DATE: Tuesday, September 23, 1997           TAG: 9709230209

SECTION: LOCAL                   PAGE: B9   EDITION: FINAL 

SOURCE: ASSOCIATED PRESS

DATELINE: RICHMOND                          LENGTH:   46 lines

AUDIT SHOWS STATE LOSSES ON STOVES MADE IN PRISONS

Virginia's prison industries are losing more than $13 each on camp stoves made by inmates in a deal set up last year with a private company, according to a state audit.

Virginia Correctional Enterprises, the state agency that runs the prison factories, has so little data on its ventures with private firms that no one knows whether the inmate operations are making or losing money, said a report by state Auditor of Public Accounts Walter Kucharski.

In the past two years, the prison factories have moved increasingly into partnerships with private companies. But the stove work was launched in March with a letter of understanding, and still does not have a contract.

``We felt the letter of understanding was OK in the circumstances,'' said Don Harrison, a spokesman for the state attorney general's office. ``They were eager to go and get on with this thing.''

Then-Attorney General Jim Gilmore approved the deal. The three-page letter of understanding was signed by a stove company executive, Director of Corrections Ron Angelone and David S. Jones, then the director of VCE.

Following the normal procedures would have taken too much time, said Jones, who now works for a VCE private partner that buys inmate-built office furniture.

``If we followed the process, if the process went perfectly, it would have taken 90 days'' to get a contract approved, Jones said. ``That was simply not acceptable.''

The camp stove deal provided work for sheet metal shops at the Buckingham and Dillwyn correctional centers. Under the letter of understanding, VCE sells the stoves to Ariens Co. of Brillion, Wis., for $43.97 each.

But the audit, based on a review by VCE accountants a month after the stove work began, concluded that each stove cost $57.26 to make.

``We're very satisfied'' with the deal, said Ariens Vice President Greg Lee. He said he could not comment on the auditor's findings.

State law says VCE should be self-sufficient. The agency earned a profit in fiscal 1996, but that was its first since 1990.

State auditors say the agency has problems estimating costs. Last year, VCE estimates were off by more than 20 percent for 10 of 13 main business lines, the audit found. KEYWORDS: VIRGINIA PRISONS

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