Calculating a New Per Diem Rate for Housing Federal Prisoners

Today, over 1,000 federal prisoners are housed in State and local jails throughout the Commonwealth of Virginia.  Historically, local Sheriffs have been reimbursed by the U.S. Marshals Service for the actual costs of housing a federal prisoner in the local jail.  A new federal program, however, now allows Sheriffs to build into their federal per diem rate both projected future jail operating costs as well as profit.  Unfortunately, Sheriffs need to be cautious about pitfalls under the new program, which could inadvertently lead to a low per diem rate which does not capture all allowable jail operating expenses.  

Background
Sheriffs have traditionally been reimbursed the cost of housing a Federal prisoner in a local jail under an Intergovernmental Agreements (IGA) executed by the Sheriff and the U.S. Marshals Service (USMS).  Each IGA listed a per diem rate which reimbursed the Sheriff for the costs of housing one federal prisoner per day.  These per diem rates were calculated by the local Sheriff and could only use actual and allowable jail operating costs from the previous fiscal year.   

The process of calculating a per diem rate under this old system was complicated, and Sheriffs were susceptible to future audits in which the Federal government could retroactively demand reimbursement of monies already paid to the Sheriff.  This situation created uncertainty and apprehension on the part of Sheriffs — who erred on the side of undercounting costs, which in turn resulted in inaccurate low per diem rates for housing federal prisoners.

A New Way To Contract With U.S. Marshals Service
In 2006, the Department of Justice’s Office of the Federal Detention Trustee (OFDT) revised the process for contracting with Sheriffs for the use of local jail bedspace for housing federal prisoners.  OFDT created the Detention Services Network (DSNetwork), an automated network which now replaces the old, cumbersome process for calculating per diem rates for housing federal prisoners in local jails.  

By November 2007, USMS completely retired the old system and requested that Sheriffs replace old IGAs with new “electronic Intergovernmental Agreements” (eIGA) under the DSNetwork.  The new system has proved to be more efficient and more accurate in calculating jail operating costs.  Sheriffs execute thirty-six month fixed per diem rate agreements which are no longer susceptible to Federal audits.  The new system allows Sheriffs to negotiate per diem rates based upon projected jail operating costs and seek profit.  However, Sheriffs need to recognize that some critical aspects of the old IGA system did not carry over to the new eIGA system.

A New Way To Calculate Federal Per Diem Rates
Under the new DSNetwork system, Sheriffs are required to submit “Jail Operating Expense Information” (JOEI) which includes expenses regarding (1) jail/detention center personnel salary and benefits; (2) costs associated with inmate care such as food/kitchen supplies, medical supplies, and recreation services; (3) facility expenses such as utilities and insurance and (4) vehicle expenses such as maintenance and insurance.  Under the old IGA system, Sheriffs could only submit costs from the previous fiscal year.  Under the new DSNetwork system, however, Sheriffs can submit projected JOEI costs. 

It is important for Sheriffs to recognize that not all cost categories under the old IGA system now appear under the new DSNetwork System.  For example, the new system does not automatically request information regarding County or Sheriff’s Office indirect costs.  Local sheriffs run the risk of negotiating a new eIGA per diem rate that does not include costs for centralized services provided by the County or the Sheriff’s Office.  The new System also does not include cost categories related to equipment depreciation or repair/maintenance of equipment.

Sheriffs Can Now Seek Profit
Finally, as noted above, the new DSNetwork System now allows Sheriffs to include profit into the per diem rate for housing federal prisoners.  Under the old IGA system, USMS was not permitted to pay Sheriffs profit pursuant to OMB Circular A-87 restrictions.   The challenge for Sheriffs under the new DSNetwork System is determining how much profit to include in their requested per diem rate.  In making this decision, Sheriffs should consider the total per diem rate as compared against per diem rates of jurisdictions of similar size and economic conditions. 

Conclusion
The new DSNetwork System has greatly improved upon the complex and cumbersome processes by which Sheriffs were compensated for housing federal prisoners in local jails.  The new System allows Sheriffs to seek projected costs, as well as profit.  However, Sheriffs need to ensure that all costs incurred in housing federal detainees (direct and indirect) are included in the requested per diem rate to USMS. 

Joseph Summerill is a former Federal Bureau of Prisons attorney.  Mr. Summerill  now practices in the Washington, D.C. office of Greenberg Traurig LLP and  may be contacted at [email protected]

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