Definition

Financial sustainability is the generation of sales revenue to cover all costs and financial obligations associated with Correctional Industries (CI) operations. The concept of a triple bottom line has emerged in Correctional Industries which focuses not only on the needs of customers, but also the funding of the social mission and value provided by the organization to incarcerated individuals for successful re-entry.

Triple bottom line accounting expands the traditional reporting framework to take into account social and environmental performance in addition to financial performance. This has also been further referred to as identifying business performance as “full cost accounting” including economic/financial, social/ethical and environmental/ecological.

Financial sustainability is essential to CI’s mission of providing vocational and soft skills training and certifications for individuals while incarcerated. These certifications and training, in turn, lead to increased opportunities upon release for real life employment for incarcerated individuals, thereby reducing recidivism.

Rationale/Benefits

Achieving financial self-sufficiency will result in financial gains and therefore maintenance or growth of adequate operational funds. In order to achieve this, CIs must be customer-driven, focusing on quality, on-time delivery and competitive pricing. In addition, CIs should pursue new business partners/models to bring in new products and revenues, and seek cost efficiencies and competitiveness while operating in a corrections environment.

Adequate operational funds will cover fixed costs as well as allow for the timely ability to procure raw materials, maintain inventories, capitalize building and equipment purchases, fund any necessary expansion of operations and provide the ability to complete needed repairs & maintenance. These funds also allow Correctional Industries to meet the demands of customers and to keep up with technology advances in operations. This also creates an ability to increase the number and types of opportunities offered to the incarcerated workforce in job training programs.

There may be business units that are not financially self-sufficient but provide valuable work opportunities for numerous incarcerated individuals. Correctional Industries can balance these with business units that can offset the financial loss.

Financially self-sufficient Correctional Industries are recognized as a viable reentry/ incarcerated job program that does not burden annual General Fund appropriations. Additionally, Correctional Industries reduces the cost of corrections security and/or programming staff required for the supervision of the incarcerated individuals.

Financial sustainability and associated funding reserves provide the basis for promoting current operational expansion as well as the ability to explore, consider, and implement new operations, thereby maintaining the number of current incarcerated individual positions and creating and expanding incarcerated individual opportunities within Correctional Industries. Funding reserves will help carry a CI through an economic downturn and/or lean budget cycles.

Practices

1. Develop annual business operating plan to support the strategic plan

a) Budgets (Short and Long-Term)

· Historical data should be considered when preparing budgets. Known business changes (expansions, end of a product line, etc.) should be considered when preparing budgets.

· Forecasts of sales revenue are generated for the budget period by the sales and marketing plan. Define key market segments, customer groups, and stakeholder groups and the key requirements and expectations for products, operational capabilities, customer support services, and overall operations.

· Include asset planning in the budget development process. The primary goal of asset planning is to maximize the return on investment of existing or additional assets which leads to delivery of customer value.

· Determine costs based on sales volume and product mix using Generally Accepted Accounting Principles (GAAP). The following is a list of some common costs which should be included:

o Cost of sales (raw materials, indirect and direct labor)

o Administration (including salaries & benefits)

o Rent

o Depreciation

o Utilities

o Communications

o Freight

o Repair & Maintenance

b) Sales & Marketing

A Sales & Marketing plan should be included within the business plan. The Sales and Marketing plan should identify the customer base for particular products and services so that efforts can be geared to those areas. Increasing sales will allow for greater contributions to funding reserves, thus contributing to financial sustainability.

c) Expansion Planning

Correctional Industry programs must always have a focus on the future. Monitoring market trends and identifying opportunities is essential in understanding when investments should be made in particular business units.