Special Report
Arkansas Legislative Audit

Review of Farm Operations

Arkansas Department of Correction – Agriculture Division
For the Period July 1, 2014 through June 30, 2015

INTRODUCTION
This report is issued in response to a request, approved by the Executive Committee of the Legislative Joint
Auditing Committee, for Arkansas Legislative Audit (ALA) to provide information about the Arkansas
Department of Correction’s (ADC) Agriculture Division (Division).

OBJECTIVES
The objectives of this report were to:


Provide background information regarding the Division's operations.



Provide Division financial statements based on the amounts recorded in the Arkansas
Administrative Statewide Information System (AASIS), the State’s accounting system.



Provide information on cash crops produced by the Division, and compare to averages at the
county or state level, as reported by the United States Department of Agriculture (USDA).



Analyze the major costs to produce cash crops, and compare to the University of Arkansas’s
Division of Agriculture Crop Enterprise budgets.



Estimate the current value of ADC-owned farm land, and determine potential lease revenue to the
State.



Compare the Division’s operations to those of similar divisions in other states.

SCOPE AND METHODOLOGY
The information in this report is primarily for the period July 1, 2014 through June 30, 2015. It was obtained
from AASIS, ADC, USDA, University of Arkansas (U of A) Cooperative Extension Service, and other states'
correctional institutions. ALA staff analyzed relevant documents; reviewed Arkansas Code; and conducted
interviews with ADC personnel, representatives from other states' correctional institution farm programs, and
others in the agriculture industry.
The methodology used in preparing this report was developed uniquely to address our stated objectives;
therefore, this review was more limited in scope than an audit or attestation engagement performed in
accordance with Government Auditing Standards issued by the Comptroller General of the Untied States.

ARKANSAS LEGISLATIVE AUDIT
500 Woodlane Street, Suite 172, Little Rock, AR 72201
Phone: 501-683-8600  Fax: 501-683-8605
www.arklegaudit.gov
Report ID: SPSA01715

Report Date: August 25, 2016

Arkansas Department of Correction – Agriculture Division

BACKGROUND AND OPERATIONS
Large-scale farming operations in Arkansas’s penitentiary system
began around 1902 with the purchase of approximately 10,000
acres for the Cummins farm. Since that time, farming has been
expanded to include the Tucker, East Arkansas, Wrightsville, and
North Central Units.

As of June 30, 2015,
ADC had jurisdiction
over 18,813 inmates1
and, excluding those
housed outside ADC
facilities, was responsible
for providing meals for
these inmates.

ADC's Agriculture Division (Division) is designed to be a selfsupporting program and had an annual budget of $20.3 million and
operating expenses of $16.4 million in fiscal year 2015. The
Division's primary goals are to provide useful and meaningful work
for inmates, cost-effectively produce sufficient food for inmate
consumption, and maximize revenues from production and sales of
marketable field crops and livestock. In an effort to achieve these
goals, the Division produces cash crops and raises livestock on
20,439 acres throughout the State. The distribution of acreage
farmed by location, as reported by ADC to the USDA Farm Service
Administration for calendar year 2015, is provided in Exhibit I.
Exhibit I
Arkansas Department of Correction (ADC)
Distribution of Acreage Farmed by Unit
For Calendar Year 215
Cummins
(Lincoln)
Cash Crops
Soybeans
Corn
Wheat
Rice
Totals
Livestock Feed
Hay/Grazing
Sorgham
Corn
Wheat
Oats
Total
Other
Inmate Gardens
Idle*
Total
Acreage Totals

Acreage Farmed by Unit (County)
Tucker
Wrightsville
East Arkansas
(Jefferson)
(Pulaski)
(Lee)

4,676
1,968
1,790
659
9,093

1,567
224
627
852
3,270

2,362

91
135

446
371
176
3,355

226

555
379
934
13,382

North Central
(Izard)

Acreage
Totals

1,793

0

1,793

0

2,637

169
387

254

8,036
2,192
2,417
1,511
14,156

254

5,513
522
446
756
176
7,413

0

57
57

0

573
934
1,507

2,637

2,791

254

** 23,076

385
2,637

941

18
498
516
4,012

*Idle land includes water impound structures, conservation reserve program, turnaround rows, and other unused lands.
**Due to some areas being double-planted in a single calendar year, the total acreage shown here and reported to the U.S.
Department of Agriculture Farm Service Administration is greater than the 20,439 in total acreage owned by ADC.

Source: United States Department of Agriculture Farm Service Administration (unaudited by Arkansas Legislative Audit)
1

This inmate population is comparable to the populations of the cities of Bryant (19,986), El Dorado (18,386), Maumelle (17,931), or
Siloam Springs (16,081).

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Arkansas Legislative Audit

The Division is overseen by the Deputy Director, a Farm Administrator, and Managers over
various functions, as shown in Exhibit II. The Farm Administrator is required to have a bachelor's
degree in agriculture or a related field, seven years experience in agriculture management, and
two years in a supervisory capacity; Managers must meet the same education requirements but
may have fewer years of management and supervisory experience.
Exhibit II
Arkansas Department of Correction (ADC) – Agriculture Division
Organizational Chart

Deputy Director

Farm Administrator

Administrative
Assistant

East Arkansas
Unit Head Farm
Manager

Budget Analyst

Tucker Unit Head
Farm Manager

Head Farm
Manager I

Vegetable
Processing
Unit Agri. Unit
Supervisor

Cold Storage
Agri. Unit
Supervisor

Outside Livestock
Head Farm
Manager

Cummins Farm
Head Farm
Manager

Wrightsville Agri.
Unit Supervisor

Confined
Livestock Head
Farm Manager

Creamery
Agri. Unit
Supervisor

Dairy Asst.
Head Farm
Manager

Poultry
Production
Supervisor

Source: Davey Farabough, ADC Farm Administrator

3

Swine
Agri. Unit
Supervisor

Feed Mill
Agri. Unit
Supervisor

Arkansas Department of Correction – Agriculture Division

In fiscal year 2015, 64 positions were paid from the Farm Fund, with an average salary of $39,318.
When health insurance, retirement matching, and other benefits were included in this amount,
average compensation increased to $53,813. These positions included farm supervisors and
managers, administrative support staff (e.g., purchasing, accounting, and secretarial), and security.
In addition to these positions, operations are supported by inmate labor. According to ADC, 350
inmates are allowed to work daily in the Division. Although the number of inmates and the number
of hours worked by inmates are reported to the Board of Corrections, ALA staff were unable to verify
this information since the Division does not have a consistent reporting mechanism in place among
the various Units (Finding 1).
Agricultural operations also rely on equipment and facilities available. In fiscal year 2015, the
Division capitalized buildings and equipment totaling $5.1 million. Based on the amounts recorded
in AASIS, Exhibit III illustrates the original cost and average age of capital assets used in the
Division’s operations.
Exhibit III
Arkansas Department of Correction (ADC) – Agriculture Division
Original Cost and Average Age of Capital Assets

Category

Original Cost

Land and land improvements
Buildings and building improvements
Implements and other farming equipment
Tractors and combines
Assets under construction
Irrigation
Personnel vehicles
Other equipment
Trucks and trailers
Total

$ 10,138,533
9,764,986
6,790,569
6,185,559
3,873,633
1,255,413
884,950
609,103
509,569
$ 40,012,315

Average Age
(In Years)
N/A
27.09
17.45
14.82
N/A
11.02
7.46
17.29
19.31

Source: Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit)

Farm Production
Cummins Unit
The Cummins Unit contains the largest farm and is home to the swine, dairy, feed mill, and egg
production facilities, as well as a portion of the beef cattle herd. Cash crops produced include
soybeans, corn, wheat, and rice.
At June 30, 2015, ADC owned 2,400 swine and 462 dairy cattle. Hogs are normally harvested at
230-250 pounds for inmate consumption, with the Division harvesting 150 per month on average.
The dairy cattle are milked twice daily, with milk production ranging from 500 to 800 gallons per day.
The milk is processed on-site, blended with powder to achieve 1.5% to 2% milk fat, and packaged in
8 ounce pouches for inmate consumption. The feed mill provides feed for swine, dairy and beef
cattle, and poultry. It produces an average of 430 tons of feed per month, with corn as the primary
ingredient in feed produced. Soybean meal, cotton seed, vitamins, and mineral packs are added to
make a complete ration.

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Arkansas Legislative Audit

Cash crops, beef cattle, and eggs are discussed in greater detail in the Production and Sales section,
beginning on page 6 of this report.
Other Units
The Tucker and East Arkansas Units produce cash crops as well as livestock feed, similar to the
Cummins Unit but on a smaller scale. The Wrightsville Unit operates the beef cattle herd not
maintained at Cummins, and the North Central Unit operates the horse breeding/training facilities.

FINANCIAL STATEMENTS AND RESULTS
The Agriculture Division operates similarly to a private enterprise, except that it is governed by the
rules and regulations of state government. The Division’s full accrual financial statements for fiscal
year 2015 are presented as Schedules 1 and 2 on pages 23-26. These statements are based on
the information recorded in AASIS, with one exception: The amount of inventory recorded for crops in
progress (CIP) was decreased and expenses were increased by $706,317 to reflect a misstatement
noted during the audit of ADC's departmental financial statements (Finding 2).
Operating and Non-Operating Revenues and Expenses
Based on the information recorded in AASIS and the $706,317 adjustment noted above, the Division
incurred a net loss of $2.6 million in fiscal year 2015. Operating revenues from the sale of products
produced totaled $9.5 million, with operating expenses totaling $16.4 million. Additional nonoperating revenue included consumption certification income2 of $4.6 million and transfers in from the
Inmate Care and Custody fund of $1.25 million. The complete income statement is shown in
Schedule 1 on pages 23-24. The major factors that contributed to this loss were the relationship
between the value of products produced on the farm for inmate consumption and the amount
reimbursed, as well as the non-operating expenses for the transfer out of capital assets to other ADC
funds. The transfer out of capital assets from the Division was a one-time entry in AASIS made by
the Department of Finance and Administration (DFA) to correct recording errors in prior periods. In
total, this entry caused no net effect for ADC; however, there was a loss of assets totaling $1.4 million
to the Farm Fund. When these factors are taken into consideration, as shown in Exhibit IV, it is
estimated that in fiscal year 2015, the Division could have generated a net income of $1.8 million.
Exhibit IV
Arkansas Department of Correction (ADC) – Agriculture Division
Income Statement Summary
For Fiscal Year 2015

Income Statement Entry

Amount

Change in net position
Transfer out of capital assets to other ADC funds
Farm commodities consumed by inmates
DFA-reimbursed consumption costs
ADC-reimbursed consumption costs
Adjusted Net Income

$ (2,598,211)
1,443,307
8,795,399
(4,600,000)
(1,250,000)
$ 1,790,495

DFA = Department of Finance and Administration

Source: Arkansas Administrative Statewide Information System (unaudited by
Arkansas Legislative Audit)
2

Ark. Code Ann. § 19-5-501(b)(1)(B) authorizes a reduction in ADC's budget revolving loan of the previous fiscal year for the value of
products produced or processed on the farm and consumed by inmates. Determination of this income is certified by the Legislative Auditor
to the Chief Fiscal Officer of the State.

5

Arkansas Department of Correction – Agriculture Division

Assets and Liabilities
Division assets and liabilities totaled $37 million and $9.6 million, respectively, in fiscal year
2015. Assets are primarily comprised of (a) land, equipment, and other capital assets and (b)
inventories. The major liabilities are loans payable of $5.6 million to the Budget Stabilization
Trust Fund for inmate consumption and $3.8 million to the Prison Construction Trust Fund for
constructing and equipping the egg production facility. The complete balance sheet is
provided in Schedule 2 on pages 25-26.

PRODUCTION AND SALES
Two of the Division’s objectives are to (a) maximize revenues through the production and sales
of marketable field crops and livestock and (b) cost-effectively produce sufficient food for
inmate consumption. In calendar year 2015, the Division grew soybeans, corn, wheat, and
rice as marketable commodities. Sorghum, corn, wheat, and oats were produced as feed for
livestock, with the intent to reduce expenses associated with the purchase of feed. Beef cattle
were raised for sale, and proceeds were used to purchase ground beef for inmate
consumption. Egg production began in fiscal year 2015 with the dual purpose of producing
enough eggs to sustain all Units and selling any excess to generate revenue. Inmates
consume eggs, vegetables, pork, milk, and other beverages produced by the Division as well
as ground beef purchased by the Division.
Cash Crops
In fiscal year 2015, total sales of the Division's field crops totaled $7.2 million, as shown in
Exhibit V.
Exhibit V
Arkansas Department of Correction (ADC) – Agriculture Division
Total Sales of Field Crops
For Fiscal Year 2015

Unit
Cummins
Tucker
East Arkansas
Totals

Rice

Field Crop*
Corn

903,104
594,477

$ 1,123,755
162,097

$

$ 1,497,581

$ 1,285,852

$

Soybeans
$ 2,550,217
654,235
335,615
$ 3,540,067

$

Wheat
366,797
283,313
141,577
791,687

Sorghum

$
$

53,187
53,187

Totals
$ 4,943,873
1,694,122
530,379
$ 7,168,374

*It should be noted that some field crops produced were used as livestock feed rather than sold.

Source: Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit)

ALA staff evaluated the Division’s production of field crops for soybeans, rice, corn, wheat, and
sorghum by compiling consignment sheets and weight tickets3 for calendar year 2015 and
verifying the results with Division management. These results were then compared to the
estimated yields per acre at the county and/or state level, based on surveys conducted by the
USDA National Agriculture Statistics Service (USDA-NASS). Exhibit VI on page 7 compares
the crop yield averages to the USDA-NASS averages.
3

Consignment sheets are used to document any movement of any farm products (i.e., animals, crops, etc.). Weight tickets are
used to document weight of farm products before and after movement from one location to another.

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Arkansas Legislative Audit

Exhibit VI
Arkansas Department of Correction (ADC) – Agriculture Division
Crop Yield Averages Compared to USDA-NASS Averages
For Calendar Year 2015
USDA-NASS
Estimated Yield

Unit (County) and Crops

ADC
Yield

Difference

Difference
from Estimate

Cummins (Lincoln)
Corn
Soybeans
Rice
Wheat

bu
bu
lbs
bu

465,452
272,641
4,991,506
100,232

432,818
164,236
5,200,400
62,369

(32,634)
(108,405)
208,894
(37,863)

-7.01%
-39.76%
4.18%
-37.78%

Tucker (Jefferson)
Corn
Soybeans
Rice
Wheat
Sorghum

bu
bu
lbs
bu
bu

44,699
96,381
6,333,778
35,115
13,230

37,723
58,806
6,856,674
25,603
11,181

(6,976)
(37,575)
522,896
(9,512)
(2,049)

-15.61%
-38.99%
8.26%
-27.09%
-15.49%

East Arkansas (Lee)
Soybeans
Wheat
Sorghum

bu
bu
bu

92,371
21,566
42,302

33,274
20,060
31,442

(59,097)
(1,506)
(10,860)

-63.98%
-6.98%
-25.67%

USDA-NASS = United States Department of Agriculture National Agriculture Statistics Service
bu = bushels
lbs = pounds

Source: USDA-NASS and ADC consignment sheets and weight tickets

As Exhibit VI shows, the Division's production level for all crops, except rice, was lower at all locations
than USDA-NASS estimates. Division management stated that the primary reason for the yield
differences was the lack of wells and irrigation capacity at all farms. According to the Farm
Administrator, a well normally exists for every 80 to 100 acres; however, Cummins has a well every
190 acres, while Tucker and East Arkansas have a well every 140 acres. According to Cooperative
Extension Service personnel, a well for every 140-190 acres would limit production.
For fiscal year 2015, ALA staff's objectives related to cash crops were to:


Determine if ADC is using the available field crop acreage to its maximum capacity by
double planting areas in the same year.



Obtain documentation supporting bids provided by non-winning bidders.



Compare the consignment sheets and weight tickets to the vendor settlement statements
to verify accuracy and to verify that ADC received payment for all crops sold.

According to information filed with the Farm Service Administration, ADC double planted
approximately 2,637 acres in calendar year 2015: 1,978 acres at Cummins, 274 acres at Tucker, and
385 acres at East Arkansas. The majority was planted with soybeans after wheat was harvested;
other fields were planted with corn after wheat was harvested. ALA staff inquired of personnel at the
Cooperative Extension Service to determine if ADC is using the available field crop acreage to its
maximum capacity by double planting areas in the same year. Personnel responded that the

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Arkansas Department of Correction – Agriculture Division

determination to double plant areas is a local decision or even a field-by-field decision due to
multiple factors, including weather and timing of harvest for the first crop. Economic factors would
also be considered. For example, yields are typically lower in a field that has been double planted,
and if soybeans are selling at a good price, it might be advantageous to plant full season soybeans.
A common practice is for farmers to double plant approximately 25% of their fields. In calendar year
2015, ADC double planted 20% of acreage that was used for crop production.
ADC Administrative Directive 12-28 requires field and horticultural crops to be offered to as large a
number of potential buyers from both the statewide and regional area, as is practical, to generate the
best price possible for ADC commodities. All sales or bids should be awarded on the basis of the
most revenue generated for ADC and in a manner consistent with Arkansas procurement laws.
Although ALA staff requested documentation of the bids submitted by the non-winning buyers on all
crop sales in fiscal year 2015, ADC could not provide this information (Finding 3).
Based on testing conducted by ALA staff, there were no material differences between the ADC
consignment sheets and the vendor settlement statements. However, ALA staff could not determine
a complete population of consignment sheets because the forms were not prenumbered but were
generated as needed from a Microsoft Excel template (Finding 4). Additionally, ALA staff noted one
instance in which ADC was overcompensated for the sale of crops and failed to report the error.
(Finding 5).
Beef Cattle
As of June 30, 2015, ADC had approximately 2,100 head of beef cattle. The cattle are raised to be
sold, with the proceeds used to purchase ground beef for inmate consumption. In fiscal year 2015,
ADC sold a total of 1,512 animals for $2.0 million at livestock auctions in Oklahoma and Arkansas as
shown in Exhibit VII.
Exhibit VII
Arkansas Department of Correction (ADC) – Agriculture Division
Beef Cattle Sales
For Fiscal Year 2015

Auction
Venue Location
Oklahoma City, OK
Oklahoma City, OK
OK Sales Totals
Morrilton, AR
Ola, AR
Waldron, AR
Morrilton, AR
AR Sales Totals
Sales Totals

Units
Sold
611
507
1,118

Gross
Sales
a
$

880,060
662,130
1,542,190

219
83
83
9
394

318,343
121,504
117,547
15,358
572,752

1,512

$ 2,114,942

Commissions
and Fees Paid
b
$

$

25,598
21,073
46,671

Net
Sales
(a-b)
$

854,462
641,057
1,495,519

11,467
5,921
5,234
721
23,343

306,876
115,583
112,313
14,637
549,409

70,014

$ 2,044,928

Estimated Gross
Sale Price in
AR (Note 1)
c
$
$

784,985
593,250
1,378,235

Variance
(a-c)
$
$

95,075
68,880
163,955

(Note 2)
(Note 2)
(Note 2)
(Note 2)

Note 1: Prices obtained from the United States Department of Agriculture (USDA) - Arkansas Cooperative Extension Service Arkansas Weekly Livestock
Summary. It should be noted that prices vary each week.
Note 2: ADC did not obtain Oklahoma prices for these Arkansas sale dates.

Source: ADC sales receipts and USDA-Arkansas Cooperative Extension Service Arkansas Weekly Livestock Summary (unaudited by
Arkansas Legislative Audit)

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Arkansas Legislative Audit

ALA staff objectives related to cattle production and sales were to:


Determine if ADC is using the beef cattle grazing acreage at its maximum capacity by
comparing animals per acre to statewide data.



Determine the state average for the number of animals that should have been sold and
compare to actual sales, based on the size of the beef cattle herd.



Determine if there was documented approval to sell the cattle.



Examine transporting procedures.



Compare the weight tickets from ADC to the weight documented by the sale barn.



Examine ADC’s determination of whether to sell the animals in Oklahoma or Arkansas.

As mentioned previously, as of June 30, 2015, ADC had 2,100 head of beef cattle located at the
Cummins and Wrightsville Units and a grazing capacity of approximately 5,000 acres. ALA staff
evaluated the Division’s use of beef cattle grazing areas by comparing the number of beef cattle
per acre to the average number of animals per acre at the state level. The average animals per
acre calculated for ADC was 2.4, and the statewide average, provided by the Arkansas Beef
Council, was 2.5, indicating that the Division’s use of pasture and grazing areas is comparable
with other operations in the State.
ALA staff evaluated other data from the beef cattle operations by comparing the number of
animals sold in fiscal year 2015 to a statewide average of similar-sized operations. As shown in
Exhibit VII on page 8, the Division sold 1,512 animals in fiscal year 2015. Based on statistical
information provided by the Arkansas Beef Council and knowledge of the Division’s operations,
ALA staff estimated the average number of animals that should have been sold to be 1,382.
Based on this surface analysis, Arkansas Beef Council personnel believe that ADC’s operation is
performing at a level typical for the State.
Procedures implemented by Administrative Directive 12-28 required the Division's Deputy Director,
or his or her designee, to determine the need to sell livestock, with final approval coming from the
ADC Director. ALA staff requested documentation of approvals to sell cattle for all transactions
during fiscal year 2015. ADC could not provide documentation to support decisions made by the
Division's Deputy Director or the ADC Director. Based on the information received by ALA staff, all
decisions were made by the Farm Administrator. ADC subsequently amended Administrative
Directive 12-28 with Administrative Directive 15-22, effective July 31, 2015, and Administrative
Directive 16-07, effective March 30, 2016, which allow the Division's Deputy Director or the Farm
Administrator, if designated, the authority to authorize sales, with notification provided to the ADC
Director (Finding 6).
Procedures implemented by ADC also require that two employees not affiliated with the beef herd
monitor and count the animals as they are loaded for transport and then sign off on the
consignment sheet to document that the procedure has been completed. These procedures were
not followed for two of the six sales in fiscal year 2015. In one instance, there was only one
signature, and in the other instance, the two employees who signed off on the consignment sheet
were both employed in the beef herd section (Finding 7).
As mentioned above, ALA staff compared the weight tickets from ADC to the weight documented
for the cattle by the sale barns and found a total difference in weight of 19,215 pounds (2.08%).
ADC management stated that the industry standard for shrinkage caused by the stress involved in
transporting the animals is 2% to 5%, which was confirmed by the Arkansas Livestock and Poultry
Commission (ALPC).

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Arkansas Department of Correction – Agriculture Division

ALA staff also evaluated the practice of ADC selling cattle in Oklahoma by examining the two
sales in Oklahoma City during fiscal year 2015. ADC supported its decisions to sell in Oklahoma
by comparing the prices received to averages obtained from the USDA-Arkansas Cooperative
Extension Service Arkansas Weekly Livestock Summary Reports. ALA staff again requested
ALPC’s professional opinion concerning if the animals sold in Oklahoma were comparable to
feeder steers and heifers, which ALPC confirmed. In both instances, ADC appeared to generate
greater revenue in Oklahoma than when selling similar animals in Arkansas. No documentation
was available to support the determination to sell at the Arkansas locations for four sales during
fiscal year 2015 (Finding 8). According to the ADC Farm Manager, the animals sold in
Arkansas were cull or inferior cattle that do not sell well in Oklahoma.
Each livestock auction assesses commissions and other fees to sellers. For ADC cattle sales
during fiscal year 2015, ALA staff determined an average assessment per head sold for the four
sales in Arkansas and compared it to the average assessment per head for the two sales in
Oklahoma. The fees charged by Arkansas auction houses averaged $59.25 per head, while the
fees charged by the Oklahoma auction house averaged $41.75 per head. The $17.50 per head
difference contributes to the profitability of selling animals in Oklahoma.
Egg Production and Sales
ADC's final purchase of powdered eggs occurred in March 2015, as it transitioned to in-house
production and sale of eggs beginning that same month, with the completion of three layer
houses and one pullet house. Total cost of the project through April 30, 2016, was $5.5 million.
The facility has the capacity to grade up to 25,000 eggs per hour and generally operates seven
days per week, from 6 a.m. to 3 p.m.
From March 2015 through April 2016,4 the Division produced 34 million eggs, for a daily average
of 82,000. Of this 34 million, 20.6 million were sold to outside parties, 12.9 million were
consumed by inmates, and 500,000 remained on-hand.
Egg sales to outside purchasers from March 2015 through April 2016 totaled $1.7 million, with
the largest buyers being McCall Sanders Marketing and the Oklahoma Department of
Corrections (ODC). Through a contract with ADC, ODC purchases white medium eggs for a
minimum of 10% less than the Urner Barry spot market price for the south central area; the
contract also allows ADC to purchase meat from ODC at a reduced cost, although no purchases
were made. ADC has no other contracts with outside purchasers, and all other sales are made
by competitive bid. ALA staff examined the 15 highest sales to outside purchasers (eight
awarded to highest bidder and seven to ODC on contract) to ensure the following:


The sale was awarded to the highest bidder or in accordance with the contract terms.



The sale price was calculated correctly and agreed with the bid or contract price.



The sale quantity agreed with the bid quantity.

Examination of the seven sales to ODC under contract revealed no exceptions. Review of the
eight sales awarded to the highest bidder revealed one instance in which the price on the bid
sheet did not agree with the final sale price, resulting in a loss to ADC of $2,016. ALA staff also
noted five other instances in which the bid quantity did not agree with the amount received by
the purchaser. All of the quantity differences seemed to result from a logistical issue related to
hauling capacity. At ALA staff's request, ADC management confirmed with the purchaser that all
sale orders were complete.
4

Since egg production was operational for less than three months in fiscal year 2015, ALA staff expanded evaluation of production
and testing of sales through April 2016.

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Arkansas Legislative Audit

Food Consumption by Inmates
Because the Division is responsible for producing sufficient food for inmate consumption in a
cost-effective manner, ADC is annually provided a loan from the Budget Stabilization Trust
Fund for farm production purposes, in accordance with Ark. Code Ann. § 19-5-501. The
outstanding amount of the loan is reduced by the value of products produced or processed on
the farm and consumed by inmates. This determination is certified by the Legislative Auditor to
the Chief Fiscal Officer of the State. The fiscal year 2015 loan amount was $5.6 million, and
the full amount was forgiven based on ALA’s Report on Certification of Consumption of Farm
Produce, which stated that the value of farm commodities consumed by inmates was $8.8
million.
Additionally, Ark. Code Ann. § 12-30-307 states the ADC Inmate Care and Custody Fund may
make payments to the Farm Fund not to exceed 50 cents on each dollar’s worth of food
produced by ADC farms for consumption by inmates. In fiscal year 2015, the Inmate Care and
Custody Fund reimbursed the Farm Fund $1.25 million.

COSTS OF PRODUCTION
ALA staff evaluated the Division’s production costs for soybeans, rice, corn, wheat, and
sorghum for calendar year 2015. Expenses by crop were based on the information recorded in
AASIS and compared to the U of A Division of Agriculture’s 2015 Crop Enterprise Budgets, as
shown in Exhibit VIII.
It should be noted that the information presented in the income statement found in Schedule 1
on pages 23-24 is for fiscal year 2015 and includes all expenses of the farm program
presented on a full accrual basis. The expenses shown in Exhibit VIII are only for production
of row crops during calendar year 2015. Around $8.6 million was coded to activities other than
row crops, including livestock, gardens, dairy, feed mill, eggs, and processing. ALA staff did
not test the account coding of any expenses. Based on comparison of expenses coded by
ADC to row crop production, costs associated with producing field crops were 9.8% less than
U of A estimates.
Exhibit VIII
Arkansas Department of Correction (ADC) – Agriculture Division
Comparison of ADC Crop Expenses to University of Arkansas (U of A) Estimated Expenses
For Calendar Year 2015

Crop
Soybeans
Corn
Rice
Wheat
Sorghum
Totals

U of A
Enterprise Budget
Estimated Expenses

ADC Expenses

$

$

$

3,375,933
1,727,660
1,119,750
1,008,690
184,640
7,416,673

$

2,475,732
1,284,062
1,137,711
1,602,139
184,622
6,684,266

Difference
$

$

900,201
443,598
(17,961)
(593,449)
18
732,407

Percentage
Difference
from Estimate
26.67%
25.68%
-1.60%
-58.83%
0.01%
9.88%

Source: U of A Division of Agriculture - 2015 Crop Enterprise Budgets and Arkansas Administrative Statewide Information
System (unaudited by Arkansas Legislative Audit)

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Arkansas Department of Correction – Agriculture Division

Vendor Selection
Other objectives of ALA staff review of farm expenses included evaluating vendor selection for
seed, feed, fertilizer, and chemical expenses; aerial application of chemicals; and farm equipment
leases. ALA staff also analyzed the terms and cost benefits of leasing farm equipment.
Seed, Feed, Fertilizer, and Chemical Expenses
Based on Ark. Code Ann. § 19-11-203(14)(DD), fertilizers, seed, seedlings, and agricultural-related
chemicals purchased by ADC do not have to be obtained through the Office of State Procurement
(OSP). ALA staff examined 15 transactions totaling $923,800 with vendors that provided these
products to ensure that the lowest price was selected and to verify that the actual amount paid
agreed with the bid documentation provided by ADC. ALA staff noted one exception in which ADC
did not maintain documentation of bids received. The test was expanded to include an additional
25 transactions totaling $679,300, and no additional errors were noted.
Aerial Application of Chemicals
For each location where row crops are farmed, a vendor provides aerial application of chemicals to
fields as needed. During fiscal year 2015, three vendors provided these services to ADC. OSP
administered the bidding and vendor selection for these contracts based on the specifications
provided by ADC. All three contracts are term contracts for one year from the date issued and are
eligible for up to six annual extensions. The term contracts guarantee a specific price per gallon/
pound for the duration of the contract period; therefore, the total contract amount is dependent
upon actual quantities used. Exhibit IX discloses the relevant terms of these contracts and
amounts expended.
According to documentation provided by OSP, only one vendor responded to the invitation to bid
on each of the contracts. ALA staff verified that any extensions were approved by both ADC
management and the vendor, with no exceptions.
Exhibit IX
Arkansas Department of Correction (ADC) – Agriculture Division
Vendors for Aerial Application of Chemicals
For the Fiscal Year Ended June 30, 2015

Original contract date
Amount expended

Cummins

Unit
Tucker

East Arkansas

Vendor A
7/17/2014
$225,214

Vendor B
6/5/2013
$107,987

Vendor C
4/15/2013
$37,396

Note: The term contracts guarantee a specific price per gallon/pound for the duration of the
contract period; therefore, the total contract amount is dependent upon actual quantities used.

Source: Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit)

Farming Equipment
With assistance from OSP, ADC developed bid specifications to lease 21 pieces of farming
equipment, which included a combine, a header, and multiple tractors and attachments. The lease
was issued in December 2012 as a term contract for 12 months. Upon mutual agreement, the
contract could be extended for up to six additional one-year periods or a portion thereof. Three
vendors responded to the invitation to bid.

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Arkansas Legislative Audit

According to OSP, if the vendor could not supply all of the equipment meeting the bid
specifications, then the vendor's bid was not considered. Bids by Vendors A and B were
rejected by OSP because they submitted specifications for a tractor with horsepower that
exceeded the bid specifications. Specifically, item three on the invitation to bid was for an
agriculture tractor with an engine horsepower rating between 129 and 135, while the vendors
whose bids were rejected provided specifications for tractors with 140 horsepower, leaving
only one qualified vendor, Vendor C, which was awarded the contract.5 Vendors A and B both
objected to the award, and the Director of OSP denied their objections. Exhibit X shows each
vendor's bid amount and the payments that have been made in accordance with the contract.
At the end of each 12-month period, one of the options allowed was terminating the lease and
purchasing any or all of the equipment at fair-market value. ADC did purchase equipment it
had leased; however, it did not do so through this particular option since the terms prohibited
ADC from leasing that type of equipment in the future. In fiscal year 2014, ADC purchased
four tractors through sole source procurement from Vendor C for $669,477. In fiscal year
2015, two tractors were purchased through an invitation to bid issued by OSP for a total of
$231,500. Vendor C was the only vendor that responded to the bid. All six tractors had
previously been used by ADC through the lease agreement. ALA staff analyzed these
purchases by adding the lease payments to the purchase price and comparing this total to the
invoice price for a new tractor, as provided by the vendor. The results are shown in Exhibit XI
on page 14.
Exhibit X
Arkansas Department of Correction (ADC) – Agriculture Division
Vendors for Leased Farming Equipment
Fiscal Years 2013 through 2016

Vendor A
Bid Amount
Payments
Year 1
Year 2
Year 3
Total

$

379,467

Vendor B
$

336,958

Vendor C*
$

379,656

$

379,656
397,922
401,444
1,179,022

$

*When the contract was renewed in subsequent years, price increases were allowed as
long as they were substantiated to the Office of State Procurement prior to billing ADC,
which the vendor did.

Source: Arkansas Administrative Statewide Information System (unaudited by
Arkansas Legislative Audit)

Overall, the leasing and subsequent purchase of the tractors shown in Exhibit XI on page 14
resulted in a cost savings to the Division. Regarding the benefits of leasing or purchasing farm
equipment, economists at the Cooperative Extension Service noted that row crop farmers vary
in their leasing and purchasing practices. If there are depreciation and tax advantages to
purchasing, farmers tend to buy equipment; otherwise, they tend to lease equipment. With the
downturn in crop prices over the past several years, equipment dealers' sales have decreased,
and many new and innovative lease options are being tried and may make leasing more
attractive.
5

According to ADC management, the range of horsepower on this tractor was small because there is a difference in the quality of
tractors in the lower horsepower ranges, and ADC wanted to ensure it received a true row crop tractor.

13

Arkansas Department of Correction – Agriculture Division

Exhibit XI
Arkansas Department of Correction (ADC) – Agriculture Division
Cost Comparison of Purchasing Previously-Leased Tractors to New Tractors

Tractors Purchased FY2014
Case Magnum 340
Case Magnum 290
Case Magnum 290
Case Puma 130
Fiscal Year 2014 Total

Lease
Payments
$
24,634
22,735
22,735
18,892
88,996

Purchase
Price
$ 199,630
177,578
177,578
114,691
669,477

Tractors Purchased FY2015
Case Puma 130 with Loader
Case Puma 130 with Loader
Fiscal Year 2015 Total

23,110
23,110
46,220

115,750
115,750
231,500

138,860
138,860
277,720

134,580
134,580
269,160

900,977

$ 1,036,193

$ 1,096,027

Totals

$

135,216

$

$

Total
224,264
200,313
200,313
133,583
758,473

New Purchase Gain/(Loss)
Price
on Transaction
$ 257,663
$
33,399
224,258
23,945
224,535
24,222
120,411
(13,172)
826,867
68,394
(4,280)
(4,280)
(8,560)
$

59,834

Source: ADC and Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit)

VALUE OF LAND AND LEASE INCOME
Value of Land
Parcels of land farmed by ADC have been accumulated over the past 100-plus years. The
cost of these assets, which is reflected on the balance sheet found in Schedule 2 on pages
25-26, is not indicative of their present market value. ALA staff estimated current market value
using estimates reported in the Land Values 2015 Summary published by the USDA-NASS,
dated August 2015. The USDA-NASS includes Arkansas in the delta economic region, along
with Mississippi and Louisiana. The report provides an average value per acre for farm real
estate, farm cropland, and pasture, determined as follows:


Farm real estate: the value at which all land and buildings used for agriculture
production, including dwellings, could be sold under current market conditions if
allowed to remain on the market for a reasonable amount of time.



Farm cropland: the value of land used to grow field crops or vegetables or land
harvested for hay.



Pasture: the value of land that is normally grazed by livestock.

Over the five-year period from 2011 to 2015, farm real estate values in the delta economic
region increased from an estimated per-acre value of $2,300 in 2011 to $2,780 in 2015, an
increase of 21%. Values per acre in Arkansas increased more dramatically over this same
period, from $2,440 to $3,050 (25%). Exhibit XII on page 15 shows the increase in value of
farm real estate, irrigated and non-irrigated cropland, and pasture used by ADC from 2011 to
2015. Appendices A, B, and C show nationwide changes in values for farm real estate, farm
cropland, and pasture, respectively, from 2014 to 2015.

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Arkansas Legislative Audit

Exhibit XII
Arkansas Department of Correction (ADC) – Agriculture Division
Value of Farm Real Estate, Cropland, and Pasture
Calendar Years 2011 through 2015

$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
$0
Farm Real Estate

2011
$49,828,240

2012
$53,504,094

2013
$55,137,807

2014
$58,201,019

2015
$62,285,300

Cropland: Irrigated

28,880,916

31,769,008

35,033,807

37,670,760

38,926,452

Cropland: Non-irrigated

3,884,717

4,240,027

4,168,965

4,358,463

4,500,587

Pasture

11,870,842

11,596,054

11,870,842

12,310,502

12,585,290

Source: United States Department of Agriculture National Agriculture Statistics Service (USDA-NASS) Land Values 2015
Summary (unaudited by Arkansas Legislative Audit)

Potential Lease Income
Ark. Code Ann. § 12-30-308 allows the Board of Corrections, with the Governor’s approval, to
offer for rent or lease any land owned by the State and under the jurisdiction of the Board that
is not needed in the operation of the penal system. If ADC ceased farming operations or
determined that it was not necessary or feasible to cultivate all areas, the Board has the
authority to enter into lease agreements with other entities.
ALA staff obtained estimated annual cash rent per acre for irrigated land, non-irrigated land,
and pasture from the USDA-NASS and from AgHeritage Farm Credit Services, who were
recommended by the U of A Cooperative Extension Service to provide a range of rental prices.
The acres used were obtained from the Report of Commodities (FSA-578) filed by ADC with
the Farm Service Administration. These FSA forms require ADC to certify that the acreage of
crops/commodities and land uses listed are true and correct. ALA staff then calculated an
estimated range of rental income if all acreage as reported on the FSA-578 forms were rented.
Based on these sources, potential rent revenue to the State in one year would range from $1.7
million to $2.6 million, as shown in Exhibit XIII on page 16.

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Arkansas Department of Correction – Agriculture Division

Exhibit XIII
Arkansas Department of Correction (ADC) – Agriculture Division
Potential Revenue from Rent or Lease of Farm Land

Unit (County)
Acres
Cummins (Lincoln County):
Irrigated
7,750
Non-irrigated
1,293
Pasture
2,362
Total Cummins
11,405
Tucker (Jefferson County):
Irrigated
2,778
Non-irrigated
869
Pasture
91
Total Tucker
3,738
East Arkansas (Lee County):
Irrigated
2,029
Non-irrigated
207
Pasture
169
Total East AR
2,405
Wrightsville (Pulaski County):
Pasture
2,637
North Central (Izard County):
Pasture
254
Totals
20,439

USDA-NASS

Per Acre

$

$

774,920
55,589
28,339
858,848

Estimated Annual Cash Rent (Note)
AgHeritage Farm Credit Service
Low
Per Acre
High

100
43
12

$ 1,278,618
116,348
35,424
1,430,390

419,531
76,901
1,454
497,886

151
88
16

225,260
14,906
2,538
242,704

$

Per Acre

165
90
15

$ 1,356,110
148,667
70,847
1,575,624

$

175
115
30

458,428
78,205
1,363
537,996

165
90
15

486,211
99,928
2,726
588,865

175
115
30

111
72
15

334,846
18,633
2,539
356,018

165
90
15

355,140
23,809
5,077
384,026

175
115
30

61,971

24

39,556

15

79,112

30

2,536
$ 1,663,945

10

3,805
$ 2,367,765

15

7,610
$ 2,635,237

30

USDA-NASS = United States Department of Agriculture National Agriculture Statistics Service
Note: The USDA-NASS conducts a survey of farm operators to determine an average by geographic location. The most recent survey available was for
2014. AgHeritage Farm Credit Service (AFCS) is a financial cooperative that focuses on the financial needs of the agricultural community in 24 central
Arkansas counties. AFCS provided estimates based on observations of market conditions.
Source: USDA-NASS, AgHeritage Farm Credit Services, and USDA Farm Service Administration (unaudited by Arkansas Legislative Audit)

An additional revenue stream that could result from selling or leasing ADC farm land would be
the tax revenue to the State as well as local governmental entities. It should be noted that any
lease agreement for farm land would create logistical and security issues involved in moving
equipment and labor into a prison facility.

FARM PROGRAMS IN OTHER STATES
ALA staff requested information from officials in Mississippi, Louisiana, Tennessee, Oklahoma,
and Missouri on the agriculture activities within their correctional systems in order to compare
current practices and determine how other states financially contribute to their respective
correctional departments. The information received from these states is shown in Exhibit XIV
on page 17. Based on information provided from each state’s respective correctional system,
Arkansas has the largest farming operation in terms of acreage, livestock, and sales.

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Arkansas Legislative Audit

Exhibit XIV
Agricultural Activities in Departments of Correction in Arkansas and Five Surrounding States
Fiscal Year 2015
State
Arkansas
Crops and Gardens Acreage
Soybeans
Wheat
Corn
Rice
Sorghum
Vegetable gardens
Oats
Total Producing Acres
Livestock
Beef Cattle
Dairy Cattle
Pork
Chickens
Total Livestock

8,037
3,173
2,638
1,511
521
572
176
16,628
2,100
462
2,400
142,284
147,246

Revenue and Inmate Consumption
Sales
$ 9,458,105
Rental income
Inmate consumption3
8,795,399
Total Revenue and
$ 18,253,504
Inmate Consumption

Mississippi

Louisiana

2,638
1,116

Tennessee1

Missouri2

Oklahoma

2,014
316
360

100
561
913

180

5,328

2,870

3,650

0

477

1,650
475

2,622

477

2,125

$ 1,105,620
689,280
782,967

$ 4,721,365

$ 2,288,000

$ 2,577,867

$ 4,721,365

2,622

12,000
12,000

0

0

(Note)

$ 11,129,557
$ 2,288,000

$ 11,129,557

$

0

1

Tennessee provided totals rather than information by activity. Additionally, Tennessee operates a dairy that produces milk for inmate consumption but did not provide a
value for this commodity.
2

Missouri does not have an Agriculture Division within its correctional system.

3

Inmate consumption is the value of products produced or processed on correctional system farms and consumed by inmates.

Note: The amount reported by Oklahoma as revenue from sales appears to be incomplete.

Source: Various states' correctional systems (unaudited by Arkansas Legislative Audit)

OTHER ISSUES
Accident at Egg Production Facility
According to ADC, in July 2015, a power outage at the egg production facility resulted in the death of
approximately 41,000 chickens, with a replacement cost of $202,950. The incident was caused by an
electrical power pole being hit by an inmate who was operating farm equipment, resulting in loss of
power to the Cummins farming area. The egg production facility had a generator in place that had been
refurbished by the Construction Division. Although the generator was periodically tested, it did not
produce electricity as designed on this day, and ADC employees were unable to correct the problem. A
generator was rented and delivered to the Cummins facility as soon as possible, but the birds could not
be saved. As a result, a new primary generator was purchased at a cost of $116,057. The primary
generator is tied to a secondary generator to provide multiple layers of backup power. The generators
are tested weekly, according to the Farm Administrator.
Land Leases
ALA staff reviewed any instances in which ADC was leasing land for farming and found these to be
minimal. During fiscal year 2015, ADC leased approximately 190 acres at a cost of $1,816.

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Arkansas Department of Correction – Agriculture Division

Inmate Cost per Day and Prison Accreditation
Due to prison overcrowding, ADC entered into a contract with Bowie County, Texas, to house
up to 288 male inmates at a fixed rate of $36 per inmate per day. According to ADC, in fiscal
year 2015 the average cost per inmate per day was $62.90 in an ADC correctional facility and
$28 in a county jail in Arkansas. ADC attributed the difference in costs to level of service:
Compared to a county jail, ADC correctional facilities have a higher level of staffing and
provide more programs to inmates.
Although ADC is accredited by the American Correctional Association, accreditation is not
required for all facilities that house inmates (e.g., county jails). The accreditation process offers
the opportunity to evaluate ADC operations against national standards and remedy any
deficiencies. Accreditation benefits could include defense against lawsuits through the
documentation required by accreditation standards and an improved environment for ADC
personnel and inmates. The total amount paid to the American Correctional Association for
accreditation fees in fiscal year 2015 was $61,800.
Inspections of Processing Facilities
ADC’s processing facilities are subject to the following inspections by the Arkansas Livestock
and Poultry Commission and the Arkansas Department of Health:
Arkansas Livestock and Poultry Commission


Swine herd tested annually for brucellosis and pseudorabies.



Egg facilities tested quarterly for compliance with USDA standards.

Arkansas Department of Health


Raw milk and processed milk both tested four times in a six-month period in
accordance with Food and Drug Administration (FDA) standards for a Grade A
permit.



Milk processing equipment tested quarterly in accordance with FDA standards for a
Grade A permit.



Vegetable processing facilities inspected annually in accordance with the State’s
standards for a Retail Food Establishment license.

ALA staff examined the results of the inspections over various time periods, depending on
when the tests were required (i.e., quarterly, annually, etc.) and noted the following:


Swine – Negative for brucellosis and pseudorabies.



Eggs – Noncompliance was noted, but ADC corrected deficiencies at that time.



Milk and milk processing equipment – Noncompliance was noted. ADC received
four warning letters, and its permit was suspended three times.



Vegetables – No instances of noncompliance.

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Arkansas Legislative Audit

NOTEWORTHY ACCOMPLISHMENTS
Cost-Savings to the State
The Division provides produce and other commodities at a savings to the State by supplying
these items at a reduced cost. Over the five-year period ending with fiscal year 2015, ALA
staff estimated this savings to be $7.8 million, as shown in Exhibit XV. This amount was
determined by comparing the value of items produced or purchased by the Division, as noted
in ALA's Report on Certification of Consumption of Farm Produce, to the amount of state
funding provided to achieve these tasks.
Exhibit XV
Arkansas Department of Correction (ADC) - Agriculture Division
Cost-Savings to the State from Commodities Produced and Purchased by ADC
For Fiscal Years 2011 through 2015

Value per Report on Certification of Consumption
of Farm Produce
State Funding:
Budget Stabilization Trust Fund loan
Reimbursement from Inmate Care and Custody Fund
Cost-Savings to the State

2015

2014

Fiscal Year
2013

2012

2011

$ 8,795,399

$ 7,220,067

$ 6,883,215

$ 7,310,208

$ 6,079,035

(5,600,000)
(1,250,000)
$ 1,945,399

(4,600,000)
(250,000)
$ 2,370,067

(4,600,000)
(1,000,000)
$ 1,283,215

(4,600,000)
(1,000,000)
$ 1,710,208

(4,600,000)
(1,000,000)
$ 479,035

Source: Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit) and Arkansas Legislative Audit Report
on Certification of Consumption of Farm Produce

Inmate Incentives
As an incentive to work in ADC farming operations, inmates are provided with meritorious good
time in accordance with Ark. Code Ann. §§ 12-29-201 – 12-29-202, namely the reduction of
parole or transfer eligibility date based on good discipline, behavior, work practices, job
responsibilities, and involvement in rehabilitative activities while under the control and
supervision of ADC. Inmates in the Agriculture Division are awarded good time based upon
becoming proficient in the job skills related to their work assignment. Each job skill contains
three levels: beginner, intermediate, and senior. Each inmate is reviewed and tested for
advancement at a minimum of every 90 days, and after successful completion of each level,
the inmate is recommended for the following good time award:


Beginner level – 10 days.



Intermediate level – 20 days.



Senior level – 60 days.

Upon completion of the senior level, inmates should be expected to perform the designated job
at a reasonable level upon their return to society. In fiscal year 2015, 94 inmates from the
Division completed a program achievement of beginner, intermediate, and/or senior, resulting
in 1,680 days of meritorious good time awarded and applied against these inmates' parole or
transfer eligibility dates.

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Arkansas Department of Correction – Agriculture Division

FINDINGS AND RECOMMENDATIONS
As a result of review of ADC Agriculture Division operations, ALA staff issue the following
findings, which were previously noted in the report, and their accompanying recommendations:
Finding 1: According to ADC, 350 inmates are allowed to work daily to support Division
operations. Although the number of inmates and the number of hours worked by
inmates are reported to the Board of Corrections, ALA staff were unable to verify this
information since the Division does not have a consistent reporting mechanism in place
among the various Units.
ALA staff recommend ADC management establish procedures to ensure that
information reported to the Board of Corrections or outside entities is fully documented
and supported by source data.
Finding 2: As part of the annual close-out, the ADC records a journal entry for an
estimated amount of crops that have not been harvested as of year-end. ADC
management did not review and approve the estimation of crops in progress (CIP), and
as a result, CIP was overstated by $706,317. The amount of inventory recorded for CIP
was decreased and expenses were increased by $706,317 to reflect the misstatement.
This lack of internal controls over the CIP calculation and entry in AASIS limits ADC's
ability to provide assurance that the estimation of CIP was accurate.
ALA staff recommend ADC management implement internal controls that incorporate
proper segregation of duties between the calculation and approval of estimations and
the related journal entries.
Finding 3: ADC Administrative Directive 12-28 requires field and horticultural crops to
be offered to as large a number of potential buyers from both the statewide and
regional area as is practical to generate the best price possible for ADC commodities.
All sales or bids should be awarded on the basis of the most cash generated for ADC
and in a manner consistent with Arkansas procurement laws. Although ALA staff
requested documentation of the bids submitted by the non-winning buyers on all crop
sales in fiscal year 2015, ADC could not provide this information. Without maintaining
complete documentation of sales transaction, ADC limits its ability to support its
decisions to management, the Board of Corrections, and others.
ALA staff recommend ADC management follow procedures for maintaining
documentation of all bids submitted for farm commodity sales.
Finding 4: The consignment sheets that ADC used to document and/or summarize the
movement of all farm products were not pre-numbered but were generated as needed
from a Microsoft Excel template. Pre-numbering or electronically generating unique
numbers that cannot be manipulated by management allows for the determination of a
complete population for any given time period.
ALA staff recommend ADC management develop consignment sheets that include
pre-numbering to provide assurance that all forms have been accounted for within a
fiscal year or other time period.

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Arkansas Legislative Audit

Finding 5: ADC was overcompensated $20,779 for soybeans and corn and failed to report
the error. Procedures had been implemented to detect these discrepancies by matching
ADC weight tickets to the buyer weight tickets and other documentation provided with the
payment; however, ADC personnel performing the controls did not report these errors.
ALA staff recommend ADC management ensure that controls are understood and
followed in order to provide assurance that all revenue is recorded accurately and in the
correct period.
Finding 6: ADC could not provide documentation that procedures were followed regarding
the sale of beef cattle. Internal controls implemented by management, as documented by
ADC's Administrative Directive 12-28, require the Division's Deputy Director, or his or her
designee, to determine the need to sell produced livestock, with final approval provided by
the ADC Director. ALA staff examination of all beef cattle sales in fiscal year 2015
revealed that no documentation was maintained to support any decisions made by the
Division's Deputy Director, nor was there any documentation of approval by the ADC
Director. Based on the information provided, all decisions to sell animals were made by
the Farm Administrator. By not following the directives and procedures implemented,
upper management had limited ability to monitor the Division's beef cattle operations.
These procedures were modified March 30, 2016, with the issuance of Administrative
Directive 16-07. This new directive allows the Division's Deputy Director or the Farm
Administrator, if designated by the Deputy Director, to make the decisions to sell produced
livestock. Notification of sales are provided to the ADC Director and the Board of
Corrections’ liaison.
ALA staff recommend ADC management follow its administrative directives and maintain
all documentation that supports procedures performed and decisions made, including the
determination of designees.
Finding 7: Internal control procedures implemented by ADC require that two employees
not affiliated with the beef herd monitor and count the animals as they are loaded for
transport and then sign off on the consignment sheet to document that the procedure has
been completed. These procedures were not followed for two of the six sales in fiscal year
2015. In one instance, there was only one signature, and in the other instance, the two
employees who signed off on the consignment sheet were both employed in the beef herd
section.
ALA staff recommend ADC management design and implement internal controls that
cannot be circumvented by employees.
Finding 8: In fiscal year 2015, the Division sold beef cattle at auction houses in both
Arkansas and Oklahoma. Documentation was provided to support the decisions to sell
cattle in Oklahoma to maximize revenue; however, documentation could not be provided to
support the decisions to sell within the State. Division management stated to ALA staff that
the cattle sold in Arkansas were cull cattle that did not sell well in Oklahoma; however,
without documenting any evaluations made, ADC limits its ability to support its decisions to
ADC management, the Board of Corrections, and others.
ALA staff recommend ADC management establish procedures to document any
evaluations made regarding the most profitable methods for selling livestock.

21

Arkansas Department of Correction – Agriculture Division

SUMMARY
The purpose of ADC's Agriculture Division is to provide useful and meaningful work for
inmates, cost-effectively produce sufficient food for inmate consumption, and maximize
revenues from production and sales of marketable field crops and livestock. The Division
produces cash crops and livestock on over 20,000 acres throughout the State, with the
Cummins Unit containing the largest farm. According to ADC, 350 inmates are allowed to
participate in agricultural operations.
The Division incurred a net loss of $2.6 million in fiscal year 2015. This loss is attributable to
non-operating expenses for the transfer out of capital assets to other ADC funds and
commodities produced and consumed by inmates rather than sold. Operating revenues from
the sale of commodities produced totaled $9.5 million, with operating expenses totaling $16.4
million. Additional non-operating revenue included consumption certification income of $4.6
million and transfers in from the Inmate Care and Custody fund of $1.25 million.
Sales of cash crops in fiscal year 2015 totaled $7.2 million. The Division's production levels
were lower than USDA-NASS estimated yields for all crops but rice. Additionally, the Division
sold 1,512 head of beef cattle for $2.0 million in fiscal year 2015 and produced 34 million eggs
from March 2015 to April 2016, with 38% being consumed by inmates and 61% being sold to
outside parties.
The total value of the Division's farm real estate, cropland, and pasture totaled approximately
$62 million in 2015. If all acreage were rented out, yearly revenue could potentially range from
an estimated $1.7 million to $2.6 million. Compared to surrounding states, Arkansas has the
largest farming operation in terms of acreage, livestock, and sales.
Overall, the Division provides produce and other commodities at a savings to the State by
supplying these items at a reduced cost. From fiscal years 2011 through 2015, estimated
savings to the State was $7.8 million.

CONCLUSION
Best practices, technology, and other variables in any industry change over time, and as a
result, it may be necessary to request outside assistance to evaluate an entity's operations.
Ark. Code Ann. § 12-30-303 establishes a duty of cooperation between the U of A Cooperative
Extension Service and the ADC Director. Therefore, based on this review, ALA staff
recommend ADC management consider the need for the U of A Cooperative Extension
Service or another outside organization to evaluate all farming operations and activities
conducted by ADC and to provide recommendations that may be used to maximize revenues
from production and sales of marketable field crops and livestock and allow for the costeffective production of sufficient food for inmate consumption.

MANAGEMENT RESPONSE
Management response is provided in its entirety in Appendix D.

22

Arkansas Legislative Audit

Schedule 1
Arkansas Department of Correction (ADC)
Agriculture Division
Income Statement
For the Year Ended June 30, 2015
Total
OPERATING REVENUES
Soybean sales
Rice sales
Corn sales
Wheat sales
Sorghum sales
Cattle sales
Juice sales
Egg sales
Other livestock sales
Other sales

$

TOTAL OPERATING REVENUES

3,540,067
1,497,581
1,285,852
791,687
53,187
2,044,928
89,842
59,508
51,493
43,960
9,458,105

Less: State Treasury service charge

(170,894)

NET OPERATING REVENUES

9,287,211

OPERATING EXPENSES
Salaries and benefits
Communication and transportation of commodities
Printing and advertising
Repairing and servicing
Utilities and rent
Travel and subsistence
Professional services
Insurance and bonds
Other expenses and services
Shop and industrial supplies
Seed and fertilizer control agent
Agriculture, horticulture, and wildlife supplies
Commodities, materials, and supplies
Refunds, taxes, and claims
Meat for inmate consumption
Depreciation

3,444,039
39,959
10,158
1,115,352
677,759
6,986
129,302
111,581
416,901
319,669
104,016
6,215,832
1,609,118
44,765
1,536,270
651,046

TOTAL OPERATING EXPENSES

16,432,753

23

Arkansas Department of Correction – Agriculture Division

Schedule 1 (continued)
Arkansas Department of Correction (ADC)
Agriculture Division
Income Statement
For the Year Ended June 30, 2015

OPERATING INCOME (LOSS)

$

Total
(7,145,542)

NONOPERATING REVENUES (EXPENSES)
Consumption certification income1
Transfers from ADC
Grants and reimbursements
Interest income
Loss on fixed asset disposal

4,600,000
1,250,000
119,641
15,890
(5,844)
(1,443,307)
7,137
698
3,116

Transfer out of capital assets to other ADC units 2
Marketing and redistribution sale proceeds
Prior-year warrants outlawed and cancelled
Prior-year refund to expense
TOTAL NONOPERATING REVENUES (EXPENSES)

4,547,331

CHANGE IN NET POSITION

(2,598,211)

TOTAL NET POSITION - JULY 1

29,891,069

TOTAL NET POSITION - JUNE 30

1

$

27,292,858

In fiscal year 2015, the loan from the Budget Stabilization Trust Fund increased by $1 million to $5.6 million.

2

This expense was a non-recurring journal entry unique to fiscal year 2015: a correcting entry processed by the Department of
Finance and Administration in AASIS to reclassify fixed assets to other ADC funds. In total, the entry caused no net effect for the
ADC financial statements.
Source: Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit)

24

Arkansas Legislative Audit

Schedule 2
Arkansas Department of Correction (ADC)
Agriculture Division
Balance Sheet
For the Year Ended June 30, 2015

Total
ASSETS
Current Assets:
Cash and cash equivalents
Memberships in cooperative organizations
Receivables:
Accounts receivable
Due from other governments
Due from other funds
Inventories:
Livestock
Crop in progress
Feed, seed, fertilizer, and chemicals
Finished goods
Fuel
Farm parts
Total Current Assets

$

1,946,489
1,212,428
748,287
111,676
17,334
4,540,930
3,615,136
1,147,898
600,271
100,207
59,061
14,099,717

Noncurrent Assets:
Capital Assets:
Land and land improvements
Infrastructure
Buildings
Equipment
Assets under construction
Less accumulated depreciation
Total Noncurrent Assets

9,850,918
585,012
9,416,542
16,286,208
3,873,634
(17,183,228)
22,829,086

TOTAL ASSETS

$

25

36,928,803

Arkansas Department of Correction – Agriculture Division

Schedule 2 (continued)
Arkansas Department of Correction (ADC)
Agriculture Division
Balance Sheet
For the Year Ended June 30, 2015

Total
LIABILITIES
Current Liabilities:
Accounts payable
Accrued payroll
Due to other funds of ADC
Due to other agencies
Due to other governments
Total Current Liabilities

$

Noncurrent Liabilities:
Loan payable to Budget Stabilization Trust Fund1
Loan payable to Prison Construction Trust Fund
Claims and judgments
Total Noncurrent Liabilities

5,600,000
3,810,124
3,075
9,413,199

TOTAL LIABILITIES

9,635,945

NET POSITION
Net investment in capital assets
Unrestricted
Total Net Position

22,829,086
4,463,772
27,292,858

TOTAL LIABILITIES AND NET POSITION

1

116,783
85,408
19,014
1,098
443
222,746

$

In fiscal year 2015, the loan from the Budget Stabilization Trust Fund increased by $1 million to $5.6 million.

Source: Arkansas Administrative Statewide Information System (unaudited by Arkansas Legislative Audit)

26

36,928,803

APPENDICES
Appendix A – 2015 Farm Real Estate Value by State – Dollars Per Acre and Percent
Change from 2014
Appendix B – 2015 Cropland Value by State – Dollars Per Acre and Percent Change
from 2014
Appendix C – 2015 Pasture Value by State – Dollars Per Acre and Percent Change
from 2014
Appendix D – Arkansas Department of Correction – Management Response

A-1

Source: United States Department of Agriculture National Agriculture Statistics Service (USDA-NASS; unaudited by Arkansas Legislative Audit)

Appendix A

B-1

Source: United States Department of Agriculture National Agriculture Statistics Service (USDA-NASS; unaudited by Arkansas Legislative Audit)

Appendix B

C-1

Source: United States Department of Agriculture National Agriculture Statistics Service (USDA-NASS; unaudited by Arkansas Legislative Audit)

Appendix C

Appendix D
Arkansas Department of Correction
Management Response

D-1

Appendix D (continued)

D-2

Appendix D (continued)

D-3

Appendix D (continued)

D-4

Appendix D (continued)

D-5

Appendix D (continued)

D-6

Appendix D (continued)

D-7

Appendix D (continued)

D-8

Appendix D (continued)

D-9

Appendix D (continued)

D-10

Appendix D (continued)

D-11