Audit finds overcharges

STATE AGENCIES: GA questions report that says Office Depot deal not monitored well enough

August 10, 2010 

The state auditor says national chain Office Depot overcharged Washington taxpayers $306,000 for pens, paper and other office supplies sold to the Department of General Administration last year.

Similar claims have arisen in other states including North Carolina and Nebraska and cities such as San Francisco.

But GA spokesman Steve Valandra said Monday that the Washington agency disputes the claims issued earlier in the day by Auditor Brian Sonntag’s office.

The audit findings were based on a 12-month spot check of transactions made in 2009 under a contract Washington state and Office Depot have had since 2006.

No fraud was alleged or found. Instead the audit investigation says GA did not adequately oversee or monitor the contracts, which led to GA paying prices that were higher than specified in the contract or included shipping costs that were higher than allowed.

“They need to do a better job” of monitoring, auditor spokeswoman Mindy Chambers said.

The audit recommends that GA work with Office Depot to recover overcharges and to improve its oversight of the contract. Just over half of the $24 million per-year contract serves the state, and the rest serves universities and, to a lesser degree, local governments such as cities and counties.

The overcharges for pens, ink, toner, paper and other supplies totaled $271,534 in prices that were above what the contract specified for a 12-week period from mid-July through September 2009. One example listed in the audit was 17 toner cartridges sold to a customer for $147.24 each that were listed under contract for $106.60 apiece.

Another $26,529 was paid in excess for items dropped from a deeply discounted list during that period, auditors found. Office Depot also overcharged $7,954 for shipping over a nine-month period, the audit said.

Spokesmen for the office supply company did not immediately return telephone or e-mail messages asking for comment.

Valandra of GA said the contract is complicated and the agency disagreed with the way auditors categorized some of the items that were purchased. He also said that the accuracy of pricing for items dubbed “essentials” was 99.88 percent – meaning just 0.12 percent was in dispute.

GA has already had meetings with Office Depot, according to Valandra, and the agency said in its written response to the audit that it intends to let the contractor explain its charges through the agency’s dispute resolution process. Valandra said GA also is reviewing the tens of thousands of transactions under the contract, and an agency auditor and contract manager are verifying whether there are overcharges.

“If there are we’ll work on getting a refund,” Valandra said. “We just don’t know yet if the figure they are talking about is correct or not.”

The contract is up for its annual renewal in March, and that is when GA would decide whether it should rebid it, Valandra said.

“We don’t know if we would do that. We’ve had it since 2006. We think it is a good contract,’’ he said.

Of the $24 million a year in goods, $10.3 million was for regular office supplies including pens, pencils and file folders; $7.5 million was for toner and ink; and $6.2 million was for paper. The audit says that the three-year contract began in 2006 and was renewed. Under it, 250 agencies and local governments paid fees of between $400 and $10,000 every two years to GA in order to receive discounted prices from Office Depot.

Prior to the contracts, the state operated its own supply agency, Consolidated Stores, which purchased pens, paper and other supplies at wholesale, then sold them to agencies.

Online

Go to www.sao.wa.gov/findings/1004031.pdf for a copy of the investigative findings or to www.sao.wa.gov/AuditReports/AuditReportFiles/ar1004031.pdf for a copy of the audit report.

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