Department of Printing Violates Law

EFF Requests Prosecution by Attorney General

It appears the state Department of Printing (DOP) has violated the law by illegally retaining and spending millions of dollars in excess state funds that should have been returned to the General Fund. The violations were easy to hide due to the fact that the department is an "off budget" agency with little or no oversight and, apparently, has some powerful friends. Although the violations were first discovered by the state auditor’s office in 1998, the audit report’s release was delayed by state officials until last November.

The DOP was created to provide other government agencies with efficient, at-cost printing. As a government agency, the department is not allowed to overcharge and profit at the expense of other agencies. Former governor Dixie Lee Ray, aware of the tendency of state agencies to gravitate toward growth and power, directed in 1980 that the DOP may retain as working capital only 15 percent of the prior year’s revenue. The legislature then directed that funds in excess of 15 percent be sent back to the state’s general fund. Further, the DOP is required to obtain direct approval from the governor before purchasing any new equipment; not abandoned or delegated approval, but direct gubernatorial approval.

Unfortunately, in this case, it looks like the law didn’t mean a lot to the officials who broke it. In 1998, the head of the DOP decided that instead of returning excess funds to the legislature, he would simply invest them in purchasing and leasing new equipment. But instead of getting the governor’s required approval, the department got an employee in the governor’s office to sign a $2.8 million purchase request—an illegal authorization. DOP officials then decided not to buy the equipment specified in the illegal purchase approval, and used $2.7 million to enter an unapproved sole source contract with Xerox for leased copiers, leaving nothing to show for the investment.

To further complicate the matter, in the recent state audit of the DOP (Report No. 6179), an auditor noted, "The agency has not developed policies and procedures to ensure compliance with state bid laws." Meaning the department likely disregarded the state’s competitive bidding process when it entered the Xerox contract.

The above violations were not a one-time incident. The audit report shows that the department kept $4 million in cash investments over its legal limit in 1997, and $3.5 million in 1998. In 1999, the amount was as much as $5.5 million over the limit depending on how "working capital" is defined. While the Office of Financial Management (OFM) is supposed to provide an annual review and certification of the DOP’s working capital, there is no record of this certification for the last several years.

Although no one was watching the department closely, it did take a little help from other state officials to hide the DOP’s misdeeds for so long. An examiner in the state auditor’s office uncovered these violations in early 1998, yet the report’s release was delayed until November by bureaucrats in the DOP, the Office of Financial Management, and the Attorney General’s office.

EFF’s Recommendations. . . .

The Department of Printing should be required to return all illegally retained surplus funds with interest to the general fund.

OFM should require the DOP to rebate any funds to overcharged state agencies. The State Auditor’s office noted the effect of not returning the money to the general fund was that "state agencies using the Department’s services may have paid more than they would if the 15 percent limit had been followed."

The Attorney General should prosecute responsible individuals in the Department of Printing and the Office of Financial Management (OFM) for violation of state laws and apparent misappropriation of state funds. OFM has known of these violations since at least June 29, 1998, and has not enforced the law requiring that excess funds be remitted to the General Fund. These serious violations require immediate enforcement penalties.

The Governor’s Office should investigate the employee who violated state law by authorizing the large equipment purchase without approval from the governor. Appropriate action should be taken to prevent future violations.

The State Printer should be investigated for providing false information to the governor’s office when it submitted a request for approval to purchase equipment and instead leased other equipment. This violates the intent of the public printing law requiring the governor’s approval for the purchase of any new machinery.

The state legislature should bring the DOP under its authority by appropriating money for the department directly into a revolving fund. The DOP is an off-budget agency, which allows it to charge other agencies any fees it wants with no outside oversight. No one currently reviews the department’s budget.

Some of these recommendations may sound harsh, but, if so, it is because our senses have been dulled by the numerous incidents of government disregard for the law. It is important to deter further violations of state law by taking swift and serious disciplinary action whenever violations such as those mentioned are uncovered.

Prepared by Bob Williams, Senior Research Analyst, (360) 956-3482 or effwa@effwa.org

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org