In his 2013-14 annual report, Howard Sapers said inmates are "increasingly likely" to leave prison by way of statutory release at the two-thirds point of their sentences instead of by conditional release, known as parole.
That means many offenders are released under limited supervision — if any.
"This is not how Canada's corrections and conditional release system was designed and certainly does not reflect best practice," Sapers told a news conference after his report was tabled in Parliament.
The corrections investigator also says more offenders are staying longer in higher security prisons where access to reintegration programs is the most restricted.
To make matters worse, Canada's federal penitentiaries are becoming ever more chaotic, the report suggests — prison interventions involving force, inmate assaults, segregation placements, involuntary transfers and self-injury incidents are also "trending upward," Sapers says.
"Returning offenders to the community who are embittered by their incarceration experience, instead of (being) provided opportunities for positive change, is not in anyone's interest," he said.
"Graduated and structured release is less costly and more successful than releasing an offender directly from prison with limited or no period of supervision."
Public Safety Minister Steve Blaney's office responded as it often does when Sapers releases a report, saying: "At all times, our thoughts are with the victims of crime."
Consequently, said spokesman Jason Tamming, the government has stopped the practice of "house arrest" and ended early parole for more criminals.
"We do not believe that convicted criminals are entitled to private accommodations," he added in an email.
The report urges the government to better fund so-called community correction centres — known colloquially as halfway houses — because they help to gradually and effectively reintegrate offenders into the community.
The centres "deliver significant impact in terms of value for money and contribution to public safety," the report found, advising they be staffed with nurses, social workers and psychologists.
Sapers has provided the government with 16 recommendations to help reduce recidivism and ensure prisoners are well-prepared for their return to society.
"Offender rehabilitation and community reintegration is extremely complex and challenging work; it's work that begins at the point of admission to federal custody," he said.
But convincing the government to heed his recommendations is often a slow process, Sapers conceded.
His report last year raised concerns about prison conditions, access to health care and programs, mentally ill offenders, aboriginal inmates and women. Sapers later said he was frustrated by the lack of response from the Correctional Service of Canada.
"The response ... has been a little challenging," he told the news conference.
"We're still waiting for the response to some of last year's annual report recommendations.... What I say to the government is, it's time that we had a response. It's time that we knew what steps were being taken because these issues address the ability to prevent deaths in custody. It's very important."
Sapers added he'd recently met with Blaney and the federal commissioner of corrections to discuss his ongoing concerns.
Follow Lee-Anne Goodman on Twitter @leeanne25