The Legislative Audit Committee voted May 27 to release an evaluation of the Colorado Department of Corrections' budgeting practices, saying the review—conducted by the Office of the State Auditor with PFM Consulting—identifies “9 findings and 9 recommendations” intended to improve how the department plans for caseload, personnel and operational costs.

The report matters because it addresses how the department translates inmate population forecasts into budget requests and staffing, a process that affects multi-hundred‑million‑dollar appropriations and the department’s ability to provide continuous operations. Michelle Collin, Deputy State Auditor, told the committee the evaluation “looked at the department's budget practices, including personnel related costs, contracts, staff spending, operational costs driven by caseload, user fees, and cash funds.”

PFM’s managing director Sarah Shermer summarized the evaluation’s scope at the hearing: “We will be discussing our evaluation of the Department of Corrections budgeting practices report,” and said the review examined four primary areas: caseload‑driven costs, personnel and contract staff spending, cash funds management and inmate fees and wages. The audit reported the department had jurisdiction over more than 26,700 individuals in March 2025 and a FY2025 budget of about $1,170,000,000 with 6,820 budgeted FTE.

The firm’s key recommendations include replacing the department’s frequent, caseload‑driven midyear budget adjustments with a more stable baseline that establishes capacity based on feasible staffing and historical operational costs; adopting a marginal‑cost approach for operational expenses rather than an average‑cost per inmate method; updating the department’s shift relief factor (PFM found the department’s factor had not been updated in at least 25 years and an updated factor was roughly 10% higher); and budgeting for the true cost of contract clinical and behavioral health staff rather than relying on vacancy savings and overtime. Shermer told the committee the department’s current approach “undermine[s] its credibility” because the DOC “adjusts its prison capacity so often” and that frequent openings and closings of housing units are disruptive and inefficient.

Department representatives told the committee they accept many of the findings and intend to implement changes. Ashley Clark, director of finance administration for the Department of Corrections, said, “We wholeheartedly agree with recommendation number 1 on how we do our budgeting practice,” and acknowledged past internal reorganization and turnover contributed to inconsistent methodologies. A department spokesperson told the committee the department used vacancy savings and overtime to cover costs while it worked through staffing shortages and that it projects about $29,000,000 in unbudgeted contract‑staff costs in FY 2025.

Committee members pressed for further analysis of fiscal impacts and faster implementation. Senator Bridges and others asked whether PFM or DOC could model how budgets would have differed under the recommended approach over past years; Shermer said the team did not produce a direct historical comparison but noted past caseload adjustments represented a small percentage of the department’s general fund budget. Several committee members emphasized that even relatively small percentage changes in DOC’s budget can be significant in the context of statewide priorities.

The committee’s formal action at the start of the meeting was to release the PFM evaluation. A motion to release the report was moved from the vice chair and seconded; no member recorded opposition during that vote and the committee released the audit for public distribution.

The department told the committee it will work with the Governor’s Office of State Planning and Budgeting and the Department of Personnel Administration to develop implementation plans; the department estimated a phased timeline for different recommendations, with some items expected to take up to a year or more to implement because they require policy development, IT work and coordination with other state offices. The audit and department responses will be used as the basis for legislative and executive‑branch follow up.

The audit and accompanying presentation, including the report’s nine findings and recommendations, were made available with the committee’s release. The audit also documents specific cost pressures cited by DOC and quantifies several budget variances identified by PFM, which the department has agreed to address with planned changes to budgeting methodology.