October 2006

Report No. 06-67

PRIDE Is Tightening Its Business Practices
But Needs Greater Transparency
at a glance

Scope ___________________

PRIDE has increased its sales over the past
three years and has improved its product
quality. PRIDE has had limited success
expanding state government and private sector
sales, but has increased sales to local
governments and nonprofit organizations.
However, due to the growth in the inmate
population, the percentage of inmates that
PRIDE employs has remained relatively low at
2.5% of the inmate population.

In accordance with s. 11.51(6), Florida Statutes, this
progress report informs the Legislature of actions
PRIDE has taken since our 2003 report. 1

PRIDE has severed relationships with its
affiliate and subsidiary companies. However,
PRIDE has suffered losses of nearly
$19 million owed by these former affiliated
businesses. PRIDE has since added internal
risk assessment measures to better control the
risk of new business ventures.

PRIDE’s mission, as defined in s. 946.501, Florida
Statutes, is to

To ensure transparency of PRIDE’s operations,
the Legislature should consider revising
s. 946.516, Florida Statutes, to require that
PRIDE submit an annual internal control report
that adheres to national internal audit
standards.

Background ______________

The Legislature created Prison Rehabilitative
Industries and Diversified Enterprises (PRIDE) in
1981 as a private, non-profit corporation to lease and
manage the state prison industries program. 2

ƒ

reinforce relevant education, training, and postrelease job placement to inmates to help reduce
recommitment;

ƒ

enhance security by reducing inmate idleness
and providing an incentive for good behavior in
prison;

ƒ

reduce the cost of state government by operating
enterprises primarily with inmate labor while not
unreasonably competing with private enterprise;
and

1

PRIDE Benefits the State But Needs to Improve Transparency in
Operations, OPPAGA Report No. 03-68, December 2003.

2

Previously, the Department of Corrections operated the state’s prison
industries.

Office of Program Policy Analysis & Government Accountability
an office of the Florida Legislature

OPPAGA Report
ƒ

Report No. 06-67

rehabilitate inmates by duplicating, as nearly
as possible, the activities of a profit-making
enterprise.

sales had been falling, as had the number of
workstations. We recommended that PRIDE

PRIDE supports the state correctional system in
several ways by reducing inmate idleness,
providing incentives for good behavior,
facilitating payment of restitution, and
providing useful vocational skills to inmates that
may help to reduce recidivism.
In 2005, PRIDE operated 36 industries, including
raising dairy calves, building office furniture,
providing printing and document imaging
services, and manufacturing service garments. 3
(Appendix A describes PRIDE’s 36 industries.)

Current Status

ƒ

increase sales to generate funds for more
workstations;

ƒ

work with state and local government
purchasing officers to identify goods and
services that PRIDE could produce for them;

ƒ

refine customer service and quality control to
remedy customer complaints; and

ƒ

work with Enterprise Florida to identify
ways that PRIDE programs could be used to
enhance the attractiveness of the state to
business and increase PRIDE sales.

PRIDE’s sales have increased but its proportion
of workstations to inmates has declined slightly.

__________

According to PRIDE’s executives, PRIDE’s ability
to increase workstations is dependent on its
sales. Over the last four years, PRIDE has been
successful selling its products. As shown in
Exhibit 1, PRIDE sales grew 10% between 2003
and 2005. To fulfill these increased product
orders, PRIDE increased the number of inmate
hours worked during this period by 12%, from
3.6 million hours in 2002 to 4.1 million hours in
2005.

PRIDE has made progress addressing the issues
raised in our previous reports, although it did
not fully implement all of our recommendations.
Since our report, PRIDE has increased sales, but
has not increased workstations commensurate
with increased sales. PRIDE has worked with
state agency purchasing officers to identify
products and improve customer service.
However, PRIDE has not yet successfully
worked with Enterprise Florida to find ways to
increase business with the private sector. PRIDE
has severed its ties with its former subsidiaries to
eliminate conflicts of interest, but it lost nearly
$19 million from its association with these
entities. PRIDE has added risk assessment and
internal control measures to better assess the risk
of new business ventures.

Exhibit 1
PRIDE Sales Have Increased in Recent Years
$71.9M
$64.7M

$65.7M

2003

2004

While PRIDE has increased sales and
improved product quality, it has had limited
success expanding private sector sales
Our 2003 report concluded that PRIDE
programs enhance prison security and increase
opportunities for inmates to find gainful
employment upon release. However, PRIDE
3

Source: PRIDE.

The required skill and educational levels vary across industries as
well as by position, though most PRIDE jobs require at least a
sixth-grade education.
All industries provide job-specific
training.

2

2005

Report No. 06-67

OPPAGA Report

As shown in Exhibit 2, PRIDE also has increased
its inmate workstations slightly in recent years,
from 2,049 to 2,117.
Workstations are the
number of inmates that can be employed at any
time. However, due to the growth in the inmate
population, the proportion of workstations to
inmates fell slightly over this period. Compared
to other states’ prison industry programs, PRIDE
has a lower proportion of workstations to
inmates. The National Correctional Industries
Association reports that of states with the
highest numbers of inmates in 2005, the
nationwide proportion of state prison industry
workstations to inmates is approximately 3.7%,
compared to 2.5% in Florida. 4

PRIDE has increased sales to state agencies and
addressed product and customer service
concerns. PRIDE has increased overall sales by

increasing its business in both the state
government and non-state/not-for profit market
sectors, as shown in Exhibit 3. PRIDE’s sales to
the private sector have grown slowly.
To increase sales to state agencies, PRIDE has
implemented our recommendation to work with
the Department of Management Services (DMS)
and agency purchasing officers to identify goods
and services that it can provide at a competitive
price. To aid in this effort, in February 2005,
PRIDE entered into a contract with DMS’
Division of State Purchasing to oversee quality
testing and cost comparability and to approve
new product lines and price increases. DMS also
acts as a liaison to resolve disputes between
PRIDE and state agencies, and it lists PRIDE
products on MyFloridaMarketPlace, the state’s
electronic purchasing system.

Exhibit 2
The Proportion of PRIDE Workstations to Inmates
Has Declined in Recent Years
Calendar
Year
2003
2004
2005

Total
Inmate
Population1

Number of
PRIDE
Workstations2

Proportion of
Workstations
to Inmates

77,316
81,974
84,901

2,049
1,990
2,117

2.7%
2.4%
2.5%

Exhibit 3
PRIDE Sales Are Highest to State Government 1

1

The number of inmates who actually work in a year is greater
than the number of work stations because more than one inmate
may use a workstation during the course of a year.

2
Not every inmate is eligible to work in PRIDE industries. Mental
or physical illness, lack of skills, and disciplinary problems exclude
some inmates from eligibility.

1

Market Sector

2003

2004

2005

State Government
Non-State/Not-for-Profit
Private Sector

$33.7
14.2
16.8

$33.5
14.5
17.7

$36.0
18.0
17.9

Values expressed in millions of dollars.

Source: Florida Department of Corrections; PRIDE.

Source: PRIDE.

The number of PRIDE’s inmate workstations has
not grown commensurate to sales for two
reasons.
First, PRIDE has upgraded its
manufacturing technology, which has allowed
inmates to produce more products at individual
workstations. Second, PRIDE has employed
workers at more than one shift at some
workstations and increased work hours per shift
at other workstations. While these actions
improved productivity, they did not expand the
proportion of workstations to inmates.

PRIDE also has addressed prior state agency
concerns with the quality of its products. In
recent years, PRIDE has implemented several
initiatives to improve product quality, including
strengthening internal quality control processes
at each industry, contracting for independent lab
quality compliance tests of specific products,
modernizing and replacing equipment, and
hiring experienced personnel with specialized
skills and knowledge in PRIDE industries. DMS
reports that PRIDE’s performance has improved
and that disputes between PRIDE and
purchasing authorities are usually resolved
quickly. In addition, DMS indicates that PRIDE’s
prices are usually competitive and its product
quality is generally comparable to that of other
vendors.

4

This ratio is the median calculated for the top 16 states ranked by
inmate population. The ratio is approximate because the
correctional industries in some states report numbers of inmates
employed, while the industries in other states, including PRIDE,
report only numbers of workstations.

3

OPPAGA Report

Report No. 06-67
countries. 5 PRIDE can offer a cost-effective
workforce for industries that require labor
intensive work. PRIDE holds a PIE certificate,
and can subcontract with private companies to
provide inmate workers for production that
might otherwise be subcontracted outside of the
United States. Such an arrangement would
benefit the state, as business would remain in
the United States and maintain local jobs, as well
as provide greater work opportunities for
inmates.

PRIDE faces challenges increasing sales to the
While PRIDE has increased
private sector.

overall sales, it continues to have difficulty
expanding sales to the private sector. As seen in
Exhibit 3, from 2003 to 2005 PRIDE has increased
sales to the private sector by 7% compared to a
26% increase in sales to the non-state/not-forprofit sector.
PRIDE faces several challenges in promoting
sales to private sector entities. Some private
companies do not see an incentive to do
business with PRIDE because of prison industry
workforce and production limitations.
For
example, PRIDE cannot guarantee a stable
workforce because the Department of
Corrections rotates inmates or transfers them for
security purposes.
Transfers interrupt
production and threaten on-time completion of
orders.
Also, due to department security
priorities, PRIDE cannot guarantee rapid
transportation or stock inventory. As a result,
PRIDE may not be able to deliver on-time or
provide goods as quickly as other private sector
businesses, which hinders its ability to expand
sales to the private sector.

PRIDE is tightening its business practices,
but lost nearly $19 million to former
affiliated businesses
At the time of our 2003 report, PRIDE had
revised its corporate structure to create several
subsidiary
for-profit
and
not-for-profit
corporations.
These included Industries
Training Corporation (ITC), a non-profit
corporation, which managed PRIDE’s prison
work programs and provided administrative
and managerial support services. ITC in turn
created
several
additional
for-profit
corporations. Several PRIDE board members
also sat on the boards of these subsidiary
corporations, and PRIDE had made $8.7 million
in loans to these corporations but had not
established terms for repayment. Our 2003
report noted that PRIDE had not sufficiently
disclosed its corporate restructuring to the
Legislature,
and
we
made
several
recommendations that it clarify and formalize its
relationship with its subsidiary corporations. 6

As we recommended, PRIDE has held
discussions with Enterprise Florida to identify
ways that it can develop private sector business
opportunities in Florida. However, Enterprise
Florida and the Governor’s Office of Tourism,
Trade, and Economic Development (OTTED)
have not aggressively promoted PRIDE as they
believe that supporting PRIDE conflicts with the
Governor’s focus on promoting a competitive
business climate and creating jobs for Florida
citizens. PRIDE should continue to work with
Enterprise Florida and OTTED to inform them of
the services it can provide to Florida’s
manufacturing and service companies.
PRIDE is exploring opportunities with the
federal Prison Industries Enhancement (PIE)
Program, through which PRIDE may be able to
supply inmate labor to private companies as an
alternative to contracting the labor from foreign

4

5

The Prison Industry Enhancement (PIE) program is a certification
from the federal Bureau of Justice Assistance that allows state
prisons to enter into sub-contracting with private companies to
provide labor, services, and/or production resources. Goods made
in PIE-certified prison industries may be sold in private markets.
PRIDE is the authorized holder of PIE certification for Florida.

6

Specifically, we recommended that PRIDE clarify through
contract its interests in assets owned by ITC, establish a
repayment schedule for the $8.7 million in loans, develop
corporate policies to assess the risk of new ventures including a
review function such as internal auditing to ensure that standard
operating procedures were followed to protect PRIDE resources,
and enhance its annual reports to the Legislature to include all
statutorily required information.

Report No. 06-67

OPPAGA Report

Due to ongoing concerns as PRIDE continued to
develop its subsidiary operations, Florida’s Chief
Inspector General audited PRIDE and ITC in
2004.
The chief inspector general’s report
included findings similar to OPPAGA’s 2003
report, and also noted that PRIDE’s loans to ITC
had increased to over $10 million without
written terms and conditions for repayment.
Additionally, several of the business ventures for
which ITC had borrowed these funds had failed.
The chief inspector general recommended that
PRIDE sever its relationship with ITC, enhance
internal controls, and establish a financially
sound policy for evaluating all investments. In
addition, the chief inspector general found that
executive compensation was excessive and
recommended that the board revisit its policy for
determining salary increases and bonuses. 7

substantial net loss when it severed
relationship with its affiliate corporations.

PRIDE’s current managers report that they have
unsuccessfully pursued formal repayment
arrangements with ITC and its affiliates. In
September 2005, PRIDE filed suit against these
entities for damages, interest, costs and any
other just relief. In August 2006, PRIDE and ITC
agreed to a confidential settlement. PRIDE’s
management indicated that ITC and affiliates
had minimal assets and could repay at best only
a small fraction of the amount owed.

Exhibit 4
PRIDE Incurred a Loss of $19.2 Million When It
Assumed Responsibility for Debts Owed by Its
Former Subsidiary Corporations
ITC 1

Reported Debt

While PRIDE has severed ties with affiliated
businesses, it lost nearly $19 million from this
association. In December 2004, PRIDE cancelled

FCP 2

Total

Due 2003

$2,316,289

$3,448,435

$5,764,724

Due 2004

7,831,734

211,979

8,043,713

Due 2005

all contracts and service agreements with ITC and
has had no subsequent business relationship with
ITC or its affiliates. PRIDE’s chief executive
officer and chief financial officer, who held
identical positions with ITC, resigned from
PRIDE but remained in their posts at ITC. Several
PRIDE board members also resigned but
remained board members of ITC.

93,721

-

93,721

Total
ITC Debt
Restructuring

$10,241,744

$3,660,414

$13,902,158

5,279,190

-

5,279,190

Total

$15,520,934

$3,660,414

$19,181,348

1

Industries Training Corporation.

2

Florida Citrus Partners.

Source: PRIDE.

PRIDE has developed corporate policies to
better assess the risk of new ventures and has
adopted standard operating procedures. As we

When PRIDE cancelled its contracts and service
agreements with ITC, it assumed responsibility
for all administrative, financial, and inmate
placement services previously provided by ITC.
PRIDE also assumed all debts that ITC and its
related businesses owed to PRIDE. These loans
had grown to approximately $19.2 million as of
January 2005 since PRIDE had extended
additional loans to ITC and its affiliated business
Florida Citrus Partners (FCP). As PRIDE had not
adopted our recommendation to formalize its
loans to ITC and its interests in assets owned by
the subsidiary corporation, it incurred a
7

its

and the chief inspector general recommended,
PRIDE’s new management has taken several
steps to increase its internal risk assessment
procedures and ensure that its operating
procedures are consistent with its Articles of
Incorporation and Florida Statutes.
These
actions include

The Office of the Statewide Prosecutor investigated this situation
but determined that there was insufficient evidence to bring
criminal charges as PRIDE and ITC’s board of directors had
approved the companies’ business transactions, including
executive compensation and major capital transfers from PRIDE
to ITC.

5

ƒ

implementing standardized procedures for
evaluating and approving new business
ventures or business expansion that require
more than $100,000 in capital;

ƒ

periodically reviewing and monitoring
under-performing business units;

OPPAGA Report
ƒ

employing an internal auditor that reports
directly to the board of directors;

ƒ

eliminating management positions with a
dual reporting structure to any other
organizational or government entity;

ƒ

including a covenant in its banking
agreement that precludes PRIDE from
investing funds in any external business or
government entity, with the exception of
rent payments to the Department of
Corrections as specified in lease agreements;

ƒ

amending its by-laws to remove PRIDE’s
president and CEO from the PRIDE board;
and

ƒ

establishing a code of ethics.

Report No. 06-67
adopted COSO standards to conform to new
federal audit regulations following high-profile
scandals of corporations such as Enron and
World-Com.
COSO established a common
definition of internal controls, standards, and
criteria
against
which
companies
and
organizations can evaluate their control systems.
Evaluating risk and internal controls according
to COSO standards could help PRIDE preserve
its resources and achieve its performance and
financial targets.

Recommendations _______
PRIDE should continue efforts to increase
sales to public, private, and not-for-profit
organizations and work to increase inmate
workstations that provide meaningful on-the-job
training. PRIDE should continue to work with
the Office of Tourism, Trade, and Development
and periodically inform the Office and
Enterprise Florida of the services it can provide
to manufacturing and service companies in
Florida.

PRIDE also has reduced its executive
compensation.
Its salary structure is now
market-based and reviewed by its board of
directors annually. 8 In addition, PRIDE has
eliminated individual management bonus
programs and replaced them with a merit-based
program.
PRIDE’s internal controls should be better
monitored. While PRIDE has taken several steps

PRIDE should continue to strengthen its internal
control mechanisms. To do so, PRIDE managers
should annually evaluate its internal controls
utilizing standards such as those of the
Committee of Sponsoring Organizations.
Managers should include a report of their
evaluation in PRIDE’s annual report.

to improve risk assessments and internal
controls, these measures should be monitored to
assure their continued effectiveness. PRIDE
could do so by adopting standards for an
internal control framework such as one created
by the national Committee of Sponsoring
Organizations of the Treadway Commission
(COSO). 9
Many public companies have

8

PRIDE’s chief executive officer salary was $275,573 in 2003 and
PRIDE eliminated this position in 2004. PRIDE has reduced
compensation for its president from $231,542 in 2003 to $179,845
in 2005, and the compensation level for its chief financial officer
from $175,711 to $101,679.

9

The Committee of Sponsoring Organizations is a voluntary
private sector organization dedicated to improving the quality of
financial reporting through business ethics, effective internal
controls, and corporate governance.

To enhance its monitoring of PRIDE’s risk
assessments and internal performance, the
Legislature should consider revising s. 946.516,
Florida Statutes, to require PRIDE to annually
report on PRIDE’s internal controls and to
require that such report be subject to an
attestation of an independent certified public
accountant. This attestation on management’s
assertions relative to PRIDE’s internal controls
should be required in addition to the financial
audit required in s. 946.516, Florida Statutes.

6

Report No. 06-67

OPPAGA Report

Appendix A

PRIDE Operates Diverse Prison Industries
Throughout Florida
Liberty
Digital Information Services


 
Apalachee
Warehouse
Calf
Cattle
Calhoun
Mattress
Printing

Baker
Paint
Madison
Shoe & Textiles



Lawtey
Garments
New River East
Forestry
New River West
Garments



 

Lowell
Garments
Tomoka
Vehicle Refurbishing

Polk
Seating
IT Systems
Customer Service


Union
Cross City
Dairy Cattle
Graphics
Dental Lab
Food Processing
Marion
Metal Furniture
Garments
Tag
Corrugated Box
Cutting Room
Sumter
Furniture
Print







Avon Park
Tire Re-Manufacturing
Sanitary Maintenance & Supplies



Pinellas
Clerical Support

Glades
Sugarcane





Hendry
Beef Cattle
Citrus

Source: PRIDE.

7

Broward
Optical

The Florida Legislature

Office of Program Policy Analysis
and Government Accountability
Visit the Florida Monitor, OPPAGA’s online service. See www.oppaga.state.fl.us. This site
monitors the performance and accountability of Florida government by making OPPAGA's four
primary products available online.
ƒ

OPPAGA publications and contracted reviews, such as policy analyses and performance
reviews, assess the efficiency and effectiveness of state policies and programs and
recommend improvements for Florida government.

ƒ

Performance-based program budgeting (PB²) reports and information offer a variety of tools.
Program evaluation and justification reviews assess state programs operating under
performance-based program budgeting. Also offered are performance measures information
and our assessments of measures.

ƒ

Florida Government Accountability Report (FGAR) is an Internet encyclopedia of Florida
state government. FGAR offers concise information about state programs, policy issues, and
performance.

ƒ

Best Financial Management Practices Reviews of Florida school districts. In accordance with
the Sharpening the Pencil Act, OPPAGA and the Auditor General jointly conduct reviews to
determine if a school district is using best financial management practices to help school
districts meet the challenge of educating their students in a cost-efficient manner.

Subscribe to OPPAGA’s electronic newsletter, Florida Monitor Weekly, a free source for brief
e-mail announcements of research reports, conferences, and other resources of interest for
Florida's policy research and program evaluation community.

OPPAGA supports the Florida Legislature by providing evaluative research and objective analyses to promote government
accountability and the efficient and effective use of public resources. This project was conducted in accordance with applicable
evaluation standards. Copies of this report in print or alternate accessible format may be obtained by telephone (850/488-0021 or
800/531-2477), by FAX (850/487-3804), in person, or by mail (OPPAGA Report Production, Claude Pepper Building, Room 312,
111 W. Madison St., Tallahassee, FL 32399-1475). Cover photo by Mark Foley.
Florida Monitor: www.oppaga.state.fl.us
Project supervised by Marti Harkness (850/487-9233)
Project conducted by Steve Lize (850/410-4747)
Gary R. VanLandingham, OPPAGA Director