SACRAMENTO - As the debate grinds on in the Legislature about how best to slice $1.2 billion from California's crowded prison system, a scathing new audit faults the Corrections Department for its skyrocketing costs and for not doing enough to track the money it spends.

According to the report, released Tuesday, spending by the California Department of Corrections and Rehabilitation jumped by nearly 32 percent from 2005 through 2008 - to almost $10 billion, a tenth of the state's operating fund - even though the inmate population actually decreased by several hundred inmates during that span.

"Corrections fails to track, maintain and use data that would allow it to more effectively monitor and manage its operations," State Auditor Elaine Howle wrote to lawmakers and the governor's office. She said that "lack of information" has prevented officials from keeping some costs in check.

It was unclear Tuesday how the report would affect the Legislature's ongoing efforts to trim the prisons budget. Cutting the budget, largely by releasing thousands of inmates, was a key piece of the weeks-long discussions that closed the state's $24 billion deficit this summer.

Efforts to send a reform package to Gov. Arnold Schwarzenegger's desk have languished amid a dispute between the Senate and the Assembly over how many inmates to release. Neither side commented Tuesday on the auditor's findings.

In examining the cost increases, prison officials point to several factors, from sharp increases in pay and benefits for corrections officers to court-mandated spending on inmate health care.

But the report found several figures that were particularly eye-popping.

In 2007-08 alone, the department spent $431 million on overtime costs - which was still a cheaper alternative than hiring and training additional corrections officers to reduce the need for overtime.

Moreover, the report blasts the department for failing to employ a computer system that collects and tracks how factors like overtime and health care costs individually contribute to rising costs.

The report also found that the department was unable to track the $208 million it spent last year on job-skills and academic programs designed to keep inmates from returning to prison after their sentences are complete.

Aside from the questions of inefficiency and fattened paychecks, the auditor noted that California's "three strikes" sentencing law adds billions to the state's corrections costs.

Because that law imposes longer-than-usual sentences on inmates who commit a third felony after two serious or violent prior offenses, the state must house and care for those inmates for years longer than would otherwise be the case.

Currently, a quarter of California's 150,000 inmates are serving "three strikes" sentences. The auditor found that if those inmates did not serve the longer-than-usual sentence, the state would save some $19.2 billion in future years.

Corrections officials said they took the auditor's remarks "very seriously" and that two new computer systems are due to go online at all 33 of the department's prisons, camps and institutions over the next two years.

But officials also said that some of the costs - related to benefits for corrections officers and "three strikes" sentencing - are outside the department's control.

Voters have resisted efforts to soften the three- strikes law since it was enacted in 1994. And much of the increase in benefits stems from a labor agreement that then-Gov. Gray Davis signed with the politically powerful California Correctional Peace Officers Association in 2001.

"We're not just sitting still," said David Lewis, the department's deputy director of fiscal services. Noting efforts to bring the department's computer systems "into the 21st century," he said, "these are things we've been working on for a long time."

Schwarzenegger's office on Tuesday praised the department's efforts to "address the inefficiencies pointed out in this audit, and we support their efforts to streamline functions and be more cost-effective."

The Senate last month approved an ambitious plan, backed by Schwarzenegger, that would have released 27,000 inmates this year, in part by offering home monitoring for inmates with less than a year to serve and providing for the supervised release of medically incapacitated inmates.

But the Assembly last week narrowly approved a scaled-back version of the plan that would release only 17,000 inmates next year.

Senate and Assembly leaders have been discussing how to bridge those differences before the current legislative session ends Friday, although the effort has taken a back seat to other issues.

That legislative dispute comes amid the backdrop of a federal court ruling last month that ordered the state to remove 40,000 inmates from its rolls because of chronic overcrowding and concerns about the quality of inmates' health care.

The Schwarzenegger administration has asked the U.S. Supreme Court to stay that ruling. But if that bid fails, the state has only until the end of next week to submit a plan that outlines the cuts.