land Fund revenues, expenditures, transfers, and changes in fund
balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues
Rental income
Investment income
Total revenues
Expenditures and transfers out
Payroll and related benefits
Professional and outside services – institutional
care1
Inmate food and related
Other operating
Total expenditures
Transfers to the Corrections Fund2
Transfers to the State Automations Projects Fund2
Transfers to the Arizona Criminal Justice
Commission3
Total transfers
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1
2

3

2016

2017

2018

2019

$1,306,976
929,080
2,236,056

$1,211,040
1,061,303
2,272,343

$1,174,360
1,188,083
2,362,443

$1,196,264
1,330,827
2,527,091
218,704

979,200

979,200

2,031,750

2,062,500
80,400

979,200

100
979,300
400,000
1,000,200

2,031,750

2,361,604

1,000,000
979,200
1,256,856
2,418,406
$3,675,262

1,400,200
2,379,500
(107,157)
3,675,262
$3,568,105

1,000,000
3,031,750
(669,307)
3,568,105
$2,898,798

2,361,604
165,487
2,898,798
$3,064,285

Institutional care expenditures were payments to private prison providers.
Transfers to the Corrections Fund and State Automation Projects Fund in fiscal year 2017 were required by Laws 2016, Ch. 117, §§130(C)&(D),
158(B)(9), and 160(5).
The transfer to the Arizona Criminal Justice Commission in fiscal year 2018 was required by Laws 2017, Ch. 286.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-19

Interagency Services Agreement Fund
The Interagency Services Agreement (ISA) Fund is a nonappropriated fund allowed by A.R.S. §35-131(H). The
fund is used to account for the Department’s ISAs with other State agencies. In fiscal years 2016 through 2019, the
Department’s primary ISA was with ADOA for the replacement of its Adult Inmate Management System (AIMS),
which is an automated system that maintains comprehensive information about all inmates, such as custody
classification, scheduled hearing dates, and inmate trust account banking transactions. As shown in Table 22,
the Department received monies from the State Automation Projects Fund to pay for the AIMS replacement,
and most of the expenditures in fiscal years 2016 through 2018 were used to pay for those costs. Although the
fund paid for all costs related to the AIMS replacement prior to fiscal year 2018, the Department began using its
General Fund to help pay for the AIMS replacement in fiscal year 2018.

Table 22
Schedule of Interagency Services Agreement Fund revenues, expenditures, transfers, and
changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
Revenues
State Automation Projects Fund1
Intergovernmental
Total revenues
Expenditures and transfers
Payroll and related benefits
Professional and outside services2
Travel3
Other operating
Operating supplies
Repair and maintenance
Software support and maintenance
Computer equipment
Information technology services
Other
Total other operating
Capital and noncapital purchases
Equipment
Adult Inmate Management System replacement1
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the Indirect Cost Recovery Fund
Total expenditures and transfers
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

3

2016

2017

2018

2019

$4,239,382
41,549
4,280,931

$8,068,088
61,700
8,129,788

$955,000
70,754
1,025,754

$2,367,800
62,108
2,429,908

505,053
40,036

553,050
699,738
47,401

552,992
614,925
94,784

36,875

5,075

2,732

3,839

12,292

11,129
11,251
1,212
550
29,217

149,206

2,517

28,023
3,027
182,988

2,904
9,260

1,401
13,693

4,593,609
2,926
4,596,535
6,079,712

14,499
1,584,937

7,928

4,371,826

1,599,436
2,871,397

7,928
58,496
1,495
59,991
2,369,917
1,520,705
$3,890,622

4,371,826
4,946,132
4,946,132
(665,201)
1,981,473
$1,316,272

6,079,712
2,050,076
1,316,272
$3,366,348

2,871,397
(1,845,643)
3,366,348
$1,520,705

The Department received monies from the State Automation Projects Fund to replace AIMS. Expenditures for replacing AIMS are broken out for
capital and noncapital purchases but not for other expenditure categories, such as payroll and related benefits, professional and outside
services, travel, and other operating expenditures. In addition, beginning in fiscal year 2018, the Department’s General Fund also paid for a
portion of AIMS replacement costs. As of June 30, 2019, AIMS replacement expenditures were approximately $16.5 million.
Professional and outside services expenditures in fiscal years 2017 and 2018 were primarily for acquiring information technology and temporary
staffing services.
The Department reported that it paid for travel associated with the testing of and staff training on the system replacing AIMS.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.
Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-20

Indirect Cost Recovery Fund
The Indirect Cost Recovery Fund is a nonappropriated fund allowed by A.R.S. §35-131(H). The fund is used to
account for the Department’s monies obtained from federal grants and other agreements that allow for recovery
of indirect costs. As shown in Table 23, during fiscal years 2016 through 2019, the fund primarily received federal
grant revenues for the administrative portion of the State Criminal Alien Assistance Program (SCAAP) federal
grant. SCAAP monies may be used for specific types of expenditures, including construction for inmate housing,
programs, and Americans with Disabilities Act requirements; inmate training and education; correctional officer
training; medical services; correctional officer salaries; and technology. The fund also received transfers from the
Department’s Federal Grant Fund for the administrative portion of federal programs. Monies from other grants
deposited in the fund may be used for Department-wide and administrative overhead costs.
As shown in Table 23, the Department spent fund monies for payroll and related benefits in fiscal years 2016
through 2019. In fiscal year 2018, the Department also used fund monies to acquire medical management
consultants. In fiscal year 2019, the Department spent more fund monies for building issues, such as addressing
damage from a Winslow prison fire and obtaining modular office buildings. In addition, in fiscal year 2019, State
laws transferred monies from the fund to the State General Fund.

Table 23
Schedule of Indirect Cost Recovery Fund revenues, expenditures, transfers, and changes in
fund balance
Fiscal years 2016 through 2019
(Unaudited)
2016
Revenues and transfers in
Federal grants1
Transfers from the Federal Grants Fund2
Transfers from the Interagency Services Agreement
Fund
Total revenues and transfers in
Expenditures and transfers out
Payroll and related benefits
Professional and outside services3
Travel
Other operating
Plumbing supplies
Repair and maintenance
Information technology services
Total other operating
Capital and noncapital purchases
Building improvements4
Equipment
Total capital and noncapital purchases
Total expenditures
Transfers to the State General Fund5
Total expenditures and transfers out
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

$455,673
45,511

2017

2018

$497,017
$68,162

2019
$508,625
146,991
1,495

501,184

497,017

68,162

657,111

17,650

17,452

15,840
178,779

22,320
1,243
203

38

7,364

61,233
42,480

568
568

7,364

103,713

18,218

18,419
18,419
43,273

18,218
482,966
2,592,652
$3,075,618

43,273
453,744
3,075,618
$3,529,362

95,806

254,736

95,806
394,138

254,736
278,502
500,000
778,502
121,391
3,203,386
$3,081,995

394,138
(325,976)
3,529,362
$3,203,386

Federal Grants revenues were the administrative portion of the SCAAP grant. Specifically, the Department received monies in fiscal years 2016,
2017, and 2019 from the U.S. Department of Justice SCAAP grant, which provides federal payments to states and localities that incur
correctional officer costs for incarcerating undocumented criminal aliens with at least 1 felony or 2 misdemeanor convictions for violations of
state or local laws, and who were incarcerated for at least 4 consecutive days. The Department remits to the State General Fund the State’s
portion of the grant and deposits the administrative portion of the grant in the fund (see Table 11, footnote 1, pages a-2 through a-3, for
additional information). Although the Department was awarded SCAAP grant monies for each fiscal year, the timing of the awards is determined
by the U.S. Department of Justice. The table reflects when the monies were received, and no monies were received during fiscal year 2018.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-21

Table 23 continued
2
3
4

5

Transfers from the Federal Grant Fund were for the administrative portion of federal programs.
Professional and outside services expenditures in fiscal year 2018 were primarily for obtaining medical management consultants.
Building improvements were for various projects such as addressing issues related to roofing, asbestos and lead abatement, and
unreimbursed fire damage costs at the Winslow prison. The Department received approximately $557,000 from State Risk Management for the
Winslow prison fire loss during fiscal year 2020; therefore, only the approximately $54,300 of unreimbursed costs are included in building
improvements expenditures in the table. The building improvements expenditures in the table also included obtaining modular office buildings.
Transfers to the State General Fund were made in accordance with Laws 2018, Ch. 276, §140(5).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-22

State Education Fund for Correctional Education
The State Education Fund for Correctional Education is an appropriated fund established by A.R.S. §15-1372.
As shown in Table 24, the fund receives State equalization monies for students attending Department education
programs. The monies may be spent to provide educational services for pupils under the age of 18 and for pupils
with disabilities under the age of 22 who are committed to Department custody. During fiscal years 2016 through
2019, fund monies were primarily spent on payroll and related benefits for Department employees who work with
the education programs. Specifically, according to the Department, the fund pays for the salaries and related
benefits of (1) teachers with special education certification who provide educational services to inmates with
disabilities who are under the age of 22 and (2) certified high school teachers in specific content areas, such as
mathematics, science, and English, to inmates who are under the age of 18 and housed at the Tucson complex.

Table 24
Schedule of State Education Fund for Correctional Education revenues, expenditures, and
changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
2016
Revenues
State equalization1
Expenditures
Payroll and related benefits
Other operating
Total expenditures
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2017

2018

2019

$520,741

$680,632

$720,847

$484,905

394,037
505
394,542
126,199
797,645
$923,844

609,936

667,707

726,026

609,936
70,696
923,844
$994,540

667,707
53,140
994,540
$1,047,680

726,026
(241,121)
1,047,680
$806,559

State equalization revenue is monies the Department receives from the Arizona Department of Education for pupils attending the Department’s
education programs.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-23

Alcohol Abuse Treatment Fund
The Alcohol Abuse Treatment Fund is an appropriated fund established by A.R.S. §31-255. The fund receives
a portion of wages earned by inmates convicted of driving-under-the-influence (DUI) offenses. The monies
should be spent to provide alcohol abuse treatment and rehabilitation services to inmates. As shown in Table
25, during fiscal years 2016 through 2019, the monies were primarily spent to obtain professional and outside
services related to alcohol and substance abuse treatment. In addition, in fiscal years 2016 and 2017, State laws
transferred monies from the fund to the State General Fund and the State Automation Projects Fund, respectively.

Table 25
Schedule of Alcohol Abuse Treatment Fund revenues, expenditures, transfers, and changes
in fund balance
Fiscal years 2016 through 2019
(Unaudited)
2016
Revenues
Inmate wages1
Expenditures and transfers
Professional and outside services2
Other operating3
Noncapital purchases – equipment
Total expenditures
Transfers to the State General Fund4
Transfers to the State Automation Projects Fund4
Total expenditures and transfers out
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

3

4

2017

2018

2019

$426,684

$470,363

$484,490

$450,016

280,358
929

329,381
11,916

555,500

482,765

281,287
250,000

341,297

555,500

743
483,508

531,287
(104,603)
1,228,848
$1,124,245

21,200
362,497
107,866
1,124,245
$1,232,111

555,500
(71,010)
1,232,111
$1,161,101

483,508
(33,492)
1,161,101
$1,127,609

Inmate wages were monies inmates paid to the fund in accordance with A.R.S. §31-255. Specifically, inmates convicted of DUI offenses must
pay the lesser of $0.50 per hour or 67 percent of wages earned to the fund.
Professional and outside services expenditures were primarily for behavioral health services. For example, in fiscal year 2019, fund monies paid
for various behavioral health programs related to alcohol and substance abuse such as alcohol and substance abuse treatment and
educational services, transitional services for nonviolent offenders, and community outpatient substance abuse treatment programs.
Other operating expenditures were for information technology services in fiscal year 2016 and for education and training and operating supplies
costs in fiscal year 2017.
Transfers to the State General Fund and the State Automation Projects Fund in fiscal years 2016 and 2017 were made in accordance with Laws
2015, Ch. 8, §133(5), and Laws 2016, Ch. 117, §130(C)&(D), respectively.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-24

Community Corrections Enhancement Fund
The Community Corrections Enhancement Fund is a nonappropriated fund established by A.R.S. §31-418.
The fund receives various fees paid by offenders under community corrections in accordance with statute (see
Chapter 3, pages 28 through 29, for additional information). For example, A.R.S. §§31-411, 31-418, 31-467.06,
41-1604.08, and 41-1604.13 require or permit the following fees to be collected and deposited into the fund:
•

A monthly community supervision fee of at least $65 must be assessed, or a reduced fee if the inmate is
unable to pay the full fee, and 30 percent of the monies must be deposited into the fund.54

•

Drug testing fees may be assessed for persons that participate in a drug testing program as a condition of
their release.55

•

Persons assigned a global position monitoring system (GPS) may be assessed a fee for the monitoring.56

In addition, the Department charges a $200 application fee to offenders who apply to be transferred to and
supervised by another state, as allowed by the Interstate Compact for the Supervision of Adult Offenders. Monies
collected for this fee are also deposited into the Community Corrections Enhancement Fund.
Fund monies can be spent to pay for related community corrections costs, including drug testing and GPS
monitoring. As shown in Table 26, the types and amounts of expenditures varied each year in fiscal years 2016
through 2019. For example, the Department spent more fund monies on other operating expenditures, such as
operating supplies and telecommunications, in fiscal year 2016 compared to the other years, and it spent more
fund monies on professional and outside services, such as electronic monitoring services, in fiscal year 2019
compared to the other years. Capital and noncapital purchases, such as acquiring equipment and vehicles, was
the largest category of expenditures in 3 of the 4 fiscal years.

Table 26
Schedule of Community Corrections Enhancement Fund revenues, expenditures, transfers,
and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)
Revenues
Supervision fees
Expenditures and transfers out
Professional and outside services
Electronic monitoring services
Automated reporting call-in system services
Medical services
Risk assessment validation study1
Other
Total professional and outside services
Travel
Other operating
Operating supplies
Employee education and training
Repair and maintenance
54
55
56

2016

2017

2018

2019

$354,440

$560,819

$423,763

$345,041

106,605
30,000
3,697
38,000
400
38,400
16,254

9,076

88,619
10,734
3,043

20,792
14,677
1,980

129
129
13,449

10,232
150,534
28,309

65,400
8,775

28,122
19,735
19,169

Statute requires the Department to deposit 70 percent of the fees collected into the ACJC’s Victim Compensation and Assistance Fund.
According to Department staff, the Department does not charge any drug testing fees.
According to Department staff, the Department only charges electronic monitoring fees/GPS fees when offenders can afford to pay them, which
is not often.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-25

Table 26 continued
Dues
Employee conference attendance fees
Information technology services
Rent
Other
Total other operating
Capital and noncapital purchases
Equipment
Vehicles
Weapons
Furniture
Other
Total capital and noncapital purchases
Total expenditures
Transfers to the State Automation Projects Fund2
Total expenditures and transfers out
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2

2016
500
3,718
40,823
16,864
12,825
177,126

2017

12,451
81,418
5,098

98,967
330,747
330,747
23,693
192,546
$216,239

4,855
300

2018
7,163
5,005
229

2019
14,326
14,203
1,000

9,354
51,958

4,110
90,682

1,318
97,873

168,814
27,835
13,201
137,733
686
348,269
409,303
7,900
417,203
143,616
216,239
$359,855

64,923
72,784
2,459
17,631

101,695
66,409
43,655
32,851

157,797
262,057

244,610
521,326

262,057
161,706
359,855
$521,561

521,326
(176,285)
521,561
$345,276

The risk assessment validation study was conducted by the University of Cincinnati Corrections Institute to evaluate the validity and reliability of
the Department’s field reassessment offender screening tool. The tool was adopted to ensure offenders’ successful reentry and supervision
after their release from prison to the community.
The transfer to the State Automation Projects Fund in fiscal year 2017 was required by Laws 2016, Ch. 117, §130(C)&(D).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-26

Risk Management Revolving Fund
The Department’s Risk Management Revolving Fund is an appropriated fund authorized by A.R.S. §41-622. As
shown in Table 27, in fiscal years 2016 through 2019, the fund received monies from the State’s Risk Management
Revolving Fund for losses the Department incurred. Fund monies were used to pay for repairs and replacement
of property related to these losses. For example, in fiscal year 2016, the Department paid over $400,000 to repair
21 broken power lines snapped by a strong burst of wind.

Table 27
Schedule of Risk Management Revolving Fund revenues, expenditures, and changes in
fund balance
Fiscal years 2016 through 2019
(Unaudited)
2016
Revenues
State Risk Management Revolving Fund payments1
Other
Total revenues
Expenditures
Other operating
Repair and maintenance
Operating supplies
Information technology services
Other
Total other operating
Capital and noncapital purchases
Building improvements
Vehicles
Equipment
Total capital and noncapital purchases
Total expenditures
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2017

$1,120,485

$300,140

1,120,485

300,140

527,255
401,571
1,027
1,148
931,001

132,678
57,656

71,929
166,517
238,446
1,169,447
(48,962)
99,280
$ 50,318

I

190,334

45,546
23,661
69,207
259,541
40,599
50,318
$ 90,917

2018

I

$

2019

$1,086,291
73,756
1,160,047

$ 60,846

52,397
397,793
7,481
5,211
462,882

65,690
19,709

293,790
21,334
45,633
360,757
823,639
336,408
90,917
427,325

60,846

I

5,400
90,799
169,149
42,979
212,128
302,927
(242,081)
427,325
$185,244

The Department received payments from the State’s Risk Management Revolving Fund for losses it incurred. ADOA manages the State’s Risk
Management Revolving Fund and is responsible for investigating, evaluating, negotiating, and settling claims for State property, vehicles, and
liability claims. The amount does not include approximately $557,000 the Department received from State Risk Management in fiscal year 2020
for Winslow prison fire loss expenditures incurred in fiscal year 2019 that were partially paid from and accounted for in the Indirect Cost
Recovery Fund, nor are the related building improvements expenditures included in this table (see Table 23, footnote 4, pages a-21 through
a-22, for additional information).

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-27

Employee Recognition Fund
The Employee Recognition Fund is a nonappropriated fund authorized by A.R.S. §41-709 and is used to account
for gifts and donations from public and private entities or individuals used for employee recognition programs.
As shown in Table 28, the Fund had been inactive and only became active in fiscal year 2019. Fund revenues
were primarily from fundraising activities, and expenditures were primarily for obtaining fundraising supplies and
providing employee awards and recognition.

Table 28
Schedule of Employee Recognition Fund revenues, expenditures, and changes in fund
balance
Fiscal year 20191
(Unaudited)
2019
Revenues
Fundraising and donated revenues2
Expenditures
Food and other operating expenditures3
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1
2

3

$102,917
55,590
47,327
156
$ 47,483

The Employee Recognition Fund was not active during fiscal years 2016 through 2018; therefore, these fiscal years are not presented.
Fundraising and donated revenues were primarily obtained from various fundraising activities such as blue jean Friday, military support food
sales, art auction, and car washes.
Food and other operating expenditures were spent for various purposes such as obtaining supplies for fundraising activities and providing
awards and recognition for employees.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-28

Donations Fund
The Donations Fund is a nonappropriated fund established by A.R.S. §41-1605 to account for private grants and
gifts. Fund monies may be spent for any general purposes in line with any donor restrictions on the revenues.
As shown in Table 29, the Department received a private grant for fire equipment in fiscal years 2016 and 2017
and donations in fiscal years 2016 through 2018, but it did not receive donations in fiscal year 2019. During fiscal
years 2016 through 2018, fund monies were primarily spent on fire equipment and high school equivalency
diploma testing for inmates.

Table 29
Schedule of Donations Fund revenues, expenditures, and changes in fund balance
Fiscal years 2016 through 2019
(Unaudited)

Revenues
Private grants1
Donations
Total revenues
Expenditures
Professional and outside services
Education and training
High school equivalency diploma testing
Capital and noncapital purchases – fire equipment1
Total expenditures
Net change in fund balance
Fund balance, beginning of year
Fund balance, end of year
1

2016

2017

$17,000
3,530
20,530

$11,479
7,500
18,979

3,975
17,000
20,975
(445)
1,890
$ 1,445

462
2,063
11,479
14,004
4,975
1,445
$ 6,420

2018

$

2019

72
72

583

583
(511)
6,420
$5,909

$5,909
$5,909

The Department received a private grant from a private organization to acquire fire equipment.

Source: Auditor General staff analysis of the Arizona Financial Information System Accounting Event Transaction File for July 1, 2015 through
December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016 through 2019; and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE a-29

APPENDIX B

Examples of Department contracts
As shown in Table 1 in the Introduction (see pages 2 through 3), the Department spent more than $340 million
annually on professional and outside services and food services contracts in fiscal years 2016 through 2019.
Table 30 provides examples and associated information of Department-contracted services.

Table 30
Examples of Department-contracted services1
Fiscal year 2019

Vendor
Inmate healthcare

Contracted service

Expenditures

Health services for inmates including
dental, pharmacy, and mental health
services

Corizon, Inc.2

$165,262,387

Funds used for contract
payments
(listed in order of amount used,
highest to lowest)
• General Fund
• Prison Construction and
Operations Fund
• State Charitable, Penal and
Reformatory Institutions Land
Fund

Private prisons and prison management

The GEO Group, Inc.

CoreCivic, Inc.

Prison management—Kingman

$48,537,007

Private Prison—Central Arizona
Correctional Facility

25,303,124

Private Prison—Florence West

11,869,999

Private Prison—Phoenix West

7,444,468

Private prison—Red Rock

Management and Training
Corporation
Food services

46,662,776

Prison management—Marana

8,427,451

Food services management for all
institutions3

$39,798,983

Trinity Services Group, Inc.
Food service management for the
Correctional Officer Training Academy
Food service management at the minor
unit at the Tucson prison complex

Arizona Auditor General

349,119
64,764

•
•
•
•
•
•
•
•
•
•
•
•
•
•

General Fund
Corrections Fund
Penitentiary Land Fund
Corrections Fund
General Fund
General Fund
Corrections Fund
General Fund
Corrections Fund
General Fund
Corrections Fund
Penitentiary Land Fund
General Fund
Corrections Fund

• General Fund
• Corrections Fund
• State Charitable, Penal and
Reformatory Institutions Land
Fund
• Revolving Fund
• Penitentiary Land Fund
• General Fund
• General Fund
• Revolving Fund

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
Fundingand
andDepartment
DepartmentFinances
Finances| |October
October2020
2020| |
Report 20-109
Report 20-109
PAGE b-1

Table 30 continued

Vendor
Contracted service
Rehabilitation and counseling services
Residential and programming services
ViVRE
for offenders
90-day post release transitional services
for nonviolent offenders
Community outpatient substance abuse
treatment program for male and female
Sage Counseling, Inc.
offenders in Coconino, Mohave, and
Yavapai Counties
Onsite alcohol and substance abuse
treatment and educational services for
females convicted of DUI at the Perryville
prison complex
Residential community behavior
Behavioral Systems
modification program for offenders in the
Southwest, Inc.
Tucson metropolitan area
Educational and vocational training
Vocational and elective educational
programs at the Perryville prison complex
Maricopa Community
Graduate equivalency degree and adult
College District
basic education instruction at the Lewis
and Perryville prison complexes
Pinal County Community
College District (Central
Arizona College)
Yuma/La Paz Counties
Community College District
(Arizona Western College)
Pima County Community
College District
Graham County
Community College District
(Eastern Arizona College)
Cochise County
Community College District
(Cochise College)
Navajo County Community
College District (Northland
Pioneer College)
1

2

3

Expenditures
$2,081,573
1,543,586

279,365

56,370

362,627

Funds used for contract
payments
(listed in order of amount used,
highest to lowest)
• Special Services Fund
• Transition Program Fund
• Alcohol Abuse Treatment Fund
• Community Corrections
Enhancement Fund
• Alcohol Abuse Treatment Fund
• General Fund
• Revolving Fund
• Transition Program Fund
• Alcohol Abuse Treatment Fund
• Revolving Fund
• General Fund

$535,020

• Special Services Fund

366,077

• Special Services Fund
•
•
•
•
•

Special Services Fund
General Fund
Federal Grant Fund
Special Services Fund
General Fund

Vocational and elective educational
programs at the Florence prison complex

498,479

Vocational and elective educational
programs at the Eyman prison complex

291,929

Vocational and elective educational
programs at the Yuma prison complex

446,861

• Special Services Fund

Vocational and elective educational
programs at the Tucson prison complex

418,526

• Special Services Fund
• General Fund

Vocational and elective educational
programs at the Safford prison complex

340,358

• Special Services Fund

Vocational and elective education
programs at the Douglas prison complex

251,349

• Special Services Fund

Vocational and elective educational
programs at the Winslow prison complex

142,885

• Special Services Fund

The table does not include examples of contracts with ACI labor partners, such as Hickman’s Egg Ranch, Inc. and Common Market Equipment
Company Inc. (also known as Swift), which are discussed in Chapter 3, pages 20 through 24.
During fiscal year 2019, the Department withheld $1,455,000 in payment to Corizon, Inc. as reimbursement for a court-ordered judgment the
Department paid in fiscal year 2018 for violations of a settlement agreement related to inmate healthcare. Because the Department was
reimbursed for this expenditure, it is not reflected in any of the financial tables in this report. Additionally, beginning in fiscal year 2020, the
Department contracted with Centurion of Arizona, LLC, to provide inmate healthcare services.
Amount includes approximately $183,600 paid for food at the Department’s reentry centers.

Source: Auditor General staff review of contract documents and analysis of the Arizona Financial Information System Accounting Event Transaction
File for fiscal year 2019 and Department-provided information.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE b-2

APPENDIX C

Department funds that contribute monies to the Building Renewal
Fund and/or can be used for capital needs
As discussed in Chapter 1 (see page 10), monies in 7 Department funds other than the Building Renewal
Fund can be for used capital projects. However, the monies available in these funds are limited because the
Department has used them for other purposes consistent with their authorizing statutes or other State laws and
their combined fund balance is declining. Table 31 summarizes information about these 7 funds. See Appendix
A, pages a-1 through a-29, for more detailed information about each fund.

Table 31
Summary information about 7 Department funds that contribute monies to the Building
Renewal Fund and/or can be used for capital needs1
Fiscal years 2016 through 2021
(In millions)
(Unaudited)

One Department fund contributes monies to the Building Renewal Fund and was
established to help pay for capital needs
Corrections Fund—An appropriated fund that receives a portion of luxury taxes on alcohol and tobacco
products. May be used for capital-related expenses, including maintenance, construction, renovation, and leasing
of corrections facilities with legislative approval. Per statute, $2.5 million is transferred annually to the Building
Renewal Fund.

Revenues/Transfers in
Expenditures/Transfers out
Fund balance

2016
$32.81
29.37
$ 7.15

Actual
2017
2018
$34.24
$31.97
31.50
31.46
$ 9.89
$10.40

2019
$32.16
33.13
$ 9.43

Estimate
2020
2021
$32.07
$32.07
33.39
37.39
$ 8.11
$ 2.79

-----

Department uses during fiscal years 2016 through 2019:
Primarily to pay private prison providers.

State-directed uses during fiscal years 2016 through 2019:
$12 million appropriated for Department operating expenses and used for inmate food services.
$2.75 million transferred to State General Fund to support State agencies.
$6,800 transferred to State Automation Projects Fund to contribute to replacing the State’s procurement system.

Arizona Auditor General

Arizona
ArizonaDepartment
DepartmentofofCorrections,
Corrections,Rehabilitation
Rehabilitationand
andReentry—Capital
Reentry—CapitalProjects
ProjectsFunding
Fundingand
andDepartment
DepartmentFinances
Finances| |October
October2020
2020| |
Report 20-109
Report 20-109
PAGE c-1

Table 31 continued
Three Department funds contribute monies to the Building Renewal Fund but were
not otherwise established to help pay for capital needs
Arizona Correctional Industries Revolving Fund—A nonappropriated fund created to account for Arizona
Correctional Industries operations, which operates as a business. Per statute, $1 million is transferred annually to
the Building Renewal Fund.

Revenues
Expenditures/Transfers out
Fund balance

2016
$42.19
39.81
$ 9.38

Actual
2017
2018
$42.34
$43.68
46.71
36.41
$ 5.01
$12.28

2019
$48.85
50.17
$10.96

Estimate
2020
2021
$42.80
$46.10
50.09
50.00
$ 3.67
$ (0.23)

-----

Department uses during fiscal years 2016 through 2019:
To operate Arizona Correctional Industries.

State-directed uses during fiscal years 2016 through 2019:
$2 million transferred to State General Fund to support State agencies.
$1 million transferred to State Automation Projects Fund for replacing the Department’s Adult Inmate Management
System.
$6.5 million transferred to ADOA for upgrades to Lewis and Yuma prison complexes.
$73,700 transferred to State Automation Projects Fund to contribute to replacing the State’s procurement system.

Inmate Store Proceeds Fund—A nonappropriated fund that receives revenues primarily from the sale of goods
in the Department’s prison commissaries. Per statute, $500,000 is transferred annually to the Building Renewal
Fund. Remaining fund monies can be used for inmate activities, incentive pay increases for corrections officers,
equipment to enhance safety for Department personnel and inmates, and other official needs (this could include
capital needs).
Actual
Revenues/Transfers in
Expenditures/Transfers out
Fund balance

2016
$6.00
7.60
$3.44

2017
$7.03
7.06
$3.41

2018
$5.92
4.28
$5.05

2019
$7.45
8.18
$4.32

Estimate
2020
2021
$6.92
$7.20
7.30
7.21
$3.94
$3.93

-----

Department uses during fiscal years 2016 through 2019:
Primarily to pay for operating supplies such as janitorial and maintenance supplies, block ice, and audio-visual
equipment, as well as satellite television services.
State-directed uses during fiscal years 2016 through 2019:
$2.5 million transferred to State General Fund to support State agencies.
$1 million transferred to State Automation Projects Fund for replacing the Department’s Adult Inmate Management
System.
$750,000 transferred to county attorneys for felony pretrial intervention programs.
$3.5 million transferred to ADOA for upgrades to Lewis and Yuma prison complexes.
$353,500 transferred to State Automation Projects Fund to contribute to replacing the State’s procurement system.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE c-2

Table 31 continued
Special Services Fund—A nonappropriated fund that receives revenues primarily from the sale of phone minutes
to inmates. Per statute, $500,000 is transferred annually to the Building Renewal Fund. Remaining monies may be
used for inmates’ benefit, education, and welfare and for technologies and programs for inmate use.
Actual
Revenues/Transfers in
Expenditures/Transfers out
Fund balance

2016
$5.19
5.86
$7.58

2017
$8.27
8.64
$7.21

2018
$7.75
6.09
$8.87

2019
$8.96
9.16
$8.67

Estimate
2020
2021
$10.27
$ 9.94
12.65
12.71
$ 6.29
$ 3.52

-----

Department uses during fiscal years 2016 through 2019:
Primarily to pay for inmate education and training, recovery housing, behavior modification programs, and satellite
television services.
State-directed uses during fiscal years 2016 through 2019:
$3 million transferred to State General Fund to support State agencies.
$4 million transferred to State Automation Projects Fund for replacing the Department’s Adult Inmate Management
System.

Three Department funds do not contribute monies to the Building Renewal Fund
but can be used for capital needs
Penitentiary Land Fund—An appropriated fund that receives proceeds from federally granted lands, donated
properties, and sale of products or property from these lands. May be used for the Department’s benefit and
support (this could include capital needs).
Actual
Revenues/Transfers in
Expenditures/Transfers out
Fund balance

2016
$2.24
0.98
$3.68

2017
$2.27
2.38
$3.57

2018
$2.36
3.03
$2.90

2019
$2.53
2.36
$3.07

Estimate
2020
2021
$3.00
$2.60
2.76
4.78
$3.31
$1.13

-----

Department uses during fiscal years 2016 through 2019:
Primarily to pay private prison providers.

State-directed uses during fiscal years 2016 through 2019:
$1 million transferred to State Automation Projects Fund for replacing the Department’s Adult Inmate Management
System.
$1 million transferred to county attorneys for felony pretrial intervention programs.
$200 transferred to State Automation Projects Fund to contribute to replacing the State’s procurement system.
Prison Construction and Operations Fund—An appropriated fund that receives assessments charged to
persons convicted of under-the-influence offenses. May be used for any costs related to prison overcrowding and
Department support and maintenance (this could include capital needs).
Actual
Revenues/Transfers in
Expenditures/Transfers out
Fund balance

2016
$11.92
11.68
$ 1.29

2017
$11.29
11.05
$ 1.53

2018
$10.52
9.11
$ 2.94

2019
$10.35
10.00
$ 3.29

Estimate
2020
2021
$10.20
$10.40
12.50
12.50
$ 0.99
$ (1.11)

-----

Department uses during fiscal years 2016 through 2019:
Primarily to pay for inmate healthcare and food services.

State-directed uses during fiscal years 2016 through 2019:
$5,000 transferred to State Automation Projects Fund to contribute to replacing the State’s procurement system.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE c-3

Table 31 continued
State Charitable, Penal and Reformatory Institutions Land Fund—An appropriated fund that receives proceeds
from federally granted lands, donated properties, and sale of products or property from these lands. May be used
for the Department’s benefit and support (this could include capital needs).
Actual

Estimate
2020
2021
$4.26
$3.06
3.16
5.16
$3.43
$1.33

2016
2017
2018
2019
Revenues/Transfers in
$2.69
$2.73
$2.90
$2.87
Expenditures/Transfers out
1.86
3.38
3.66
3.57
Fund balance
$4.44
$3.79
$3.03
$2.33
Department uses during fiscal years 2016 through 2019:
Primarily to pay for inmate healthcare, payments to Arizona counties for housing inmates, inmate food services,
furniture and equipment, and other operating expenses.

-----

State-directed uses during fiscal years 2016 through 2019:
$1 million transferred to State Automation Projects Fund for replacing the Department’s Adult Inmate Management
System.
$1 million transferred to county attorneys for felony pretrial intervention programs.
$500,000 transferred to Yavapai County for reentry planning services for persons in Sheriff’s custody.
$16,100 transferred to State Automation Projects Fund to contribute to replacing the State’s procurement system.
1

Financial information for the Arizona Correctional Industries Revolving Fund is presented on a cash basis in this table based on information
provided by the Department to allow for consistency of reporting financial information between fiscal years. As discussed in Chapter 3, page 22,
Arizona Correctional Industries operates like a business enterprise and its financial activity is generally accounted for in a similar manner as
private businesses (see Chapter 3, Table 5, pages 22 through 23).

Source: Auditor General staff review of Arizona statutes and analysis of the Department of Corrections Arizona Correctional Industries Financial
Statements audited by other auditors, the Arizona Financial Information System Accounting Event Transaction File and State of Arizona Annual
Financial Report for fiscal years 2016 through 2019, and Department-provided financial estimates for fiscal years 2020 through 2021.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
Report 20-109
PAGE c-4

APPENDIX D

Inmate trust account (ITA) deductions
As discussed in Chapter 2 (see pages 12 through 16), the Department is responsible for applying deductions
from ITAs. Statutes, Department orders, and court orders require or authorize 32 various deductions from ITAs,
and the Department deducted approximately $81.2 million from ITAs in fiscal year 2019. Table 32 summarizes
information about fiscal year 2019 deductions.

Table 32
Amounts deducted from ITAs and numbers of inmates with 1 or more deductions by
deduction type
Fiscal year 2019
(Unaudited)
Deduction type

Commissary/inmate store purchases—Inmates can purchase various items, such as food,
cigarettes, phone cards, toiletries, etc., from the commissary store (see page 29 for more
information about commissary store prices).
Retention account—For inmates who earn $2 or more per hour and have excess wages
after all mandatory deductions are made, the Department deposits the excess wages to their
retention account.
Various check payments—Includes inmate payments to parties other than
the Department, such as sending money to family, and monies deducted from
dedicated discharge or retention accounts and distributed to inmates when released.
Dedicated discharge account (DDA)—Wage-earning inmates pay 25 percent of inmate
wages to the DDA until the account reaches $250 (or $50 for inmates serving a life sentence).
Room and board—Inmates who earn $2 or more per hour pay 30 percent of their wages
toward the Department’s costs of maintaining the inmates at the prison complex.
Fundraisers—Inmates’ voluntary donations to charity fundraisers.
Court-ordered restitution—When court ordered, 20 percent of all deposits to an inmate’s
spendable account is deducted for paying restitution.
Transition fee—Wage-earning inmates pay 5 percent of their income to this fee.1 Monies
provide services such as substance abuse treatment to inmates being released/transitioning
into the community.
Other deduction types—Inmates are subject to 16 other deductions that generally occur
less frequently and involve smaller amounts, such as deductions for obtaining Motor Vehicle
Division identification cards, postage, and GED testing fees.
ITA fee—As allowed by statute, all deposits to inmate spendable accounts are charged a 1
percent fee, which is deposited into the Building Renewal Fund.2
Utilities—Inmates with a qualifying appliance are charged a $2.00 monthly fee (see pages
27 through 28 for more information about this fee).
Alcohol Abuse Treatment Fund (AATF)—Wage-earning inmates convicted of driving-under-the-influence (DUI) offenses under A.R.S. Title 28, Ch. 4, pay 67 percent of wages or
$0.50 per hour—whichever is less—to the AATF. Monies in the AATF provide alcohol abuse
treatment and rehabilitation services.

Arizona Auditor General

Amount
deducted

Number of
inmates

$50,527,284

53,766

7,455,264

3,265

7,326,507

27,720

3,939,988

42,918

3,503,072

3,073

3,031,615

25,926

1,480,177

7,230

1,155,776

41,219

685,057

33,440

598,800

54,998

520,208

27,358

454,296

2,386

Arizona
ArizonaDepartment
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Table 32 continued
Deduction type

Amount
deducted

Medical copays—Inmates are charged $4 per medical visit/issue.3
Discipline restitution—When assigned by the Department to pay restitution, such as for
destroying State property, 10 percent of all deposits to an inmate’s spendable account is
deducted to pay this restitution.
Federal filing fees—When an inmate initiates a federal lawsuit, the inmate pays 20 percent
from all deposits to the spendable account for court filing fees.
Child support—When applicable, inmates pay 30 percent from their wages to court-ordered
dependent care.
State filing fees—When an inmate initiates a State lawsuit, the inmate pays 20 percent from
all deposits to the spendable account for court filing fees.
Total
1

2

3

Number of
inmates

341,775

32,863

104,135

4,290

44,052

431

23,049

134

21,040

192

$81,212,096

Per A.R.S. §31-254(D)(3) and (E)(3), inmates charged with a DUI offense are assessed the AATF deduction and are not assessed the transition
fee.
A.R.S. §31-230(D) allows the Director to charge a fee for each deposit made into an inmate’s spendable account. In addition, A.R.S. §31-230(D)
requires the Department to deposit these fees into the Department’s Building Renewal Fund, which is used to repair and rework Department
buildings and infrastructure.
A.R.S. §31-201.01(G) and (N)(1) require the Director to establish a reasonable medical copay fee that does not exceed $5. According to
Department staff, if more than 1 medical visit is needed to treat an issue, inmates are only charged the initial $4 medical copay. In addition,
Department staff reported that inmates are not charged copays for prescription drugs or medical equipment. The Department also reported that
an inmate who cannot afford the copay will still receive medical services; the inmate’s account will have a balance due for the copay until it can
be paid.

Source: Auditor General staff analysis of statutes, Department Orders, and ITA transactions for fiscal year 2019 obtained from Department records.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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PAGE d-2

APPENDIX E

Objectives, scope, and methodology
The Arizona Auditor General has conducted this performance audit of the Department pursuant to a September
19, 2018, resolution of the Joint Legislative Audit Committee. The audit was conducted as part of the sunset
review process prescribed in A.R.S. §41-2951 et seq. For this audit, we reviewed the Department’s (1) revenues
and expenditures for fiscal years 2016 through 2019, (2) requested and appropriated funding for capital and
building renewal projects for fiscal years 2016 through 2021, and (3) management of inmate trust accounts. We
also provide additional information about the Department and ACI.
We used various methods to address the audit’s objectives. These methods included reviewing applicable
statutes, rules, and session laws; reviewing information on the Department’s website, such as Department Orders
and monthly reports; and interviewing Department management and staff. We also used the following additional
methods to meet the audit’s objectives:
•

To review the Department’s revenues and expenditures for fiscal years 2016 through 2019, we compiled
and analyzed information from the Arizona Financial Information System Accounting Event Transaction File
for July 1, 2015 through December 31, 2019; State of Arizona Annual Financial Report for fiscal years 2016
through 2019; Department of Corrections Arizona Correctional Industries Financial Statements, audited by an
independent certified public accounting firm, for fiscal years 2016 through 2019; and Department-provided
information and State appropriations reports.

•

To conduct a high-level review of the Department’s fiscal year 2019 expenditures and transfers, we performed
the following:
○

Analyzed each Department fund’s expenditures for professional and outside services, food and related
services, other operating expenditures, and capital and noncapital purchases to understand the types
and amounts of fund expenditures and judgmentally selected large contracts that made up various
expenditure categories to assess whether the purpose of contract expenditures complied with statutory
requirements or other laws:
• 25 professional and outside services contracts from 18 vendors with $333.8 million in expenditures,
representing 97.6 percent of professional and outside services expenditures.
• 2 food and related contracts from 1 vendor with $40.2 million in expenditures, representing 99 percent
of food and related expenditures.
• 25 other operating expenditure contracts for 22 vendors with $12.9 million in expenditures, representing
8 percent of other operating expenditures.
• 14 capital and noncapital purchase contracts for 13 vendors with $7 million in expenditures, representing
37.1 percent of capital and noncapital purchases.
We also assessed an additional $101 million of other operating expenditures paid to inmates and 24 vendors,
representing 63 percent of other operating expenditures, for compliance with statutory requirements and
other laws through other methods such as reviewing vendor websites, similar contracts, and supporting
documentation or analyzing overall expenditures in certain areas such as inmate payments.

Arizona Auditor General

Arizona
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•

•

57
58
59
60

○

Reviewed all transfers to other State funds or agencies and assessed these transfers for compliance with
statutory requirements and other laws.

○

Analyzed overall payroll and employee related expenditures for trends between fiscal years 2016 and
2019 and assessed fiscal year 2019 payroll expenditures for compliance with statutory requirements and
other laws.

To assess the Department’s internal control procedures for processing various financial transactions—
including payroll, travel, professional and outside services, food, capital and noncapital equipment, other
operating expenses, and purchasing card (p-card) and central travel account (CTA) transactions—we
reviewed the Department’s procedures and compared them to the policies and procedures required by the
State of Arizona Accounting Manual (SAAM).57 We also judgmentally selected and tested the following fiscal
year 2019 expenditure transactions for compliance with the Department’s procedures and SAAM and for
compliance with statutory requirements or other laws:58
○

56 professional and outside services, food and related, other operating, and capital and noncapital
purchase expenditure transactions, which comprised between 1.2 and 10.7 percent of these expenditures
made in fiscal year 2019, excluding p-card transactions.

○

10 payroll expenditure transactions.

○

10 travel expenditure transactions, excluding CTA transactions.

○

7 CTA transactions.

○

5 p-card transactions.

To review the Department’s capital improvement process, capital funding requests, and capital funding
received for fiscal years 2016 through 2021, we performed the following:
○

Reviewed the State’s annual capital improvement process requirements.

○

Interviewed capital planning management and staff at ADOA.

○

Reviewed the Governor’s executive budgets for fiscal years 2016 through 2020.

○

Reviewed capital appropriation bills for fiscal years 2016 through 2021.

○

Reviewed the Department’s and ADOA’s annual capital improvement plans and the Department’s reports
to the Joint Legislative Budget Committee on the status of JCCR-approved building renewal projects.

○

Reviewed literature pertaining to potential effects of underfunding capital projects and deferred
maintenance.59

○

Toured the Lewis prison complex in August and December 2019, reviewed a report on the effectiveness
of locks at the Lewis prison complex, and reviewed JCCR documentation pertaining to a project to
replace locking mechanisms at the prison.60

CTA is a type of commercial credit card used for travel-related purchases.
We judgmentally selected expenditure transactions (1) from large contracts identified in our high-level review, (2) with large dollar amounts, or
(3) in categories that have a higher risk of being unallowable such as those paid using a p-card or CTA.
CGL Companies. (n.d.). Deferred maintenance crisis—Predicting negative effects. Retrieved 8/9/2019 from https://www.cglcompanies.com/
knowledge-center/#whitepapers.
Berch, R.W., & McGregor, R.V. (2019). Report to the Governor: The effectiveness of locks at Lewis prison. Retrieved 8/15/2019 from https://
azgovernor.gov/sites/default/files/corrections_report.pdf.

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•

•

•

•

61
62

To review the Department’s oversight and management of inmate trust accounts (ITAs), we performed the
following:
○

Reviewed and summarized deposits into and deductions from the ITAs for fiscal year 2019.

○

Reviewed a stratified random sample of 179 deductions for 60 inmates across 16 different deduction
types to determine the accuracy (i.e., the amount deducted was correct) and appropriateness (i.e., the
Department had support justifying the deduction) of the deductions.61

○

With the help of Department staff, observed and verified our understanding of ITA information in the
Department’s Adult Inmate Management System (AIMS) database on 3 occasions between December
2019 and March 2020.

○

Analyzed all fiscal year 2019 deductions that were a specified fee amount (i.e., utility fees and medical
copays) to ensure that inmates were charged the correct amount. Specifically, we analyzed all 261,331
utility-fee and all 86,468 medical-copay deductions.

○

Reviewed various ITA reconciliation reports and observed how the Department performs various ITA
reconciliations. We also reviewed the June and November 2019 reconciliations of the overall ITA balances
in AIMS to bank statements and available documentation for 4 unreconciled items from the November
2019 reconciliation (see Chapter 2, pages 14 through 16, for additional information).

To obtain additional information about ACI, we performed the following:
○

Judgmentally selected and reviewed contracts and contract amendments for 4 of the Department’s 33
labor partners for fiscal year 2019 to obtain information on costs labor partners pay to ACI.62

○

Reviewed information from the Internal Revenue Service website regarding the Federal Work Opportunity
Tax Credit.

To obtain additional information included in the report, we performed the following:
○

Contacted corrections and budget personnel in 4 other states—Ohio, Texas, Virginia, and Washington—
to obtain comparative information on capital funding provided to state corrections agencies in fiscal
years 2016 through 2020, inmate wages, and inmate fees, including phone fees, medical costs, and
utility fees. We judgmentally selected these states based on factors (both for similarities and differences)
such as inmate population, agency budget, and geographic location.

○

Reviewed Department contracts with private entities for services such as inmate phone use and prison
commissaries. Additionally, between January and February 2020, we compared the prices of 10
commissary items to prices at 3 different retail stores that sell similar items to assess the reasonableness
of their prices.

○

Reviewed an interagency service agreement between the Department and Arizona Department of
Economic Security regarding the vending machines in prison visitation areas.

Our work on internal control included reviewing Department policies and procedures and performing test work
over Department expenditures, ITA deductions, and setting commissary-item prices, and our conclusions are
reported in Chapters 2 and 3. We also assessed the reliability of the ITA data within the AIMS database by
reviewing database controls and ITA reconciliation processes and comparing information in the database
against supporting documentation to ensure its accuracy. Through this work, we determined that the data

We reviewed 179 of the 4,833,774 total deductions in fiscal year 2019 across 16 of the 32 total deduction types.
The 4 labor partners are Hickman’s Egg Ranch, Inc.; Keefe Commissary Network, LLC; Common Market Equipment Company Inc. (also known
as Swift); and Taylor Farms Southwest. We judgmentally selected these 4 partners, who represent the top contracts for highest number of
inmate labor hours, inmate workers, and ACI revenue for fiscal year 2019.

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was sufficiently reliable for audit purposes. Our internal control work was limited to reviewing the control
activities component of internal control and its related principles, which were significant to our objectives.
We selected our audit samples to provide sufficient evidence to support the information, findings, and
recommendations in this report. Unless otherwise noted, the results of our testing using these samples were not
intended to be projected to the entire population.
We conducted this performance audit of the Department in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.
We express our appreciation to the Department’s Director and staff for their cooperation and assistance
throughout the audit.

Arizona Auditor General

Arizona Department of Corrections, Rehabilitation and Reentry—Capital Projects Funding and Department Finances | October 2020 |
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PAGE e-4

AGENCY RESPONSE

DEPARTMENT RESPONSE

Arizona Department of Corrections
Rehabilitation & Reentry
DOUGLAS A. DUCEY

1601 WEST JEFFERSON
PHOENIX, ARIZONA 85007
(602) 542-5497
www.azcorrections.gov

DAVID SHINN
DIRECTOR

GOVERNOR

October 6, 2020

Lindsey Perry, CPA, CFE
Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018-7271
Re: Auditor General Report - Capital projects funding and finances
Dear Ms. Perry:
Attached is the Arizona Department of Corrections, Rehabilitation and Reentry's response to the
performance audit report, focusing on capital projects funding and finances. Thank you for the
opportunity to respond.
If you have any questions, please do not hesitate to contact my office.

Thank you,

David Shinn
Director

L

-

-

-

-

Chapter 2: Although most inmate trust account (ITA) deductions we reviewed were accurate
and supported, Department has not reconciled ITA and bank statement balances since
November 2019, which increases the risk of incorrect ITA balances or unaccounted-for monies
Recommendation 1: To ensure compliance with State policy, the Department should
continue to resolve its data conversion issues and complete the reconciliations for those
months that have not been fully reconciled.
Department Response: The finding of the Auditor General is agreed to and the audit
recommendation will be implemented.
Response explanation: Since the implementation of the new system (Keep Trak) at the
end of November 2019, the monthly reconciliation takes place inside the system. During
the data migration from AIMS, a lot of records that should have not be transferred to the
new system did, causing complications and a lot of manual work to resolve the
conversion issues. As with any new system, the lack of enough knowledge and
experience of the staff, led to posting errors that additionally delays and complicates the
reconciliation process. The Department is planning to complete the reconciliations and
become current by November 30, 2020. In addition, the Department will create written
procedures for the reconciliation in the new system by October 31, 2020.
Recommendation 2: To ensure compliance with State policy, the Department should develop
and implement a strategy and time frame to resolve the outstanding unreconciled items from
previous reconciliations and resolve them in accordance with this strategy and time frame.
The Department should work with ADOA, as needed, to determine how to address
unreconcilable items. Going forward, the Department should ensure that it resolves
anomalies, deficiencies, imbalances, and errors detected through reconciliations generally
within 30 days.
Department Response: The finding of the Auditor General is agreed to and the audit
recommendation will be implemented.
Response explanation: The Department will review each outstanding unreconciled item,
less than five years old, from previous reconciliations and have them cleared by
November 30, 2020, which may involve processing journal entries in Keep Trak and/or
AFIS. The Department will also establish Standard Work to ensure that any anomalies,
deficiencies, imbalances, and errors detected through reconciliations are resolved within
30 days. The Standard Work will be established by December 30, 2020.
Recommendation 3: To ensure compliance with State policy, the Department should retain
all historical supporting documentation for each monthly reconciliation in accordance with its
record retention policy.
Department Response: The finding of the Auditor General is agreed to and the audit
recommendation will be implemented.
Response explanation: The Department developed a template that captures the monthly
end balance of the Payroll Receivable account. The Excel document has a summary
section with the balances of the different type receivables, and a detail section that
support the amounts on the summary table. The new template was deployed in FY 2021.

ARIZONA _ __

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