The men, from HMP Hewell in Redditch, were on a scheme run by a local charity, the Batchley Support Group.
A prison service spokesman said there had been "a mistake".
Ms Smith said the prisoners "didn't have anything else on" and she made a donation to the charity for their time.
Ms Smith stepped down as home secretary in June 2009 following the revelation that she had inadvertently claimed parliamentary expenses for pornographic films ordered by her husband.
She lost her seat as MP for the Worcestershire constituency of Redditch to Conservative Karen Lumley in the 2010 general election.
CLICK HERE and read more of the story. Source BBC NEWS