Concerns have been raised that the prison service is spending £300,000 a year renting flats for inmates on home leave.
In a report published today, HM Chief Inspector of Prisons for Scotland said HMP Castle Huntly was spending the money on accommodation for those with no fixed abode.
Inmates at Castle Huntly near Dundee - Scotland’s only open prison - are allowed one week’s leave per month to help prepare them for release.
But David Strang, HM Chief Inspector of Prisons, said the prison was “picking up the tab” when he would have expected local authorities to foot the bill.
He said: “One of the big issues for people leaving prison, whether it’s Barlinnie, Grampian or the Open Estate (Castle Huntly), is whether they have somewhere to live.
“Often they can’t register as homeless until the day of release. It’s generally a problem that needs tackling.
“When they are at the Open Estate they are granted a week’s leave per month, but if they haven’t got accommodation to go to, then they can’t get out.
“What we found was that the prison itself was paying to rent flats for prisoners so that they could take advantage of home leave.”
Mr Strang said the prison authorities were doing a “good and positive” thing, but he said their budget was not meant to cover such costs.
He added: “They need to negotiate with local authorities and housing associations to see if that can be improved. Clearly the prison service is funded for what happens in the prison.
“I commend them for doing it because part of the rehabilitation process is that prisoners are tested in the community, but that housing provision is clearly a local authority responsibility rather than a prison service one.”
Elsewhere in the largely positive inspection report, Mr Strang noted “significant” staffing shortages in Castle Huntly’s healthcare team, which is provided by NHS Tayside.
He also said the use of psychoactive substances - sometimes referred to as “legal highs” - was a growing issue in the prison.
And he called for prisoners to be allowed to access the internet, including Skype, to help communicate with the outside world.
The Scottish Prison Service did not respond to a request for comment.