An independent report into Albany prison on the Isle of Wight has criticised a merger which has seen it "clustered" with two others.
The Independent Monitoring Board also said the care of inmates with low intellect, mental health or learning difficulties was "unacceptable".
A new £1m night sanitation system was dubbed "unreliable and unsatisfactory".
The governor of the reorganised prisons says the merger project will save more than £1m a year.
The report said the board was "satisfied" in the way the governor and his staff run the prison given the "constant budget reductions".
But it added: "Nationally, [boards] have been complaining about the lack of proper care and treatment of prisoners of low intellect and those with learning difficulties as well as the thousands of inmates with mental health issues, and the Albany board is no different.
"Although the staff do an excellent job caring for these individuals, they are not trained to do that, creating a situation that is unacceptable."
On the merger it found: "Clustering of the three island jails has been ongoing for some time... it is quite clear that the Prison Service will take the plan to fruition, with the aim of saving over £1m in budgets across the three establishments.
"The board feels that the expense of the whole operation will not achieve the required financial result."
Barry Greenberry, HMP Isle of Wight Governor, said: "The report reflects the natural anxieties experienced by staff prior to a major change, but the result of clustering has been a great success.
"The launch of HMP Isle of Wight has resulted in a saving of £1.1m a year through management and central services efficiencies, which have significantly reduced the need to cut front line staff."