What is MINNCOR?

MINNCOR Industries is a division of the Minnesota Department of Corrections, subject to its policies and procedures. MINNCOR is not incorporated as a separate organizational entity nor as a public corporation. MINNCOR employs prison inmates to produce some goods and services that are sold to other government agencies as well as the general public. Inmates are paid for their labor.

All of the information for this article was taken from the State Auditor’s Report on Minncor and can be found at:
https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf

Is MINNCOR a Private Company or Just Another Government Agency?

Depends on on who you ask and how you state your question. MINNCOR told us that they are a private company. But, as you read further, you’ll see that MINNCOR is directed, monitored and controlled the government. MINNCOR is filed with the Secretary of State as a non-profit company and doing business under an assumed name.

Is MINNCOR Subsidized With Tax Money?

Per MINNCOR’S statement on their website, they receive “no State subsidies, taxpayer dollars or grants” (https://minncor.com/about-us/faq.aspx). However, MINNCOR is a unit or division within the auspices of Commissioner of Corrections, clearly a government entity that is funded by tax dollars. It’s goal is to be self-sufficient, but it has “been in business” since 1994 and did not show a profit for at least 13 years.

Is MINNCOR Staffed/Managed With/By Government Employees?

Yes. The Commissioner of Corrections appoints MINNCOR’s chief executive officer (an unclassified position in the state’s civil service system) who reports directly to the department’s deputy commissioner of facility services. The deputy commissioner reviews and approves all MINNCOR-related policies and directives and provides general oversight of MINNCOR’s operations.

MINNCOR staff are department employees and, with a few exceptions, part of the state’s classified civil service. Depending on their job classification, staff are also governed by work rules established under Minnesota Association of Professional Employees, American Federation of State, County, and Municipal Employees, Middle Management Association, or Managerial Plan contracts.

Although all MINNCOR staff are hired by its chief executive officer and must report ultimately to him or her, some MINNCOR staff are also accountable to other department officials. For example, MINNCOR’s chief financial officer reports directly to MINNCOR’s chief executive officer and the department’s chief financial officer. Similarly, facility industry directors report to their respective wardens and to MINNCOR’s vice president for operations.

MINNCOR Does Not Always Adhere to Best Management Practices

MINNCOR has not always adhered to best management practices when it enters into revenue contracts with private businesses. (https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf Page 57 of PDF, Page 47 of actual report)

In setting contract labor rates, MINNCOR has intentionally understated its inmate wage costs because DOC has traditionally returned to MINNCOR the charges it deducts from inmate wages for their confinement costs. This understates the costs that MINNCOR has incurred and it is counter to the spirit of the federal Prison Industries Enhancement Certification Program (PIECP).

The Department of Corrections has not provided sufficient oversight of MINNCOR’s private labor arrangements. (https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf Page 60 of PDF, Page 48 of actual report)

MINNCOR does not have a formal, written marketing plan to help guide its sales activities. (https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf Page 62 of PDF and Page 50 of report)

MINNCOR Does Not Report to an Independent Board of Directors

Many private businesses report to an independent Board of Directors. Not MINNCOR. They have an advisory board that consists entirely of staff from MINNCOR and the Department of Corrections. MINNCOR’s advisory board consists of two deputy commissioners of corrections, the assistant commissioner of facilities, the assistant commissioner of support services, the chief financial officer for the department, two facility wardens, and MINNCOR’s chief executive officer and chief financial officer.

The board meets periodically throughout the year and has primarily been used to help advise MINNCOR on its operations and “recommend” ways to spend MINNCOR earnings and profits.

Corrections Commissioner Controls Revolving Fund for MINNCOR Operations

Minnesota statutes establish a revolving fund under the control of the Commissioner of Corrections for MINNCOR’s operations. Both the Legislature and the department expect MINNCOR to rely solely on revenues generated by its business activities to support and grow its operations. Minnesota’s Minncor program is also like prison industry programs in 36 other states and the federal government in that it operates on a revolving fund.

State Government Should Conduct its Business in an Open, Transparent Manner

The way in which MINNCOR records—or, more specifically, does not record the true cost of inmate labor and the funds it receives from DOC for inmates’ confinement costs in its annual financial statements is not accurate. Over the last several years, MINNCOR’s financial statements have understated inmate wages by about $1 million annually.

Furthermore, while the department must deduct confinement costs from certain inmates’ wages, it is not required to return this money to MINNCOR. State law only requires the department to spend it “for the purposes of the fund from which the earnings were paid,” which could include inmate education, self-sufficiency skills, and transition services. (16)

(16)   Minnesota Department of Corrections, “Division Directive 300.1004: Compensation,” Policies, Directives and Instructions Manual (St. Paul, 2008), https://www.doc.state.mn.us/DOCPolicy2/Documents/300.1004.htm, accessed April 14, 2008. This is consistent with state law, which requires that, “All sums of money received…for correctional services…are appropriated to the commissioner of corrections for the purposes of the fund from which the earnings were paid.” Minnesota Statutes 2008, 243.23, subd. 2.

For the most part, MINNCOR does not pay the salaries of correctional officers that routinely patrol MINNCOR work areas, except for overtime pay when an industry operates more than one work shift per day. MINNCOR contends that the DOC needs to pay for correctional officers no matter what activity the inmates were doing.

MINNCOR’s Annual Financial Statements Do Not Show Funds DOC Transfers to Them

MINNCOR after deductions are made from inmates’ wages for their confinement costs. MINNCOR’s fails to account for inmate wages and confinement cost funds it receives from the Department of Corrections in its financial statements in the same way it reports them in the state’s Comprehensive Annual Financial Report understates its expenditures and overstates the extent to which it is self-sufficient. (https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf PDF Page 45, Page 33 of actual report)

Department of Corrections’ policy requires that it return deductions for inmates’ cost of confinement to MINNCOR, and the department returned about $1.2 million in fiscal year 2008.16 However, the $1.2 million that MINNCOR paid out in wages and then received back from the department is not reflected in its financial statements. As required by the Department of Finance, MINNCOR reports the $1.2 million in the state’s Comprehensive Annual Financial Report, which is prepared in accordance with generally accepted accounting principles. It is included along with the other inmate wages as an expense under the category of “purchased services” and the reimbursement to MINNCOR is included under “other income.” (17)

(17)   Minnesota Department of Finance, State of Minnesota Comprehensive Annual Financial Report for the Year Ended June 30, 2008 (St. Paul, December 2008), 166.

Other State Auditor Notes Regarding MINNCOR

MINNCOR’s failure to include in its financial statements all of the wages it pays to inmates has resulted in an understatement of MINNCOR’s expenditures. Likewise, its failure to acknowledge DOC’s return of the wages withheld from inmates to MINNCOR gives the appearance that MINNCOR is more self-sufficient than it actually is.
(https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf Page 47 of PDF, Page 35 of actual report)

MINNCOR should report its full cost for inmate wages and the funds it receives from the Department of Corrections for inmates’ confinement costs in its annual financial statements and reports. Remitting these funds to MINNCOR can be thought of as a grant, and MINNCOR should record them as such in its annual financial statements and reports.

MINNCOR should also be more transparent in showing how confinement cost charges that DOC deducts from inmates’ wages and returns to MINNCOR affect its overall profitability. MINNCOR would not have been profitable in two of the last six fiscal years without these funds from DOC. Yet, MINNCOR’s annual reports give no indication that it receives these funds and no explanation as to how the funds affect its bottom line.

For the most part, MINNCOR does not compete unfairly with the private sector and, in some cases, provides them with needed services. (https://www.auditor.leg.state.mn.us/ped/pedrep/minncor.pdf Page 63 of PDF and Page 51 of report)

Feel free to contact us with any questions or comments.