REPORT OF
THE
STATE AUDITOR

Private Prison Procurement
Department of Corrections
Performance Audit
November 2006

LEGISLATIVE AUDIT COMMITTEE
2006 MEMBERS
Senator Jack Taylor
Chair

Senator Stephanie Takis
Vice-Chair

Representative Fran Coleman
Senator Jim Isgar
Representative James Kerr
Senator Nancy Spence
Representative Val Vigil
Representative Al White

Office of the State Auditor Staff
Sally Symanski
State Auditor

Cindi Stetson
Deputy State Auditor

Julie Kennedy
Jonathan Trull
Anna Weisheit
Legislative Auditors

STATE OF COLORADO
OFFICE OF THE STATE AUDITOR
303.869.2800
FAX 303.869.3060

Sally Symanski, CPA
State Auditor
Legislative Services Building
200 East 14th Avenue
Denver, Colorado 80203-2211

November 30, 2006

Members of the Legislative Audit Committee:
This report contains the results of a performance audit of private prison procurement.
The audit was conducted pursuant to Section 2-3-103, C.R.S., which authorizes the State
Auditor to conduct audits of all departments, institutions, and agencies of state government.
The report presents our findings, conclusions, and recommendations, and the responses of
the Department of Corrections.

TABLE OF CONTENTS
PAGE
Report Summary......................................................................................................1
Recommendation Locator.....................................................................................5
FINDINGS AND RECOMMENDATIONS
Private Prison Procurement....................................................................................7
Employee Conduct..............................................................................................13
Prison Construction.............................................................................................18
Appendix A: Capital Construction Request History....................................... A-1
Appendix B: Adult Inmate Population Projections..........................................B-1

STATE OF COLORADO
OFFICE OF THE STATE AUDITOR

REPORT SUMMARY

SALLY SYMANSKI, CPA
State Auditor

Private Prison Procurement
Department of Corrections
Performance Audit, November 2006
Authority, Purpose, and Scope
This performance audit was conducted under the authority of Section 2-3-103, C.R.S., which
authorizes the Office of the State Auditor to conduct performance audits of all departments,
institutions, and agencies of state government. The audit work was conducted between August and
October 2006 in accordance with generally accepted government auditing standards.
This audit was conducted in response to a legislative request. We reviewed the Department of
Corrections’ (the Department’s) processes for procuring private prison beds. We also investigated
an allegation regarding possible misconduct by a former Department employee with respect to an
RFP issued by the Department in December 2005 for male, medium-security prison beds. Finally,
we reviewed the Department’s program controls for addressing potential conflicts of interest and
for promoting ethical behavior. We gratefully acknowledge the assistance and cooperation extended
by staff from the Department of Corrections.

Background
According to the statutes, the Department is responsible for managing, supervising, and controlling
the correctional institutions operated and supported by the State, including monitoring the activities
of private prisons. Since the 1980s, Colorado’s inmate population has exceeded the physical
capacity of prisons operated by the Department, and as a result, the Department has housed inmates
in county jails, prisons operated by other states, and private prisons. As of October 31, 2006 (most
recent data available), the Department’s inmate population was about 22,300, of which 4,700 (21
percent) were housed in six private prisons located in Colorado. The Department paid about $70
million to incarcerate inmates in private prisons in Fiscal Year 2006.
Because of growth in Colorado’s inmate population and the lack of beds available in state-owned
and -operated prisons, the Department continues to rely upon private prisons to house its inmate
backlog and reports that it will need to procure additional private prison beds in the future. Since
2001 the Department has issued the following three requests for proposals (RFPs) for private prison
services in Colorado:

For further information on this report, contact the Office of the State Auditor at 303.869.2800.

-1-

SUMMARY
2
Private Prison Procurement, Department of Corrections Performance Audit - November 2006

Construction of a Level III, Pre-Parole and Parole Revocation Facility (2001). In 2003 the
Department selected Community Education Centers, Inc. (CEC) and The GEO Group (formerly
Wackenhut) to each construct and manage a 500-bed pre-parole and parole revocation facility.
CEC’s Cheyenne Mountain Re-Entry Center, located in Colorado Springs, has been constructed and
accepted its first residents in August 2005. As of our audit, The GEO Group had not begun
construction of its proposed facility due to zoning problems and lack of agreement with the city of
Pueblo and the Department regarding facility design, financing, and contract terms.
Construction of up to 2,250 private prison beds for male inmates (December 2005). The
Department received proposals from five private companies and in June 2006 selected two
companies to construct the prison beds: Corrections Corporation of America (CCA) and The GEO
Group. CCA plans to expand two of its existing private prisons by 720 beds each. The GEO Group
proposes to construct a new 1,500-bed facility in Ault, Colorado, located in Weld County. Since
issuing the awards for this RFP, the Department has established an agreement with CCA for
construction of private prison beds but is still negotiating contract terms with The GEO Group.
Construction of up to 750 private prison beds for female inmates (January 2006). The
Department received proposals from two private companies and in June 2006 selected Cornell
Companies, Inc. to construct the prison beds. Cornell Companies, Inc. plans to build a new 832-bed
prison in Hudson, Colorado, located in Weld County.

Summary of Audit Findings
Our audit did not identify any evidence indicating that the Department did not comply with statutes
and procurement rules related to the issuance of the requests for proposals (RFPs) and the selection
of proposals for award. We identified areas for improvement related to the Department’s oversight
of employee conduct and conflicts of interest. We also discuss options and challenges related to
addressing the shortage of prison beds in the future.
Employee Conduct
We were asked to determine whether a former senior-level employee at the Department used or
disclosed confidential information acquired in the course of his official duties to prepare a proposal
for a private company that received an award as part of an RFP issued by the Department in
December 2005. Nothing came to our attention indicating that the former employee used or
disclosed confidential information to assist prospective bidders in responding to the Department’s
2005 RFP. However, we found:
•

There is no evidence that the former employee requested or the Department approved
the former employee’s outside employment, which is required by State Personnel
Board Rules and Department regulations. In August 2005 the former senior-level
employee, while employed by the Department, filed articles of organization with the

Report of The Colorado State Auditor

SUMMARY
3

Colorado Secretary of State for a prison consulting business. Public records and interviews
indicate that the former employee began actively working on behalf of his prison consulting
business as of November 2005, while the former employee was still employed by the
Department.
•

The former employee’s private business activities arguably present a conflict of interest
and result in a breach of his fiduciary duty and the public trust. Statute prohibits a state
employee from assisting any person for a fee or other compensation in obtaining any
contract, claim, license, or other economic benefit from his agency. We found that this
former employee, while still employed by the Department, began working on behalf of his
prison consulting business to assist prospective bidders in developing a proposal for the
Department’s December 2005 RFP related to private prison services. One of the companies
that the former employee helped develop a proposal ultimately received one of the awards
issued by the Department in June 2006. The former employee reports that his business could
receive a fee as high as $1 million if the company for which he provided services constructs
the private prison under the award.

•

The former employee’s use of paid sick leave valued at $14,000 is in question.
According to timesheets, the former employee used a combination of annual, sick, and
holiday leave between November 2005 and January 2006. As mentioned earlier, public
records indicate that this employee began working on behalf of his business as early as
November 2005, while still employed by the Department. Neither the Department nor the
former employee provided evidence that the employee received the express consent from his
attending physician or appointing authority to engage in outside work activities.

Additionally, we identified weaknesses in the Department’s controls related to ensuring that
employees uphold high ethical standards. For example, the Department does not require employees
to annually provide the Department with signed certificates attesting that they have read, understand,
and will abide by the Governor’s executive order on code of ethics.
Prison Construction
The Department is anticipating that over the next five years it will have a shortage of approximately
8,500 prison beds physically located in Colorado. Some of the options for addressing the shortages
and the challenges faced by the Department include:
•

Constructing new prisons and/or expanding existing facilities using state capital
construction funds. This is the Department’s preferred method for increasing its prison bed
inventory, primarily because the Department maintains direct control over the design,
construction, and operation of state prisons. However, although the Department has
submitted several requests for capital construction funds since Fiscal Year 2000, it has

SUMMARY
4
Private Prison Procurement, Department of Corrections Performance Audit - November 2006

received limited funding for constructing additional prison beds, mainly due to the State’s
revenue shortfalls and competing demands for capital construction monies.
•

Using private prisons to house inmates. One of the main advantages to using private
prison companies to house state inmates is that the private sector, rather than the State,
finances the design and construction of the prisons, which allows the State to retain its
capital construction monies for other priorities. A major drawback is that the State
relinquishes some control over the design, construction, and operation of the prisons.

•

Implementing other options to provide relief to the Colorado prison system. Other
options include converting one-person prison cells into two-person cells and increasing the
percentage of the inmate population placed in community corrections.

To prevent the State from reaching a crisis situation with housing its inmate population, the
Department will need to continue to work closely with the Governor’s Office and the General
Assembly to identify short- and long-term solutions to addressing shortages in prison beds.
Our recommendations and the responses of the Department of Corrections can be found in the
Recommendation Locator and in the body of the report.

RECOMMENDATION LOCATOR
Agency Addressed: Department of Corrections
Rec.
No.

Page
No.

Recommendation
Summary

Agency
Response

Implementation
Date

1

17

Investigate the activities of the former senior-level employee regarding
compliance with ethical and legal requirements related to his employment with
the State and the appropriateness of leave benefits used prior to his retirement,
seek reimbursement from the former employee for all misused paid leave, and
refer the case to the local district attorney, as appropriate.

Agree

December 2006

2

17

Require all employees to annually provide signed certificates attesting that they
have read, understand, and will abide by the Governor’s executive order on code
of ethics, and revise the Department’s training policy to require all management
staff to receive refresher training on the State’s codes of ethics and conduct at
least every two years.

Agree

January 2007

3

28

Continue working with the Governor’s Office and the General Assembly to
identify short- and long-term solutions to addressing the shortage of prison
beds for Colorado inmates.

Agree

Ongoing

–5–

7

Private Prison Procurement
Background
According to statute (Section 17-1-103(1)(a), C.R.S), the Department of Corrections
(the Department) is responsible for managing, supervising, and controlling the
correctional institutions operated and supported by the State, including monitoring
and supervising the activities of private prisons. The Department is also responsible
for providing work and self-improvement opportunities to those inmates in its
custody and for establishing an environment within its correctional institutions that
promotes rehabilitation for successful reentry into society. The Department must
also develop a systematic building program providing for the projected, long-range
correctional needs of the State. The Department is also charged with supervising
inmates in community corrections facilities and on parole, and developing and
operating the Colorado Youthful Offender System. As of October 31, 2006 (most
recent data available), the Department’s inmate population was about 22,300
inmates, of which 4,700 (21 percent) were in private prisons. The Department spent
approximately $618 million in Fiscal Year 2006, of which $70 million was for
housing inmates in private prisons, and had about 5,900 FTE.
Colorado’s inmate population has exceeded the physical capacity of the
Department’s prisons since the 1980s. For several years, the Department used
county jails to house its inmate backlog. However, in the late 1980s, 25 counties
sued the Department to reduce inmate populations in their jails and to receive
compensation for services rendered for housing state inmates. In response, the
Department began contracting with other state departments of corrections and out-ofstate county jails to house Colorado’s inmate backlog. In 1993, placement shifted,
almost exclusively, to private prisons in other states. Placement of Colorado
offenders in out-of-state prisons resulted in some inmates’ families filing lawsuits
against the Department, citing the hardships of traveling to visit their relatives in
these facilities.
In 1994 the Bent County Correctional Facility (the State’s first private prison)
opened in southeastern Colorado. The Department moved some of its inmates
housed in out-of-state facilities to this private prison. By December 1998, three
additional private prisons operated in Colorado, and all inmates in out-of-state
facilities were returned to Colorado. The first private female facility in Colorado
opened for operation in 2003. The Department did not issue requests for proposals
(RFPs) for construction of these five private prisons and was not involved in
selecting the prisons’ locations, developing the design specifications, or monitoring

8

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

the construction of the facilities.
Since 2001 the Department has issued three RFPs for private prison services to be
provided in facilities located in Colorado. As discussed in greater detail later, state
statutes required the Department to issue an RFP for the construction of a Level III
(medium security), Pre-Parole and Parole Revocation facility by December 1, 2001.
In an effort to solicit competition in the private prison market in Colorado, the
Department issued two additional RFPs in December 2005 and January 2006 for
male and female private prison beds, respectively.
Currently six private prisons operate in the State, including (1) Brush Correctional
Facility, (2) Bent County Correctional Facility, (3) Crowley County Correctional
Facility, (4) Huerfano County Correctional Center, (5) Kit Carson Correctional
Center, and (6) Cheyenne Mountain Re-Entry Center. Brush Correctional Facility
houses female offenders, and the other five house males. The map below shows
where these prisons are located.

1

5

6

3
2
4

Report of The Colorado State Auditor

9

The table below shows the number of Colorado inmates housed in each type of
facility used by the Department, including state prisons, private prisons, county jails,
and community corrections programs.
Department of Corrections
Number of Colorado Inmates by Facility Type as of October 31, 2006
Type of Facility
State Prisons
Private Prisons
Community Corrections Facilities & County Jails
Off-Grounds 1
TOTALS

Number of
Inmates
14,100
4,700
3,000
500
22,300

Percent of
Total
63%
21%
14%
2%
100%

Source: Department of Corrections October 31, 2006, Monthly Population and Capacity Report.
1
Off-grounds includes escapes, walkaways, and those inmates temporarily off-grounds for court or
medical treatment.

In Fiscal Year 2006 the Department spent about $618 million to house and provide
services to inmates in its custody. Of this amount, the Department spent $531
million (86 percent) on inmates housed in state-operated prisons and paid
approximately $70 million (11 percent) to private prisons, $14 million (2 percent)
to county jails, and $3 million (1 percent) to community corrections facilities to
house state inmates. As of October 31, 2006, state-owned and -operated prisons
were at 99 percent capacity and private prisons at 97 percent capacity. The State’s
current prison population is growing by about 100 inmates per month.

Request for Proposals
Construction of new state-owned and -operated prisons has been limited in Colorado
in recent years (see Appendix A). The only construction projects currently
authorized by the General Assembly are the Colorado State Penitentiary II, which
is still under construction and should open in August 2009, and the renovation and
expansion of the Denver Reception and Diagnostic Center (DRDC). Inmate
population projections prepared by Legislative Council staff indicate that the prison
population will increase by about 7,300 inmates, or 33 percent, over the next five
years (see Appendix B). Because of the growth in Colorado’s inmate population and
the lack of beds available in state prisons, the Department continues to rely upon
private prisons to house its inmate backlog and reports that it will need to procure
additional private prison beds in the future.
Several statutory provisions direct the Department’s procurement of private prison
beds. In particular, statute (Section 17-1-105(1)(f), C.R.S.) gives the Department the
authority to enter into contracts for the confinement and maintenance of inmates in

10

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

its custody. Furthermore, statute (Section 17-1-104.9, C.R.S.) authorizes the
Department “to permanently place state inmates classified as medium custody and
below in private contract prisons.” The Department classifies inmates, using a
custody range from minimum (not a management problem or threat) to
administrative segregation (severe management problem and high threat level), with
medium-custody inmates falling in the middle. Statutes prohibit the permanent
placement of high-custody inmates (close and administrative segregation
classifications) in private prisons. Therefore, to house Colorado inmates in a private
prison, the private prison must be designed and constructed to house inmates
classified as medium custody and below.
Statutes also provide specific guidance and requirements for the use of requests for
proposals for procuring private prison beds. Specifically, statute (Section 17-1-202,
C.R.S.) states that before the Department enters into any contract for designing,
financing, acquiring, constructing, and/or operating a private contract prison, the
Department may issue a request for competitive proposals. If competitive proposals
are requested, the Department must award the contract to the company found by the
Department to be “the most qualified and most competitive under the
circumstances,” and the company selected must demonstrate that it has (1) the
qualifications, experience, and management personnel necessary to carry out the
terms of the contract; (2) the ability to expedite the location, design, and construction
of a private correctional facility; and (3) the ability to comply with applicable laws,
court orders, and national correctional standards.
Additionally, statute (Section 17-1-202.5(2)(b), C.R.S.) requires the Department to
adequately inform prospective contractors that the Department will give priority to
proposals that satisfy the requirements of Section 17-1-202, C.R.S. (see above), and
are competitive to the extent that they contain terms most favorable to the
Department. This section also requires the Department to take steps, to the extent
possible, to create a competitive market and to avoid decreased competition and
creation of a monopoly in the market. Furthermore, once the decision is made to
issue RFPs, the Department must comply with the State of Colorado Procurement
Rules, which implement the provisions of the Colorado Procurement Code (Section
24-101-101, et seq., C.R.S.) and the Construction Bidding for Public Projects Act
(Section 24-92-101, et seq., C.R.S.).
Since 2001 the Department has issued three requests for proposals (RFPs) for private
prison services in Colorado to address the current and anticipated growth in its
inmate population. These RFPs are described below.
Pre-Parole and Parole Revocation Facility: As required by statute (Section 17-1206.5, C.R.S.), the Department issued an RFP for the construction of a Level III, PreParole and Parole Revocation Facility in 2001. The purpose of this facility is to

Report of The Colorado State Auditor

11

provide assessment, programming, reintegration, and treatment services in a
medium-security correctional setting to Colorado offenders who are either near
parole eligibility or whose parole has been revoked. Statute defines the types of
offenders that may be placed in this type of facility, which include:
•

Inmates who have not been convicted of a crime of violence (as defined in
Section 18-1.3-406, C.R.S) and who have no more than 19 months remaining
until their parole eligibility date.

•

Inmates who have been convicted of a crime of violence and who have no
more than 9 months remaining until their parole eligibility date.

•

Offenders whose parole has been revoked and who will not be incarcerated
in the facility more than 180 days.

This facility must meet the requirements of a Level III facility as set forth in statute
(Section 17-1-104.3 (1)(a)(III), C.R.S.).
In 2003 the Department selected Community Education Centers, Inc. (CEC) and The
GEO Group (formerly Wackenhut) to each construct and manage a 500-bed preparole and parole revocation facility. CEC’s Cheyenne Mountain Re-Entry Center,
located in Colorado Springs, has been constructed and accepted its first residents in
August 2005. As of our audit, The GEO Group has not begun construction of its
proposed facility due to local zoning problems and lack of agreement with the city
of Pueblo and the Department regarding facility design, financing, and contract
terms. According to Department management, the Department is considering
canceling The GEO Group’s award if the company does not propose satisfactory
solutions to these issues by November 30, 2006.
Private Prison Beds and Services for Male Inmates: In December 2005 the
Department issued an RFP for the construction of up to 2,250 private prison beds for
male inmates classified as medium custody or below. The Department received
proposals from five private companies and in June 2006 selected two companies to
construct the prison beds: Corrections Corporation of America (CCA) and The GEO
Group. CCA plans to expand two of its existing private prisons – the Bent County
Correctional Facility and Kit Carson Correctional Center – by 720 beds each. The
GEO Group proposes to construct a new 1,500-bed facility in Ault, Colorado, located
in Weld County.
Since issuing the awards for this RFP, the Department has established an agreement
with CCA for construction of private prison beds but is still negotiating contract
terms with The GEO Group. Specifically, the Department entered into a nonfiscal
implementation agreement with CCA in November 2006 for 1,440 prison beds to be

12

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

constructed by the private company over the next three years. With a nonfiscal
implementation agreement, the Department will not pay any funds to the private
company until after the prison beds are constructed and inmates are placed at the
facility. This means that CCA will not receive payment for the additional prison
beds until at least March 2008. Further, the agreement includes specific deadlines for
the design and construction of the facility and requires the company to pay for a
Department project liaison, who will be hired and employed by the Department and
will provide contract management services for the Department.
The Department has not established a nonfiscal implementation agreement with The
GEO Group due to the company’s request for an inmate bed guarantee. The
Department has not historically made any guarantees to private prison companies
that it will place a specific number of inmates in private prisons operating in
Colorado. According to Department management, the Department does not plan to
establish an agreement with The GEO Group until a decision is made by the
Governor’s Office, in consultation with the General Assembly, regarding the use of
bed guarantees.
Upon completion of the new private prison beds, the Department plans to use the
same method it has used in the past to procure ongoing private prison correctional
services at the new private facilities. Historically, the Department has entered into
intergovernmental agreements with the local governments (city or county where the
prison is located) for the confinement of state inmates in private prisons in their
jurisdictions. The local governments subcontract with private companies, which
own, operate, and manage the facilities. The Department pays the local
governments, which in turn pay the private companies.
Private Prison Beds and Services for Female Inmates: In January 2006 the
Department issued an RFP for the construction of up to 750 private prison beds for
female inmates classified as medium custody or below. The Department received
proposals from two private companies and in June 2006 selected Cornell Companies,
Inc. to construct the prison beds. Cornell Companies, Inc. plans to build a new 832bed prison in Hudson, Colorado, located in Weld County.
The Department expects to enter into a nonfiscal implementation agreement, similar
to the one established with CCA, with Cornell Companies, Inc. The agreement will
cover the construction of the new private prison, scheduled for completion in May
2008. As mentioned above, the Department plans to enter into an intergovernmental
agreement with the city government where the prison is located prior to placing
inmates in the facility.

Report of The Colorado State Auditor

13

Audit Scope
This audit was conducted in response to a legislative request. The audit reviewed the
Department of Corrections’ (the Department’s) processes for procuring private
prison beds since 2001, including the Department’s compliance with applicable
statutes and procurement rules. Overall, we did not identify evidence indicating that
the Department did not comply with statutes and procurement rules related to the
issuance of the RFPs and the selection of proposals for award. We also investigated
an allegation regarding possible misconduct by a former Department employee with
respect to the 2005 RFP for male, medium-security prison beds and reviewed the
Department’s program controls for addressing potential conflicts of interest and
promoting ethical behavior. We identified two areas for improvement and discuss
each below.

Employee Conduct
State statutes, rules, regulations, and executive orders provide guidance and set forth
a range of requirements related to the conduct of state employees. For example,
Article 18 of Title 24 of the Colorado Revised Statutes requires state employees to
carry out their duties impartially and to avoid real or perceived conflicts of interest.
Further, an executive order issued in January 1999 by Governor Owens specifies that
state employees should serve the people of the state “with integrity and honesty and
should discharge their duties in an independent and impartial manner.”
We were asked to determine whether a former senior-level employee at the
Department used or disclosed confidential information acquired in the course of his
official duties to prepare a proposal for a private company that received an award as
part of the Department’s procurement of 2,250 male, medium-security private prison
beds. As we described previously, the RFP for this procurement was released in
December 2005 and the award was made in June 2006. We reviewed documentation
related to this RFP, including draft and final RFP documents, internal and external
Department communications, proposals submitted in response to the RFP, and
documentation related to the scoring and selection of proposals. We also interviewed
current and former Department employees, representatives from companies
submitting proposals in response to the RFP, and members of the committee that
scored and selected the winning proposals. Nothing came to our attention indicating
that the former employee used or disclosed confidential information to assist
prospective bidders in responding to the Department’s 2005 RFP. However, we
found that prior to this employee’s retirement in January 2006, the former employee
may have violated state statutes, personnel rules, and Department regulations
regarding outside employment and failed to observe rules of conduct for state
employees. We describe these issues below.

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Private Prison Procurement, Department of Corrections Performance Audit - November 2006

Outside Employment: According to statute (Section 24-50-117, C.R.S.), “no
employee shall engage in any employment or activity which creates a conflict of
interest with his duties as a state employee.” This statute requires the State
Personnel Board to promulgate rules on incompatible activities, conflicts of interest,
and outside employment. Personnel Board Rules allow state employees to engage
in outside employment only if they receive advance written approval from their
appointing authority. The rules state that this approval should be based on whether
“the outside employment interferes with the performance of the state job or is
inconsistent with the interests of the state, including raising criticism or appearance
of a conflict.” Department regulations stipulate that employees, prior to engaging in
outside employment, must complete and submit an outside work request to their
supervisor for review and approval.
In August 2005 the former senior-level employee, while employed by the
Department, filed articles of organization with the Colorado Secretary of State for
a prison consulting business. Public records and interviews indicate that the former
employee began actively working on behalf of his prison consulting business as of
November 2005. Neither the Department nor the former employee provided
documentation showing that the employee requested or the Department approved the
former employee’s outside employment.
We also found that the former employee’s private business activities arguably
present a conflict of interest and result in a breach of his fiduciary duty and the
public trust. In particular, statute (Section 24-18-108 (2)(b), C.R.S.) prohibits a state
employee from assisting any person for a fee or other compensation in obtaining any
contract, claim, license, or other economic benefit from the employee’s agency.
Statutes state that an employee violating this provision, if proven beyond a
reasonable doubt, has breached his fiduciary duty and the public trust. As noted
above, we found that this former employee, while still employed by the Department,
began working on behalf of his prison consulting business to assist prospective
bidders in developing a proposal for the Department’s December 2005 RFP related
to private prison services. One of the companies for which this former employee
helped develop a proposal ultimately received one of the awards issued by the
Department in June 2006. As of the date of our audit, the Department had not
entered into any agreement, including a nonfiscal implementation agreement, with
this company related to this award, and the Department will not pay the company any
state funds until the prison is constructed and inmates are placed in the facility.
The former employee reports that if the company for which he provided consulting
services constructs the new private prison under the award, the former employee’s
business could receive a fee as high as 1 percent of total construction costs. The
former employee estimates that the facility will cost approximately $100 million to

Report of The Colorado State Auditor

15

build, and his fee would be about $1 million. At the time of our audit, the
Department had not investigated the activities of the former employee.
Leave Benefits: According to Personnel Board Rules and Department regulations,
sick leave is provided to state employees in the event time off is needed for health
reasons (e.g., medical examinations and treatment). Department regulations prohibit
employees on approved sick leave from engaging in any type of employment,
vocation, avocation, or recreational activity, either paid or unpaid, without the
express consent of their attending physician and the appointing authority.
Unauthorized use of leave can result in the denial of the paid leave and/or corrective
or disciplinary action.
Between November 2005 and January 2006, the former employee was on extended
paid leave from the Department. According to the former employee’s timesheets, he
used a combination of annual, sick, and holiday leave during this time. As noted
earlier, public records indicate that the former employee began working on behalf of
his prison consulting business as early as November 22, 2005. Neither the
Department nor the former employee provided evidence that the former employee
received the express consent of his attending physician or appointing authority to
engage in outside work activities. As a result, we question the former employee’s
use of about 240 hours of paid sick leave benefits valued at about $14,000 from
November 22, 2005, until his retirement on January 31, 2006.

Ethical Standards
The Department has established some controls to ensure that its employees uphold
high ethical standards. For example, the Department has developed regulations that
describe appropriate and inappropriate employee conduct. These regulations require
employees to sign a certificate of review and compliance attesting that they have
read, understand, and will abide by the Governor’s executive order on the code of
ethics, and the certificates are to be placed in each employee’s personnel file.
We identified weaknesses in the Department’s controls over employee conduct and
found that the Department could improve in three areas. First, we reviewed the
personnel files for 28 current and former Department employees, most of whom were
senior-level employees, and found that more than one-half (15) of the files did not
contain a signed certificate, including the file for the former senior-level employee
discussed earlier. The Department does not require employees to sign these
certificates on an annual basis, which is the requirement of some state agencies.
Requiring that employees sign such a statement annually is important because it
communicates to staff that all employees are required to comply with the State’s
codes of ethics and conduct and provides confirmation that employees are aware of
the standards by which they will be held accountable.

16

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

Additionally, we found the Department does not require employees to take refresher
training on the State’s codes of ethics and conduct, unless prescribed as part of an
employee’s disciplinary action. All newly hired employees and volunteers must
attend the Department’s basic training program, which provides an overview of the
Department and a basic level of knowledge, skills, and performance-based training.
One of the courses included in the basic training program is Professionalism - Code
of Conduct, which is designed to teach new employees about the Department’s
expectations of ethical and professional behavior. We reviewed the training files for
the same 28 current and former employees and found that more than one-half (15)
had not attended the Department’s Professionalism - Code of Conduct training since
at least 1995 (11 years), including the former senior-level employee discussed
earlier.
Finally, we found that the Department’s Professionalism - Code of Conduct training
does not provide sufficient guidance to senior-level employees. The majority of the
training focuses on prohibitions related to staff sexual misconduct and inappropriate
behavior between staff and inmates. The training only briefly discusses an
employee’s responsibilities regarding outside work and business ownership. The
training does not specifically address several key statutory provisions, including
those pertaining to ethical principles for public officers, local government officers,
and employees (Section 24-18-105, C.R.S.); rules of conduct for public officers and
state employees (Section 24-18-108, C.R.S.); and interests in contracts (Section 2418-201, C.R.S.). Training on these statutory provisions is important for all
employees and, in particular, management staff who can have substantial information
on Department operations and who often hold positions of influence and authority.
The Department should investigate the concerns identified in this audit related to the
activities of the former senior-level employee regarding compliance with ethical and
legal requirements related to his employment with the State and the use of leave
benefits and take appropriate actions. These actions should include requiring the
former employee to repay any misused sick leave and referring the matter to the local
district attorney, as appropriate.
In addition, the Department needs to strengthen its practices for overseeing the
conduct of its employees. To accomplish this, the Department should ensure that all
employees annually submit a signed certificate of review and compliance related to
the State’s codes of ethics and conduct. The Department should also strengthen its
training policies to require, at a minimum, that all management staff receive refresher
training on the State’s codes of ethics and conduct at least every two years. The
training should discuss ethical issues that management staff may encounter,
including state employees’ responsibilities with regard to Sections 24-18-105, 24-18108, and 24-18-201, C.R.S, which relate to ethical principles and rules of conduct for
state employees and interest in contracts.

Report of The Colorado State Auditor

17

The holding of state employment is a public trust. State employees serve the people
of the state of Colorado and should act in the State’s interest. Furthermore,
employees should act with integrity and honesty and carry out their duties in an
independent and impartial manner. Inappropriate behavior by state employees
degrades citizens’ trust in state government, weakens the credibility of state
departments, and raises questions about the basis of decisions made by agency
officials.

Recommendation No. 1:
The Department of Corrections should investigate the activities of the former seniorlevel employee described in this report regarding compliance with ethical and legal
requirements related to his employment with the State and the appropriateness of
leave benefits used prior to his retirement. On the basis of the results of the
investigation, the Department should take actions, which should include seeking
reimbursement from the former employee for all misused paid leave and referring the
case to the local district attorney, as appropriate.

Department of Corrections Response:
Agree. Implementation date: December 31, 2006. The CDOC Inspector
General is actively pursuing the investigation. We anticipate the
investigation being completed by December 31, 2006 and, if warranted, will
be presented to the District Attorney.

Recommendation No. 2:
The Department of Corrections should strengthen safeguards for ensuring
compliance with codes of ethics and conduct and for preventing conflicts of interest
by:
a. Requiring all employees to annually provide the Department with signed
certificates of review and compliance attesting that they have read,
understand, and will abide by the Governor’s executive order on the code of
ethics.

18

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

b. Revising the Department’s training policy to require all management staff to
receive refresher training on the State’s codes of ethics and conduct at least
every two years.

Department of Corrections Response:
Agree. Implementation date: January 1, 2007.
a. This is currently in progress. The Department has implemented an
electronic signature for the Code of Ethics. The Department’s
Administrative Regulation on the Code of Ethics is currently being
rewritten to reflect the use of electronic signatures on an annual basis. As
of November 29, 2006, 4,785 of the Department’s employees have
utilized the electronic signature process. The remainder will be
completed by December 31, 2006.
b. The current DOC training programming offers in-service, advanced, and
refresher training on an ongoing, voluntary basis. The program will be
revised by January 1, 2007 to require mid-level supervisors and above to
complete the Department’s advanced training on the Code of Ethics
every two years. The implementation of this recommendation will have
a fiscal impact of approximately $50,000 per year.

Prison Construction
The Department of Corrections’ mission is to protect the public through the efficient
and effective management of inmates in its custody. To achieve this mission, the
Department must build, manage, operate, and oversee prisons with enough beds to
safely house the inmates in its custody. As discussed earlier, Colorado’s inmate
population has exceeded the physical capacity of the Department’s prisons since the
1980s, and the Department has used a combination of state prisons, private prisons,
and county jails to house its inmates. During this time, Colorado has experienced an
increase of almost 340 percent in its inmate population, with the population growing
from 5,100 inmates in June 1988 to 22,300 in October 2006. In comparison,
Colorado’s resident population has increased 42 percent, from approximately 3.3
million residents in 1990 to about 4.7 million in 2005 (1988 population data are not
available).
The Department, along with other states and the United States Department of Justice,
measures prison capacity in two different ways:

Report of The Colorado State Auditor

19

•

Design capacity, which is the number of inmates that planners and/or
architects originally intend for a facility.

•

Operational capacity, which is the number of inmates that can be
accommodated based on a facility’s staff, existing programs, and services.
The operational capacity for a facility will typically be greater than the
design capacity. Operational capacity will generally include temporary beds
and bunks added to cells after construction (i.e., double-bunking).

Currently the Department is close to filling its available inventory of prison beds
physically located in Colorado. As of October 31, 2006 (most recent data available),
state prisons were at 99 percent, and private prisons located in Colorado were at
97 percent, of their operational capacities. Current data comparing design capacities
for state- and privately-run prisons are not available. Additionally, the Department
has backlogged more than 400 inmates in county jails throughout the State as of
October 31, 2006. Legislative Council staff project that the inmate population will
continue to grow over the next five years, with an increase of about 7,300 inmates
(33 percent) from June 2006 to June 2011 (see Appendix B). This means that, on
average, the prison population will increase by about 1,500 inmates per year.
Colorado is not the only state experiencing prison overcrowding. The United States
Bureau of Justice Statistics reported that 24 states (including Colorado) and the
federal prison system operated at 100 percent or more of their prisons’ capacities in
2004 (most recent data available). California, in particular, has experienced severe
overcrowding in its prison system and operated at more than 200 percent of its
design capacity in 2004 (housing 167,000 inmates in facilities designed for only
81,000 inmates). Other state prison systems that operated substantially above 100
percent of their design capacity in 2004 included Illinois (161 percent), Delaware
(160 percent), Hawaii (159 percent), Florida (132 percent), Nevada (132 percent),
and Nebraska (130 percent). Colorado was operating at 131 percent of its design
capacity in this year.
The Department is anticipating that over the next five years it will have a shortage
of approximately 8,500 prison beds physically located in Colorado. In an effort to
address current and future bed needs, the Department recently requested and received
authorization from the Joint Budget Committee (JBC) to transfer up to 720 inmates
to a private prison located in Oklahoma. The Department expects that it will need
to place a portion of its inmates in private prisons located in other states until at least
2009. This is not a preferred method for housing inmates because of higher per diem
and transportation costs, reduced opportunities for inmate-family visitation, limited
ability for the Department to regularly monitor and oversee the prisons, and poor past
performance by the out-of-state private prisons, particularly in complying with
contract provisions and appropriately managing inmates.

20

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

The Department is currently facing a number of challenges in addressing its shortage
of prison beds. In the sections below, we discuss these challenges and the
Department’s options for securing additional prison beds in the future.

Publicly Funded Prisons
The Department’s preferred method for increasing its prison bed inventory is to
construct new prisons and/or expand existing facilities using state capital
construction funds. This is because the Department maintains direct control over the
design, construction, and operation of state prisons. Although the Department has
submitted several requests for capital construction funds since Fiscal Year 2000, the
Department has received limited funding for constructing additional prison beds,
primarily due to the State’s revenue shortfalls and competing demands for capital
construction monies. Specifically, since Fiscal Year 2000, the Department has
requested capital construction funds to expand state prisons by about 3,500 beds.
However, more than 2,000 of these beds (57 percent) were either withdrawn, not
approved for funding, or were approved but had funding canceled prior to project
completion (see Appendix A).
In addition, the Department has encountered delays in constructing the Colorado
State Penitentiary II (CSP II), a 948-bed high-custody prison to be located in CaZon
City, Colorado. House Bill 03-1256 authorized the Department to execute a leasepurchase agreement not to exceed $102.8 million for up to 15 years to finance the
construction of CSP II. Before construction of the facility could begin, a citizens’
group sued the Department and the State, claiming that House Bill 03-1256 violates
the Taxpayer’s Bill of Rights (TABOR) by entering the State into a multiyear debt
without first receiving voter approval. The lawsuit has been resolved in favor of the
State. However, due to delays caused by litigation, CSP II is not scheduled to
become operational until August 2009, about two and a half years later than
originally planned, and it is estimated that the cost will increase by about $42 million
due to inflation. JBC staff estimate that by Fiscal Year 2009 the Department will
have a shortage of about 1,230 high-custody beds. This means that CSP II will be
filled to capacity once it is operational in 2009, and the Department will need to
identify alternatives for housing an additional 280 high-custody inmates. Under
current law (Section 17-1-104.9(2)(a), C.R.S.), the Department can house highcustody inmates in private prisons, located in Colorado or other states, only upon a
declared correctional emergency by the Governor. However, statute (Section 17-1104.9(2)(c), C.R.S.) specifically states that a correctional emergency “does not
include inmate overcrowding.” As such, the Department cannot rely on private
prisons to house high-custody inmates when state-operated prisons are overcrowded.

Report of The Colorado State Auditor

21

One of the primary benefits of using state funds to finance prisons is that the
Department maintains direct control over the design, construction, and operation of
the prisons. As we will discuss later, the Department relinquishes some control when
it uses private prisons to house its inmates. Using state funds to construct prisons
allows the Department to more easily ensure that the physical plant design
appropriately addresses the security and programming needs of inmates incarcerated
in state prisons. Additionally, the Department maintains direct oversight of the
construction schedule and is in a position to better ensure that construction is
completed on time. Unlike private prisons, the Department is not required to obtain
approval from local governments to construct, expand, or renovate state prisons,
which can help reduce the amount of time needed by the Department to design and
construct a prison.
The Department also has more control over the number and types of staff hired to
operate state prisons. Our April 2005 performance audit of Private Prisons found
that the Department had identified ongoing concerns with staffing patterns at private
prisons. The audit reported that staffing ratios at private prisons were about 80
percent of staffing ratios at state-run prisons. Staffing levels at prisons are one of the
primary ways to ensure the security and safety of facilities. The 2005 audit also
found that salaries at state prisons are about 50 percent higher than salaries at private
prisons, which can affect employee turnover rates and the quality of staff hired.
The main problem with using public funds to finance prisons is the high cost
involved in constructing the facilities and the competing needs for state general
funds. We estimate that it could cost the State as much as $510 million over the next
five years, or nearly $100 million annually, to build a sufficient number of stateoperated prisons to safely house the growing inmate population. As discussed
earlier, capital construction funds have been limited in recent years due to the State’s
revenue shortfalls. Investing such a large amount of capital construction monies into
prison construction could affect funding availability for other projects and needs in
the State, such as completion of life safety and controlled maintenance projects at
state buildings, construction of and renovations to higher education facilities,
advanced technology investments, highway improvements, and healthcare services.

Privately Financed and Operated Prisons
As mentioned earlier, the Department has used private prisons to incarcerate a
portion of its inmate population since 1993. As of October 31, 2006, about 21
percent of the State’s 22,300 inmates were housed in private prisons. The
Department plans to continue using private prisons to house a portion of its inmates,
particularly because projections indicate that the inmate population will increase by
33 percent over the next five years and limited expansion in the state prison bed
inventory is expected.

22

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

One of the main advantages to using private prison companies to house state inmates
is that the private sector, rather than the State, finances the design and construction
of the prisons. As previously discussed, these costs can be substantial. By relying
on private companies, the State is able to retain its capital construction monies for
other priorities. Additionally, Department data indicate that housing inmates in
private prisons may cost less than housing inmates in state prisons. The Department
reports that in Fiscal Year 2005 (most recent year data on actual costs are available)
the average annual cost, including Department overhead costs, for a medium-security
(Level III) private prison bed was approximately $20,300. As shown in the table
below, the Department’s average annual cost for a state-operated medium-security
(Level III) prison bed was $25,200 or about 24 percent higher than the cost for a
private prison bed.
Department of Corrections
Average Annual Bed Costs in Fiscal Year 2005
Private Prisons
Authorized Per Diem
Total Cost of Level III Prison (includes DOC overhead) 1
State-Operated Prisons
Level I Facilities
Level II Facilities
Level III Facilities 1
Level IV Facilities
Level V Facilities

Annual Bed Cost
$18,100
$20,300
Annual Bed Cost
$21,200
$22,700
$25,200
$28,700
$30,700

Source: Joint Budget Committee Fiscal Year 2007 Staff Budget Briefing.
1
Private prisons in Colorado are most comparable to Level III state-operated facilities. However,
there are differences in the types of inmates housed in Level III state prisons and those in private
prisons, which include (1) the Department typically places inmates with special needs, such as those
with extensive disabilities, severe mental health illnesses, and chronic medical issues, in Level III
state prisons and not in private prisons, and (2) statutes allow Level III state prisons to house close
custody inmates (i.e., inmates that are higher custody than medium custody), while private prisons
can generally only house inmates classified as medium custody and below.

Although private prisons in Colorado are most comparable to Level III state-operated
facilities, it should be noted that the Department does not place inmates with special
needs in private prisons. Inmates with extensive disabilities, severe mental health
illness, and chronic medical needs are more costly to manage and are primarily
housed in state-operated prisons. Also, statutes allow Level III state-operated
facilities to house close custody inmates (i.e., inmates that are higher custody than
medium custody), while private prisons can generally only house inmates classified
as medium custody and below. High custody inmates are typically more costly to
manage.

Report of The Colorado State Auditor

23

As previously discussed, a major drawback to using private prisons is that the State
relinquishes some control over the design, construction, and operation of the prisons.
During our current audit, we identified several issues related to the construction of
private prisons procured through the issuance of RFPs that raise questions
concerning whether 2,000 of the 4,800 beds included in the RFPs, or 42 percent, will
actually be built and become operational. Issues related to the construction and
operation of private prisons are described below.
Bed Guarantees: Historically, private sector companies built prisons in Colorado
as speculative investments. Speculative construction meant that companies would
build prisons in anticipation that the Department or another government entity would
need the beds in the future. However, many of these companies experienced
financial difficulties in the 1990s because their prisons were not filled to capacity,
and as a result, many private prison companies are no longer willing to build prisons
on speculation. Instead, these companies are seeking guarantees from governments
that the companies will receive payment for a certain portion of newly constructed
prison beds, regardless of whether the beds are actually filled by inmates.
Furthermore, private prison companies report that bed guarantees, along with the use
of tax-exempt revenue bonds, provide the most affordable means for the private
companies to finance the construction of new prisons because this approach
substantially lowers the interest rate on borrowed funds.
To date, the Department has not offered bed guarantees to companies operating in
Colorado. However, representatives from The GEO Group, which was selected by
the Department to build a 500-bed pre-parole and parole revocation facility and a
1,500-bed medium-security prison, have informed the Department that construction
will not proceed on either of these facilities unless bed guarantees are provided. The
GEO Group is currently seeking guaranteed payment from the State for revenue
equivalent to 90 percent occupancy of the beds in both facilities (about $34 million
per year using current rates) for the next 30 years or a total state financial
commitment of $1 billion. It should also be noted that The GEO Group’s original
proposal for the 500-bed pre-parole and parole revocation facility did not include a
bed guarantee requirement. As such, neither the Department’s evaluation of The
GEO Group’s proposal nor the subsequent award was based on a bed guarantee
requirement. The Department reports that construction for these facilities is
currently on hold until a decision regarding bed guarantees is made by the
Governor’s Office, in consultation with the General Assembly. The Department
expects a decision on bed guarantees by early 2007.
Financing Plans: The GEO Group plans to finance the construction of its two
facilities through tax-exempt revenue bonds issued by local governments in the
communities where the prisons are located. A portion of the Department’s payments
for housing state inmates in the private prisons will be used to fund the revenue

24

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

bonds. The GEO Group is asking for bed guarantees to ensure the Department
continues making payments at levels sufficient to repay the revenue bonds. The
GEO Group is working with each local government to create a political subdivision
with the authority to issue bonds, and the proceeds from the bonds would be used to
pay prison construction costs. Prior to placement of inmates in the private prisons,
the Department would enter into an intergovernmental agreement with the local
government and pay the local government for each inmate housed in the prison. The
Department’s payments would then be used by the political subdivision for debt
repayment and for covering the costs of operating the prison. This financial
arrangement is new to Colorado and requires the agreement and coordination of
multiple government agencies. The complexity of this financing method could result
in construction delays and possible project cancellation.
Local Planning Laws: Private companies wanting to build and operate prisons in
Colorado must comply with local zoning and planning laws. Companies must
typically select a location for the proposed prison, purchase the necessary land, and
then seek local government approval. The GEO Group, which is proposing to build
a 500-bed pre-parole and parole revocation facility in Pueblo, has experienced delays
in constructing the facility due to compliance issues with local and federal zoning
and planning laws. Three years after being selected to build this facility, The GEO
Group has not yet begun construction.
Prison Design: As previously mentioned, because the Department does not finance
the construction of the private facilities, the Department relinquishes some control
over the final design of a prison that is privately financed and operated. For
example, the Department awarded Community Education Centers, Inc. (CEC, Inc.)
a contract to build and operate a 500-bed pre-parole and parole revocation facility
in Colorado Springs, Colorado. CEC’s Cheyenne Mountain Re-Entry Center was
completed and began accepting Colorado inmates in August 2005. Department staff
has expressed concerns with the design of this facility, indicating that poor design
and construction of the facility has resulted in problems in managing the inmate
population.
Past Performance: The Department has historically identified a number of contract
compliance issues related to services provided by private prisons, as discussed in our
2005 performance audit of Private Prisons. For example, the audit found that
inmates with serious mental illnesses were not being seen by mental health staff at
the private prisons within required time frames, and private prisons were not
consistently following the Department’s master menu as required by contracts. The
2005 audit also noted that the Department had documented continued contract
violations by the private prisons, yet had failed to take action to enforce the terms of
the contracts. In June 2006 the Department reported to the Legislative Audit

Report of The Colorado State Auditor

25

Committee that it had implemented all but one of our 15 recommendations in the
2005 audit.

Other Options
While construction and expansion of state and private prisons are the primary ways
for adding prison beds to the Department’s inventory, other options exist that can
provide some relief to Colorado’s prison system. These options include:
Double-Bunking: One option for increasing the number of beds in facilities is to
convert one-person prison cells into two-person cells, which is known as doublebunking. The Department typically places high-custody inmates in one-person cells
as a way to manage inmates that present a security threat to the facility. During the
2006 Legislative Session, the Department requested and received a one-time
appropriation of almost $346,000 to modify state facilities to add 540 mediumcustody beds through double-bunking. The Joint Budget Committee (JBC) also
recommended and the General Assembly approved a $3.5 million appropriation and
43.6 FTE for the Department to provide the appropriate staff and services to begin
filling 400 beds in 2007.
The Department recently reported to the JBC that it intends to fill about 290 of these
beds in February 2007 but will intentionally leave the remaining 250 beds vacant for
future emergencies and for handling disruptive inmates. The JBC has advised the
Department that it will revisit the Fiscal Year 2007 double bunking appropriation
during the regular supplemental process. Although converting additional prison cells
at state-operated facilities to double bunk inmates is an option, the Department
reports that double-bunking can increase security risks related to managing inmates.
Expansion of Community Corrections: According to Section 18-1.3-301(3),
C.R.S., Department inmates are eligible for referral for placement in community
corrections programs when they have served a specified portion of their sentences.
These programs are an alternative to prison and are intended to help reintegrate
offenders into their communities. In Fiscal Year 1998 the Department established
a goal of placing 10 percent of its prison population in community corrections
programs. The General Assembly has raised the goal, with the target for Fiscal Year
2007, set at 11.25 percent.
As part of our 2004 performance audit of Residential Community Corrections
Programs, we noted that expansion of community corrections is an option for
addressing overcrowded prisons and generating cost savings for the State because
community corrections is less expensive than incarceration in prison. For Fiscal Year
2007 the average annual reimbursement rate for a standard community corrections
bed is $13,800 compared with $18,900 per year for a private prison bed. Neither of

26

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

these figures includes the Department’s overhead costs. Our 2004 audit
recommended an annual evaluation of “the feasibility of increasing the percentage
of prison inmates who are placed in community corrections.” Currently about 10.5
percent of the Department’s inmate population are in community corrections
programs. Further expansion of the community corrections population is an option
for adding prison beds to the Department’s inventory without constructing additional
state-owned or private prisons. However, as we discussed in our 2004 audit, the
Department may face various challenges in expanding the percentage of inmates
placed in community corrections. For example, local community corrections boards
and programs are given discretion as to which offenders to accept and reject for
placement. In some cases, the criteria used by local boards and programs to screen
referrals can restrict the number and types of inmates accepted. As recommended
in the 2004 audit, the Department will need to work with the Department of Public
Safety and community corrections stakeholders to address these issues.
Options Used by Other States: We reviewed the practices of other states addressing
prison overcrowding issues and found that many alternatives being explored by other
states are similar to those being pursued by Colorado. In particular, we found that
most other states with severe prison overcrowding are using a combination of options
to increase the number of available prison beds, which include (1) building,
renovating, and/or expanding state prisons; (2) procuring additional private prison
beds within their states and in other states; (3) converting prison cells to house two
or more inmates; (4) housing inmates in gymnasiums, auditoriums, or other open
prison areas not originally designed for housing inmates; and (5) seeking alternatives
to prison incarceration (e.g., moving great numbers of inmates to community
corrections and/or parole revocation facilities).

Strategic Plan
With almost 22,300 inmates, Colorado’s prison population is at a historic high.
Barring changes to the State’s sentencing laws, Colorado’s prison population is
expected to grow by about 7,300 inmates over the next five years to 29,300 inmates
as of June 2011. As previously mentioned, state-operated facilities and private
prisons located in Colorado are at or near capacity. As such, new prison beds will
need to be added to the Department’s current inventory to house the additional
inmates. We estimate it could cost the State as much as $510 million over the next
five years, or nearly $100 million annually, to build a sufficient number of stateoperated prisons to safely house the growing inmate population. The Department
also reports that it costs, on average, $26,800 per year to incarcerate a person in a
state-operated facility. Based on this data, the Department’s annual operating costs
could increase by almost $196 million over the next five years.

Report of The Colorado State Auditor

27

To date, the Department’s plans for acquiring sufficient prison beds to house the
State’s inmate population in Colorado have been unsuccessful. As a result, the
Department is planning on transferring 240 inmates to a private prison in Oklahoma
in December 2006. In recent years the Department has worked with the Governor’s
Office and the General Assembly to acquire new prison beds by requesting capital
construction funds from the Capital Development Committee and issuing RFPs for
private companies to construct prisons in Colorado. However, due to a number of
circumstances, some of which have been outside of the Department’s control, the
Department has not been able to obtain a sufficient number of prison beds physically
located in Colorado to address its shortage.
There are no easy solutions to Colorado’s current situation. However, to prevent the
State from reaching a crisis situation with housing its inmate population, the
Department will need to continue to work closely with the Governor’s Office and the
General Assembly to identify short- and long-term solutions to addressing shortages
in prison beds. In the short term, the Department should determine whether the
4,300 private prison beds awarded as part of RFPs issued since 2001, but not yet
constructed, will actually be constructed and operational, as scheduled. The
Department should also work with the Governor’s Office, in consultation with the
General Assembly, to make a decision regarding whether the State will provide bed
guarantees to private prison companies. If the planned private prison beds are not
built, the Department will need to identify alternatives for housing its inmate backlog
in the near future, which may include transferring more inmates to out-of-state
private prisons, double bunking inmates, and other emergency housing options, such
as housing inmates in gymnasiums, auditoriums, or other open prison areas not
originally designed for housing inmates.
In the long term, the Department will need to continue working with the Governor’s
Office and the General Assembly to:
•

Determine the right mix of inmates housed in state versus private
prisons. As mentioned earlier, 21 percent of the State’s inmates were housed
in private prisons as of October 31, 2006. The Department reports that its
policy has been to place no more than 30 percent of the inmate population in
private prisons. Based on available data, we estimate that 32 percent of
Colorado’s inmate population could be incarcerated in private prisons by
June 2011. If the Department, the Governor’s Office, and the General
Assembly agree that no more than 30 percent of the inmate population should
be placed in private prisons, additional capital construction funds will be
needed to construct new state prisons or expand existing facilities to house
additional inmates by 2011.

28

Private Prison Procurement, Department of Corrections Performance Audit - November 2006

•

Identify options for housing high-custody inmates. As discussed
previously, it is estimated that CSP II will be filled to capacity when it
becomes operational in 2009, and at that time the Department will have a
shortage of 280 beds for high-custody inmates. State statute allows the
Department to house high-custody inmates in private prisons, located in
Colorado or other states, only upon a declared correctional emergency by the
Governor. The statute specifically states that a correctional emergency
“does not include inmate overcrowding.” Barring changes to current law, the
Department will need to work with the Governor’s Office and the General
Assembly to obtain capital construction funding to construct additional state
prison beds for high-custody inmates.

•

Assess ways to increase the number of inmates placed in community
corrections. The Department reports that about 450 inmates are currently
awaiting placement in residential community corrections programs but beds
are unavailable. The Department should work with the Department of Public
Safety, which administers Colorado’s community corrections system, and
with local community corrections boards and programs to identify ways to
increase the number of inmates in the prison system that are placed in
community corrections, while still ensuring the public’s safety.

The Department should document the short- and long-term solutions and any
contingencies identified in a strategic plan. The plan should include target dates and
supporting data on costs of each solution and be updated on an ongoing basis, as
necessary.

Recommendation No. 3:
The Department of Corrections should continue working with the Governor’s Office
and the General Assembly to identify short- and long-term solutions to addressing
the shortage of prison beds for Colorado inmates. As part of this process, the
Department should document solutions and contingencies in a strategic plan with
target dates and supporting detail on costs of each solution, and the plan should be
updated on an ongoing basis, as needed.

Report of The Colorado State Auditor

29

Department of Corrections Response:
Agree. Implementation date: Ongoing. The Department will continue to
coordinate with the Governor’s Office to address the shortage of prison beds
and will continue implementing strategic plans. The Department will
continue to provide strategic plans to the General Assembly.

Appendix A
Capital Construction Request History for the Department of Corrections for Fiscal Years 2000 - 2007
Capital Construction Request History for Additional Prison Beds in the Department of Corrections
Fiscal
Year
2000

2004

TCF Phase II
DRDC Renovation / Expansion Design2
SCCF Phase II Design2
SCCF Phase II Design
DRDC Renovation / Expansion Design
CWCF Expansion / Renovation Planning
SCCF Phase II Construction (70%)2
AVCF High Custody Expansion (50%)2
DRDC Renovation / Expansion Construction2
CWCF Renovation Design
Fort Lyon Phases I and II
AVCF High Custody Expansion (50%)
DRDC Renovation / Expansion Construction2
SCCF Phase II Construction (70%)
CCF High Custody Expansion (40%)
CSP II/ CCF High Custody Expansion

Amount
Requested
$77,889,000
$1,019,000
$2,084,000
$2,089,000
$1,093,000
$411,000
$18,805,000
$19,791,000
$15,395,000
$2,450,000
$12,312,000
$18,912,000
$12,912,000
$18,371,000
$18,241,000
$102,800,000

$0
$0
$0
$2,089,000
$1,093,000
$0
$105,0003
$17,0003
$747,0003
$0
$12,312,000
$0
$0
$0
$0
$102,800,000

Requested
Beds
710
0
0
0
0
0
250
384
62
285
500
384
62
250
384
948

2005
2006
2007

None - Due To Statewide Budget Crisis
None - Due To Statewide Budget Crisis4
DRDC Renovation / Expansion Construction

$0
$0
$18,542,000

$0
$0
$9,000,000

0
0
62

2001

2002

2003

Project

Amount
Funded

Built
Beds
0
0
0
0
0
0
0
0
0
0
500
0
0
0
0
0
0
0
0

Security
Level
V
V
V
V
V
IV
V
V
V
IV
III
V
V
V
V
V

Legislation 1
n/a
n/a
n/a
HB 00-1451
HB 00-4551
n/a
SB 01-212
SB 01-212
SB 01-212
n/a
SB 01-212
n/a
n/a
n/a
n/a
HB 03-1256

n/a
n/a
V

n/a
n/a
HB 06-1385

Status
Withdrawn
Withdrawn
Withdrawn
Complete
Complete
Not Approved
Negative Appropriation
Negative Appropriation
Negative Appropriation
Not Approved
Built and Occupied
Not Approved
Not Approved
Not Approved
Not Approved
Under Construction To Be
Completed by August 2009
n/a
n/a
Under Construction To Be
Completed by Spring 2009

8-YEAR TOTAL1
$273,110,000
$127,294,000
3,523
500
n/a
n/a
Source: Office of the State Auditor’s analysis of the Colorado Joint Budget Committee’s FY 2006-07 Staff Budget Briefing Department of Corrections.
1
Legislation is only listed for projects that were funded by the General Assembly.
2
Several projects were requested more than once. For the 8-year total, we only included the most recently requested project for amount requested, amount funded, and requested
beds.
3
These capital construction projects were initially approved for funding by the General Assembly. The funding, however, was withdrawn by the General Assembly with SB 01S2023. Before funding was withdrawn, the Department had expended about $869,000.
4
The Department received non-capital funding to add 540 beds by double bunking existing cells.
Key: TCF = Trinidad Correctional Facility, DRDC = Denver Reception & Diagnostic Center, SCCF = San Carlos Correctional Facility, CWCF = Colorado Women’s Correctional
Facility, AVCF = Arkansas Valley Correctional Facility, CCF = Centennial Correctional Facility, CSP II = Colorado State Penitentiary II

A-1

Appendix B
Adult Inmate Population Projections
Colorado Legislative Council Staff Adult Inmate Population Projections
Fiscal Years Ended 2007 to 2011
Population Projections for Fiscal Year Ended
Actual
Change
Population
Inmate
from
2006
as of
Type
to
2011
2007
2008
2009
2010
2011
06/30/06
Male
19,800
20,700
21,800
23,000
24,300
25,800 6,000 (30%)
Female
2,200
2,500
2,700
3,000
3,300
3,500 1,300 (59%)
TOTALS
22,000
23,200
24,500
26,000
27,600
29,300 7,300 (33%)
Source: Legislative Council Staff December 2005 prison population projection and monthly population
statistics prepared by the Department of Corrections.

B-1

The electronic version of this report is available on the Web site of the
Office of the State Auditor
www.state.co.us/auditor

A bound report may be obtained by calling the
Office of the State Auditor
303.869.2800
Please refer to the Report Control Number below when requesting this report.

Report Control Number 1819