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The alleged theft, which took place from January 2007 to January 2008, totaled $6,877, Luallen said Tuesday during a news conference.
She said the investigation started after an anonymous caller used the auditor's public hotline -- 1-800-KYALERT --to question labor reimbursements for inmates in the Kentucky Correctional Industries program.
The program at the state reformatory in LaGrange houses six industrial plants employing 175 inmates. Their salaries range from 25 cents an hour to $200 a month.
The program is a self-supporting division of the state Corrections Department, which produces goods and services in state prisons. Products range from furniture to embroidery.
Inmates have access to computers as part of their jobs, but are never allowed to use the Internet, Luallen said. She declined to identify the alleged thief and those who benefited because she has referred her audit to the state police for further investigation.
Luallen's office worked with the state Department of Corrections to examine the inmate payroll processing system.
All the missing money went into inmates' commissary accounts.
Al Parke, deputy adult institutions commissioner, said the alleged thief was placed in a segregated unit last Thursday.
If other inmates are found guilty, amounts erroneously credited to their commissary accounts can be deducted in the future, Parke said.
Luallen recommended that the Kentucky Correctional Industries improve oversight of the inmate payroll system.
