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NJ overpaid prisoner halfway houses by nearly $600,000

The Department of Corrections has done a poor job of monitoring the state’s 20 privately run halfway houses, study concludes

By Joelle Farrell
The Philadelphia Inquirer

TRENTON, N.J. — New Jersey overpaid the operators of prisoner halfway houses nearly $600,000 and failed to punish the companies for errors, including some that led to inmate escapes, according to a state audit released Wednesday.

The Department of Corrections has done a poor job of monitoring the state’s 20 privately run halfway houses, concluded State Comptroller Matthew Boxer, whose office performed the audit.

“This is a $64 million program whose success or failure has important consequences for public safety,” Boxer said. The state “cannot simply cut these halfway houses a check and hope for the best.”

Boxer initiated the audit following a tip to his office from an inmate who said the state was paying too much to its vendors, said Pete McAleer, a spokesman for the comptroller.

Many financial and operational issues raised in the report were fixed in 2010 contracts with the halfway houses, said Department of Corrections spokeswoman Deirdre Fedkenheuer.

The department will address Boxer’s other concerns and examine whether operators of the facilities should be fined for some of the 201 inmate escapes the audit mentioned, Fedkenheuer said.

This year, an estimated 2,720 inmates will stay at halfway houses, in what is typically the final stop before they reenter society. In the Camden, Burlington and Gloucester Counties area, there are three halfway houses, all in Camden. The audit did not specify where in the state the problem facilities were located.

The Department of Corrections overpaid 10 privately run halfway houses by $587,196 during the period from 2004 to 2010, according to the audit.

It also failed to fine them when they violated terms of their contracts. Six inmates were able to escape when workers failed to put them in a secured holding area while they awaited transit, according to the report. Three of the six were in a facility that didn’t even have a secured holding area, the audit found.

The department could have collected $30,000 in fines for the breaches.

The state also failed to inspect the facilities often enough, and its visits were not unannounced, as required by state policy. In 2009, four department officials logged 104 days of visits when more than 600 days were required, the audit said.

In a separate letter to the Corrections Department, Boxer requested that the state take a closer look at the companies it uses and how it awards contracts.

One firm subcontracts nearly all of its services to a for-profit company, according to the letter. Halfway house operators are required to be nonprofit in order to contract with the department.

The nonprofit Education and Health Centers of America Inc., based in Roseland, N.J., receives about half of the state’s halfway-house inmates, according to the comptroller’s office. But the company subcontracts with the for-profit Community Education Centers Inc.

Since 1997, the department has paid the nonprofit more than $400 million to run four halfway houses, all in central and northern New Jersey. Of that, approximately $390 million went to Community Education Centers, according to the audit.

William Palatucci, a longtime friend and political adviser to Gov. Christie, is director of development for the nonprofit company and senior vice president at the for-profit company.

The Attorney General’s Office approved the subcontracting arrangement in 1994 and 1996, when the Corrections Department sought the agency’s advice, Fedkenheuer said. But the comptroller suggested that the department check again, since the company’s contracts have increased to $34.8 million from about $3 million in 1996.

“We’re still operating under the same agreement that was approved by the attorney general back then, so we’re a bit puzzled by the report,” Palatucci said Wednesday. “We’ll take a look and talk to the Department of Corrections about it.”

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