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Cost Containment in Corrections

Across the country, correctional agencies are facing an era of fiscal austerity. They are being tasked with meeting the mission of public safety with reduced resources while maintaining effective operations and the efficient use of public funding. This has now become the “new normal.”

In a 2011 survey of correctional professionals, 98.5% of the respondents indicated that cost containment is a significant or critical concern within their organizations. Ninety-two percent of the respondents indicated that their agencies have engaged in targeted cost containment efforts within the past 5 years. These cost containment efforts were primarily the result of budget constraints due to both short- and long-term economic conditions.

The primary targets for cost reductions are in the areas where correctional agencies expend the majority of their resources – staffing, offender medical/mental health services, and supervising the offender population. As they considered budget restrictions, respondents focused on three approaches:

  • Targeted reductions (i.e., hiring freezes, reductions in overtime)
  • Changes in business practices (i.e., bulk food purchasing, reducing inmate hospital stays, more efficient pharmaceutical purchasing)
  • The use of new technology (i.e., increased web-based training, increased use of electronic monitoring, online bail system). In addition, many states have embarked on an agenda of reducing the incarcerated population with more, and dramatically less expensive, supervision in the community.

How the Cost Containment Framework Can Help Your Agency

The National Institute of Corrections (NIC) understands the critical situation many correctional agencies are facing with their budgets. Under a cooperative agreement with NIC, The Moss Group, Inc. has collaborated with NIC, its stakeholders, a global professional services firm, and practitioners in the field to develop an online resource center for correctional agencies. The cost containment framework assists correctional administrators in developing strategies for thoughtfully containing and sustaining cost in their agencies by analyzing and targeting budget expenditures.

A key strategy outlined is a risk-based budgeting approach. Risk-based approaches are endorsed by a consortium of "good business" organizations and industry that is centralized as the Committee of Sponsoring Organizations (COSO).

Using risk management in operational decisions (including budgeting/funding) is well established through COSO. One of the primary benefits of the center is that it provides a cadre of tools to assist organizations in developing a strategy before a budgetary crisis strikes. It allows an agency head to develop contingency plans that will assist in ongoing, day-to-day cost containment as well as respond to requests from a chief executive or legislative body to reduce costs.

How is risk-based cost containment different from cost/benefit analysis? They are not completely different; however, often when organizations include only financial costs in the "cost" part of their strategies, they generally overlook what the risks are. Similarly, unless they're including "negative benefits" in the benefits part of their strategies, they are overlooking risk. Assessing risk is not explicitly part of a cost/benefit analysis, and that is where the framework can provide critical guidance. Organizations may still want to do cost benefit analysis, but they are encouraged to assess risk as well, as established by COSO as sound operational management.

Who Benefits from Using the Cost Containment Framework?

All parts of corrections -- community corrections, jails, prisons, probation, and parole -- are affected by budgetary constraints and can benefit from the use of this resource center. In many jurisdictions the corrections budget is one of the largest allocations of the state or local government. As a result, it is often a target for fiscal and human resources reductions. The framework will help corrections professionals analyze the impact of cost containment efforts and strategically determine the most effective way to reduce expenditures while maintaining mission critical functions. An agency can use the cost containment framework to analyze cost containment in a specific area – for example, how to reduce inmate healthcare expenditures – or to broadly analyze cost containment as an agency-wide agenda.

The NIC Cost Containment Framework provides the field with tools and strategies they can use to:

  • Identify opportunities and solutions to fiscal challenges
  • Facilitate the exchange of information and ideas
  • Provide mutual aid between corrections professionals and fiscal managers

 

The Corrections Containment Framework is not just about cutting costs. It is about stakeholder buy-in; the evaluation of risk and short- and long-term impact; and the implementation, monitoring and measuring of lean practices. The Framework is built around a pragmatic cost modeling process—a methodical approach that will increase efficiency, reduce costs, and yield positive results for a solid understanding and foundation of the cost containment process.