The specific objectives of the audit were to determine whether the South Carolina Department of Corrections (SCDC) has complied with Federal and State laws in its federally certified and State prison industries program; to determine whether the prison industries program is operated in a manner that results in a competitive advantage over private-sector workers; to determine whether SCDC has adequate procedures for procuring and monitoring its contracts to provide prison labor to private companies; and to determine whether there is significant potential for increasing SCDC prison industry production and sale of goods and services to State and local government units in the State. The period covered by the audit was July 2001 through June 2003. The audit found that SCDC does not have adequate goals or performance measures for its prison industries program. Also, under Federal law, the use of inmates for manufacturing jobs by private-sector companies involved in interstate commerce may not displace private-sector workers. Wages must also be comparable to those paid for similar work in the community. The audit advised that the Employment Security Commission must improve its method for determining comparable wage levels and for ensuring that employment displacement does not occur. The audit concludes that the employment of inmates may create a competitive advantage over private-sector workers because companies that employ inmates pay low wages, do not pay fringe benefits, and receive subsidized rent and utilities. Whether this competitive advantage results in the displacement of private-sector workers by inmates depends on whether a company would transfer its operations out-of-State or to a foreign country if it were not employing inmates. The SCDC has not complied with the requirements of the Prison Industry Enhancement Program by dividing the cost of inmate training between SCDC and a private company. In addition, SCDC has not consulted with the Employment Security Commission before establishing the training period for inmate workers. Also, contrary to State law, SCDC has not consistently deducted from the wages of inmates in its prison industries who work for private organizations. Consequently, funding has been reduced for items such as child support, victim restitution, and inmate room and board. The audit further concluded that since State law limits competition between SCDC and private vendors in the sale of goods and services to government entities, there is a reduced incentive for SCDC and its private competitors to limit the prices they charge to government entities. Recommendations are offered for addressing the shortcomings identified in the audit. Appended SCDC comments on the audit