LITTLE ROCK — Arkansas’ prison farms operated at a net loss of $2.6 million in the fiscal year that ended June 30, according to an audit report presented to a legislative panel Friday.


The Legislative Joint Auditing Committee also received a report in which auditors concluded that problems with the state’s eligibility and enrollment framework for Medicaid stemmed from a lack of knowledge at the state Department of Human Services about handling projects of that size and scope.


Large-scale farming operations in Arkansas’ prison system date back to the purchase of about 10,000 acres for the Cummins Prison Farm in Lincoln County in 1902. Since then, farming operations have been added at prisons in Jefferson, Lee, Pulaski and Izard counties, respectively, with crops being grown and livestock raised on a total of 20,439 acres.


The department’s Agriculture Division is designed to be self-supporting, but state auditors found that it incurred a $2.6 million net loss in the past fiscal year, which they attributed to the transfer of capital assets to other Department of Correction funds and the consumption by inmates — rather than sale — of some of the commodities produced on the farms.


Auditors found that production levels on the farms were lower last year than national yield estimates for all crops except rice. They also said Arkansas’ prison farm operations are larger than those of any surrounding state.


If the state were to rent the land out instead of using it for prison farms, estimated yearly revenue would range from $1.7 million to $2.6 million, according to the audit report.


Prison officials told the committee the farming is done by inmates, many of whom have no previous farming experience. They also said allowing inmates to consume some of the farms’ products reduces the amount of money the state has to spend to feed the inmates.


Rep. Julie Mayberry, R-Hensley, said the panel should consider “the human element,” meaning the difference that being able to work on a farm makes for inmates.


“There needs to be some type of study or research done on that to show what happens to them when they leave,” she said. “Do they end up becoming a taxpaying citizen and get on the right track, taking care of their family or what have you, or do they end up doing nothing and possibly ending back up in jail? I think that that’s a really important element for us to keep in mind because there might be a huge cost savings that we’re not factoring in.”


The panel adopted a motion by Sen. Eddie Joe Williams, R-Cabot, to refer the audit report to the House and Senate state agencies and governmental affairs committees. Williams also said he would direct legislative staff to look at prison farming operations in other states.


“I just want us to gather information to see if we’re making the right decisions for the taxpayers of the state of Arkansas,” he said.


In a separate report, auditors said they reviewed software procurements and cooperative purchasing agreements at DHS in relation to the creation of a system for conducting Medicaid eligibility checks and enrollment — a project that ran into delays and cost overruns and led to a work backlog at the agency.


The auditors concluded that DHS lacked knowledge about managing such a large project, which involved enrolling and checking the eligibility of hundreds of thousands of people who applied for the state’s Medicaid expansion program.


DHS entered into contracts in which payment was based on time and materials, not on products delivered, and in doing so the agency unnecessarily assumed all risks associated with the project, the auditors found.


The auditors noted that in July 2015 DHS amended an existing contract with vendor Cognosante so the company could begin managing the project and that the agency now has a project management office.


The audit findings did not include anything that needed to be reported to a prosecutor, Andy Babbittt of Arkansas Legislative Audit told the panel.


Rep. Kim Hammer, R-Benton, said he hoped the report would bring “some closure” on the matter.