Prison Phone Justice

OFFICE OF THE INSPECTOR GENERAL

CONTRACT MANAGEMENT REVIEW

FLORIDA DEPARTMENT OF CORRECTIONS
Inmate Telephone System Contract C#1864
Paul C. Decker, Inspector General
Report # CMR06001

Dave Mecusker, Chief Internal Auditor

July 24 , 2006

BACKGROUND

RESULTS OF REVIEW

On June 1, 2001, the Florida Department of
Corrections (DC) entered into a five-year contract with
MCI WorldCom Communications (MCI) to provide,
install, repair, and maintain an Inmate Telephone
System (ITS). The system has security features
designed to proactively reduce fraudulent activities
conducted by inmates over the telephone as well as to
enhance the operation and security of DC institutions.

Although we identified several issues requiring
management’s attention, we determined that overall,
MCI has provided an effective ITS which meets the
operational and fiscal specifications enumerated in the
contract.

The current ITS is primarily a collect-call-only system
comprised of over 2,600 coin-less and 250 coinoperated telephones. Rates charged to call recipients
from DC correctional institutions for non-local in-state
calls, which comprise the majority of all calls, cannot
exceed 85% of the Florida Public Service Commission
(PSC) maximum allowable rate for station-to-station
collect calls.
The contract specifies that DC is to receive a 53
percent commission of MCI gross revenues from all
ITS calls. In 2005 this commission generated over $16
million dollars in revenue for the State of Florida.
OBJECTIVES
Our objectives were to determine whether:
• DC is effectively verifying and monitoring the
delivery of service;
• DC is receiving contract commissions in
accordance with contract terms; and
• The rates charged are in accordance with
contract terms.
SCOPE
We reviewed electronic and paper records of ITS
activity between January 2005 and April 2006. We
interviewed the two ITS contract managers
(operations and accounting) and communicated with
other DC and MCI staff who perform ITS-related
functions. We also inspected and inventoried ITS
equipment at Wakulla CI.

Management has taken action to comply with the
recommendations as indicated in their responses
found below each finding and recommendation.
We also identified an alternative to the existing collectcall only ITS that could provide cost savings to inmate
family and friends and yield adequate revenue to DC
and the contractor.
WAYS TO LOWER PHONE CHARGES
To reduce the cost to inmate families and friends and
take advantage of current technology, DC should
consider offering an ITS that allows prepaid/debit and
collect call capabilities. Rates for prepaid calls are
significantly less than a collect call because these
calls can eliminate both the surcharge cost and the
risk of uncollectible or bad debt to the telephone
provider. Currently, telephone provider contracts with
the Departments of Corrections in Virginia, Ohio and
Missouri offer prepaid discounts ranging from 10 to 20
per cent of the normal collect call rate. It is highly
probable that the reduction in cost to the call
recipients will cause an increase in the volume of calls
made which could increase the net revenue to DC.
Prepaid calls offer a win/win situation for all parties
involved. It provides a reduction in cost to inmates
and their family and friends, eliminates bad debt to the
telephone provider and continues to provide revenue
to DC without compromising security.
In addition to offering prepaid calls, DC could increase
the inmate telephone call list from 10 individuals to 15
individuals and extend calls longer than the now 15
minutes.

RATES MET TERMS OF CONTRACT

FEW COMPLAINTS FILED WITH PSC

We tested almost seven million calls listed on the
January through December 2005 call detail reports,
and found no material deviations from the following
schedules of maximum rates specified in the contract:

We found only nine ITS-related complaints filed with
the PSC since January 2004. Most involved calls
blocked due to a lack of local service agreements with
MCI or recipients who were billed for calls they said
they had not accepted.

COINLESS COLLECT CALLS
CALL TYPE

SURCHARGE

FINDINGS AND RECOMMENDATIONS

RATE /MINUTE

Local

$1.75

$0.00

Intrastate

$1.49

$0.255

Interstate

$3.95

$0.89

In addition to the primary contract deliverables
described above, we identified five significant issues
in contract performance and oversight which we feel
warrant management’s attention. They are as follows:

Coinless telephones are installed within secure Correctional
Institutions and Work Camps.

Finding No. 1: Operations Contract Managers did not
monitor and document contractor performance.

COIN COLLECT CALLS
CALL TYPE

SURCHARGE

RATE /MINUTE

Local

$1.75

$0.30

Intrastate

$1.75

$0.30

Interstate

varies

varies

Finding No. 2: Management neglected to assess
$722,000 in liquidated damages for MCI’s failure to
complete routine service repairs within 24-hour time
limits.
Finding No. 3: New inmate PIN numbers are not
being processed and activated timely.

Coin-operated pay telephones are installed primarily at Work
Release Centers.

Rates for international calls, which account for less
than one percent of all ITS usage, vary widely by
destination and carrier.
COMMISSIONS WERE PROPERLY PAID
We tested the electronic records of the ITS calls listed
on call detail reports for calendar year 2005. We
calculated the state’s 53% commission from this
information and found that the commission was paid
in the correct amount and within time limits set by the
contract. The total paid to the state for 2005 was
$16,086,048. Payments were verified monthly by the
accounting contract manager’s staff. One weakness
in the verification process is that it relies on MCIsupplied data to determine call charges and
commissions. This risk is mitigated somewhat by the
use of an independent accounting firm which places
test calls and reports on the integrity of the MCIsupplied data files. However, the verification process
could
be
strengthened
by
implementing
recommendations presented in Finding #4 below.

Finding No. 4: MCI’s CPA firm’s methodology in
testing for reliability of the ITS has weaknesses in that
the same telephone numbers have been called since
the inception of the contract in 2001.
Finding No. 5: MCI has not provided proof of required
performance guarantee.
Finding #1: Operations Contract Managers did not
monitor and document contractor performance.
Management could not provide documentation to
verify that the current nor previous operations contract
managers have evaluated contractor performance
since the inception of the contract.
There is no evidence of on-site reviews, or monitoring
of MCI’s performance by ensuring the receipt and
review of:
• Quarterly updated list of telephone numbers
by facility and all coin operated telephones;
• Monthly cumulative “down time” report of
system failures and repair times; and
• Monthly listing of PIN information
Our review of the above noted reports identified
deficiencies which will be discussed in Findings #2
and #3.

July 24, 2006

Report #CMR06001

Page 2

The operations contract manager recently developed
a monitoring tool for evaluating service. However, this
monitoring tool duplicates contract language without
focusing on or prioritizing compliance with critical
service issues. The items to be measured should be
structured according to priority, so that the most
critical service issues are monitored first.
We recommend that the operations contract manager
obtain the required reports from the contractor, review
them in a timely manner, maintain a contract
management file, implement prioritized monitoring
activities, and perform site visits to verify service
delivery;
Management’s Response: The Bureau of Facility
Services is presently developing a monitoring plan
which will include identification of Regional and
Institutional Contract Managers to assist Central
Office Contract Manager in proper monitoring. Plan
will include monitoring tools, reporting requirements
and schedules for review.
Finding #2: Management neglected to assess
$722,000 in liquidated damages for MCI’s failure to
complete routine service repairs within 24-hour
time limits.
The contract requires all routine service failures to be
repaired within 24 hours. Failure to meet these
response times should have resulted in liquidated
damages of $1,000 per day for each workday or any
part thereof exceeding the 24-hour requirement until
the repair or replacement has been completed.
We reviewed “Downtime Reports” from October 2005
to March 2006, and found 355 incidents where the 24hour time limit was exceeded. A total of $722,000
should have been assessed as liquidated damages.
The service calls ranged from broken phones to faulty
work stations. It appears this report has never been
used as a monitoring tool to ensure prompt service
and prevent excessive downtime.
We recommend management pursue the liquidated
damages
identified
and
monitor
contractor
performance to ensure timely repair of service
failures.
Management’s Response: A draft letter notifying the
vendor of assessment of Liquidated Damages in the
amount of $722,000 has been submitted to the
Secretary for review by the Bureau of Facility
Services.

July 24, 2006

Finding #3: New inmate PIN numbers are not being
processed and activated timely.
The contract requires new PIN numbers and inmate
calling lists be added to the ITS within five (5) working
days of receipt of a written request from DC.
Failure to meet this requirement would subject MCI to
liquidated damages of five hundred dollars ($500.00)
per day for each work day or any part thereof
exceeding the 5 day requirement until the PINs and/or
inmate calling lists are added.
We reviewed the time frame for the activation of new
PIN numbers assigned to inmates at the department’s
three reception centers. At Central Florida Reception
Center, it took an average of 15.5 business days for
an inmate’s PIN number or calling lists to be activated.
Many of the forms we reviewed at the three reception
centers failed to contain dates sufficient to determine
whether department staff or MCI was at fault for the
delay in activating new PIN numbers or calling lists.
Form DC6-223, Inmate Telephone Agreement and
Number List, does not record the date delivered to
MCI.
We recommend DC management revise Form DC6223 to indicate the date of submission to MCI to
ensure the timely activation of inmate PIN numbers
and calling lists. We also recommend the operations
contract manager monitor MCI’s performance in
complying with contract terms for the activation of PIN
numbers and calling lists.
Management’s Response: The Bureau of Facility
Services is presently developing a monitoring plan
which will include identification of Regional and
Institutional Contract Managers to assist Central
Office Contract Manager in proper monitoring. Plan
will include monitoring tools, reporting requirements
and schedules for review.
Finding #4: MCI’s CPA firm’s methodology in
testing for reliability of the ITS has weaknesses in
that the same telephone numbers have been
called since the inception of the contract in 2001.
The contract requires an independent CPA firm to
provide a semi-annual report of the accuracy and
reliability of the ITS. MCI selects and pays the CPA
firm that conducts the semi-annual reviews. We found
the same telephone numbers were called each time
the CPA firm conducted the semi-annual audit. Such
a practice diminishes the reliability of testing in that by
examining prior audits, MCI would know which
telephone numbers would be called and could handle

Report #CMR06001

Page 3

those calls differently than others placed by inmates.
All CPA reports to date have indicated “No exceptions
found.”
We recommend MCI review their selected CPA firm’s
methodology in conducting the semi-annual reviews to
ensure the same inmate telephone numbers are not
continuously used.
We also recommend the
Accounting Contract Manager date-stamp the receipt
of reports.
Management’s Response: The Bureau of Finance
and Accounting concurs with the finding and will
comply with the review recommendations.
Finding #5:
MCI has not provided proof of
required performance guarantee.
The contract requires a $1.5 million performance
guarantee. MCI’s performance bond for $1.5 million
expired on April 1, 2006. A continuation or renewal of
this bond has not been secured. As of May 2, 2006
the performance bond has not been renewed. MCI’s
representative indicated that they are awaiting
management’s approval.
We recommend MCI obtain and provide proof of
adequate performance guaranteed coverage.
Management’s Response:
The Bureau of
Procurement and Supply provided a copy of an
executed Performance Bond secured by the
contractor.

July 24, 2006

Report #CMR06001

Page 4