In the recent Performance Evaluation & Expenditure Review (PEER) report released this week, Mississippi Prison Industries Corporation’s (MPIC) audited financial statements for 5 fiscal years which showed a significant decline in the financial health and sustainability of the corporation. This decline threatens MPIC’s future viability as an ongoing business enterprise and its ability to operate an effective prison industries program.
From Fiscal Year (FY) 2012 through FY 2017, MPIC’s ending net position (net worth) declined by $6.7 million, from approximately $10 million to $3.3 million and fiscal year-end cash balance declined from approximately $4.8 million to $560,707. Costs for goods and services, increased payroll, acquisition and construction of capital assets, and capital lease obligations, as well as other expenses, contributed to the significant decrease of approximately $3.7 million in cash during FY 2016 and FY 2017.
Through February 28, 2018, MPIC’s net operating loss totaled $628,970, including a net operating profit of approximately $24,000 during February 2018. At the end, MPIC’s cash balance was $329,970. While MPIC’s financial operations were relatively stable for three years, significant operating losses of approximately $3.5 million during fiscal years 2016 and 2017 have affected the corporation’s financial health.
Since 2015, MPIC has experienced a deterioration of its financial sustainability as the result of losses in long-term product lines, unsuccessful expansion into new product lines, and failure to control administrative overhead expenses, such as salaries and benefits, contractual services, and operating expenses. Increases in direct costs associated with MPIC product lines without appreciable increases in sales caused five of MPIC’s six existing long-term product lines to move from being profitable in FY 2015 to being unprofitable in FY 2017. Costs associated with MPIC’s expansion into two new product lines—fish tanks and suture spool recycling—have contributed to a deterioration of the corporation’s overall financial condition.
In addition, when establishing these two new product lines, MPIC did not conduct marketing feasibility studies, hold public hearings, or consult for financial sustainability as required by state law in the establishment of new product lines. Administrative overhead expenses associated with MPIC’s central office in Jackson increased from $1,594,494 in FY 2015 to $2,781,701 in FY 2017, a 74% increase.
Despite a freeze on employing new MPIC personnel, wage increases, & year-end incentive payments for all MPIC employees, MPIC salaries and benefits increased 27% for two years. Due to the poor quality of MS prison industries program data, it is not possible to accurately assess the program’s effectiveness in reducing recidivism. Furthermore, Mississippi’s implementation of its prison industries program is missing several key components designed to increase the program’s effectiveness in reducing recidivism.