Locked Up Efficiency? Finances at Prison

By Mustafa Bukhari, CCUF Columnist at Queen’s University

I recently volunteered to teach a finance class at a prison in Kingston, Ontario  Along the way I saw unnecessary bureaucracy, overstaffing and heavy-handed regulation on taxis of all things.

The prison administration organises classes for inmates who are nearly done with their prison sentences to help them back on to their feet. This helps them from falling into the vicious cycle of relative and sometimes absolute poverty which is often followed by crime, leading them back to jail. A truly commendable effort, especially because besides the social benefits, it’s virtually cost-free.  Smart government. But viewing how the prison system is run generally is a little troubling.

To check in at the reception there were around three people at the desk. As one of them checked our IDs, the other two sat and looked on. You may think that you need many guards at a prison but this was a minimum security facility where inmates could walk around the compound freely as long as they checked in and out. Why do they need three people? Who knows, but were paying for it.

Now it’s tempting to say that it’s providing employment so let it go. After all it’s not much in the bigger scheme of things. But this is really a chronic problem across government agencies. Friends of mine who have worked for the government complain of little work not only for them but for everyone else at their respective offices. If we could have government more efficient than we wouldn’t need to be taxed as much. More consumption and investment by consumers and businesses will result. The people who are laid off would then be put to better use elsewhere

How do we solve this?

There are of course significant challenges to getting departments to be more efficient. One is that it is just naturally hard to fire people.

But the even higher hurdle is of motivation. Why should a department head let go of people? Why should the supervisor have his/her budget cut and have lesser influence because of it?

Basically there is a shortage of incentive. No high-ranking official with such an agenda will be able to impose a sum of how much departments should cut from their budgets as he won’t know where the inefficiencies are. Only department leaders on the ground will be knowledgeable enough to make the call.

So how do we keep departments from running up costs without any profit and loss reports for them to be worried about?

The Cost-Bonus Ratio

Cost of running department after operation streamlining

Original costs

To create the necessary incentives we could use the above ratio. The fewer dollars you’re able to run a department on, the lower the ratio will be. And we could assign large bonuses for each percentage point cut to be shared among the units who achieve those cuts.

The ratio is simple and I think very effective as managers know exactly what activities they need and the ones they don’t. The bonus should be given only if services maintain equal quality and scope. Of course, tying incentives with cutting costs can create a negative, counterproductive outcome. It is therefore essential to push the idea of efficiency over the more understood “cost cutting”.

The extra prison guards might be a small problem, but it represents a huge expense for our nation. It might seem commonplace to accept any government as being inefficient, but let’s prove that we can be the exception to the rule.