The man in charge of prisons and probation in England and Wales received a bonus of up to £20,000, it has emerged.
Michael Spurr was given the payment in 2016-17 on top of his annual salary of around £150,000.
The bonus was "awarded" the previous year when the chief inspector of prisons said many jails were "unacceptably violent and dangerous".
The Prison Officers Association (POA) called it "scandalous and shameful".
Steve Gillan, general secretary of the POA, told BBC News: "It's absolutely disgraceful that those who are overseeing a crisis in the prison service have been rewarded with performance bonuses.
"It's scandalous that they're being rewarded for failure."
In his latest assessment of prisons in England and Wales, released this week, chief inspector of prisons Peter Clarke said he was "appalled" at conditions in many jails and said there had been a "staggering decline" in standards in youth custody centres.
Justice Secretary David Lidington also admitted in an open letter that the probation system was "falling short" of expectations and that measures designed to support prisoners on release did not "command the confidence" of the courts.
The bonus payment is disclosed in the annual report from the National Offender Management Service (NOMS), which was published on Thursday.
Mr Spurr was chief executive officer of NOMS until April, when the government agency was re-named HM Prison and Probation Service, which he now heads.
The report revealed that in 2016-17 the 55-year-old was paid £145,000-150,000 and received a bonus payment of £15,000-20,000, along with pension benefits of £25,000.
Phil Copple, the chief operating officer and interim director of probation, Colin Allars, director of probation, and Ian Porée, director of commissioning, were given bonuses of £10,000-15,000.
Claudia Sturt, director of security, order and counter terrorism, was paid a £5,000-10,000 bonus.
The report said bonuses are determined by a committee headed by Richard Heaton, permanent secretary at the Ministry of Justice.
It said they are based on "performance levels attained" and are made as part of the "appraisal process".
"An individual can only be awarded a bonus if they have exceeded at least one finance and efficiency objective," the report said.
Mr Spurr, who has spent his entire career in the prison service, starting out as a prison officer, did not receive a bonus the previous year, 2015-16, though payments were made to Mr Copple, Mr Allars, Mr Poree and Carol Carpenter, a former human resources director.
The annual report also revealed NOMS "breached" government pay policy when it increased overtime pay to prison officers, trained to deal with riots, and raised allowances for other officers to address staff shortages.
The report said when the breaches became clear the Ministry of Justice submitted a business case to the Treasury asking them to agree to the payments, but it refused to do so.
A review into the pay policy breaches found there had been "failings in governance" but the payments still went ahead and are set to continue, the report found.
It also emerged in the document that all prisons in England and Wales are expected to become smoke-free by the end of 2018.
The phased roll-out of smoke-free jails began last year in Wales and the south-west of England and there is now a complete ban on smoking in 21 prisons across the estate.
It is understood a further 40 are in the process of going smoke-free this summer, with the majority expected to be smoke-free by the end of the year.
Earlier this week, the Scottish Prison Service said it intended to make all of Scotland's prisons smoke-free by next year.
Peter Clarke said the success of the smoke-free scheme depended on how well prepared prisons, staff and inmates were for the change.
He said one prisoner had been so desperate for a cigarette he had mixed nicotine patches with tea leaves and rolled the "tobacco" between pages torn out of a Bible.