Govt funds squandered in toner scam

Victorian government employees have allegedly rorted the state's procurement system by buying overpriced toner cartridges from an unauthorised government supplier, and in some cases cartridges that were not even required.

Nine government bodies purchased goods from the supplier in question, to the amount of $260,937, with one public officer being responsible for $148,000 of that spend, according to a recent report by Ombudsman Victoria.

The ombudsman, George Brouwer, looked in detail at the organisations, one of which was Arts Victoria, where a procurement officer spent $143,000 on toner cartridges for a Ricoh printer.

The authorised government supplier OfficeMax didn't have toner to supply for that printer, so the supplier recommended that agencies purchase the toner from the printer manufacturer, Ricoh, at a price of $263 to $342 per cartridge.

A purchasing officer had in part held with this recommendation, buying 43 colour cartridges from Ricoh between September 2004 and March 2009 at $263 each, with a total cost of $11,309. The black cartridges were free under the service contract.

However, the officer also purchased toner cartridges from an alternate company between 2006 and 2009, which came to a total cost of $54,000.

The officer told the ombudsman that they "honestly" believed they were saving Arts Victoria money, saying that Ricoh's prices were slightly higher at the time.

However, invoices showed that the project officer purchased black toner cartridges from the company for $799 and $899 per unit, which were free under the Ricoh service contract.

They bought 55 black toner cartridges and 74 colour cartridges from the company at a cost of around $42,000 and $58,000 respectively.

The ombudsman said that if the same amount of toner cartridges had been purchased under the Ricoh service contract, the cost would have been $19,462 for the colour cartridges. This meant that an extra $80,733 had been spent than had been required.

Product vouchers had also been purchased as prepayment for black and colour toner cartridges to be delivered in the future. These vouchers must be paid in 30 days.

The officer admitted in an interview, according to the ombudsman, that they knew that Arts Victoria didn't need the 12 black cartridges they'd ordered in product vouchers, saying they'd purchased product vouchers to 'get them off my back'. Ricoh told the ombudsman that the organisation should have only needed one black cartridge that year.

Ricoh said that the amount of printing being carried out at the organisation would have only required 11 colour toner cartridges, not 37 that the officer ordered in vouchers.

In 2009, the ombudsman found that the officer had purchased 24 black and 42 colour cartridges from the company in total, which Ricoh told the ombudsman would be enough black toner to keep the company going for the next 40 years, and enough colour toner for the next four years.

The ombudsman found that the officer had received $8300 in Coles Myer vouchers and Visa cards from the company, which they had not declared, and in fact had denied receiving when asked.

The officer also requested that invoices be broken up, so that they didn't get actioned up the chain, admitting to the ombudsman that it was "the wrong thing to do".

The officer stopped purchasing from the company in late 2009 and began to purchase with another supplier, which also offered gifts and incentives when cartridges were purchased. The ombudsman said that the officer had estimated that they had received a further $3000 in gifts from the other supplier.

Management said that since the employee, who was difficult to manage and has resigned during the investigation, had been there for a long time. However, the ombudsman was not impressed with that reasoning.

"In my view, the response provided by the director of Arts Victoria reflects a reluctance to come to grips with the fact that a lack of management and auditing at Arts Victoria contributed to a culture that allowed the corrupt conduct to go undetected," he said.

He suggested that Arts Victoria's guest and hospitality policy needed to be reviewed as well as its management.

Arts Victoria said that its gift practice is transparent, supported by contractual obligations and open to scrutiny.

Schools and prisons

Arts Victoria wasn't alone in its irregular printer procurement, according to the ombudsman's report. Similar purchases had occurred in a prison and primary schools, with 66 schools buying product from the company, leading to a toner stockpile in one school. The ombudsman also noted that in one school, the company would give the school better gifts coinciding with a rise in the unit price of a toner cartridge.

Recommendations by the ombudsman included procurement audits of the entities involved and that the state's auditor-general consider conducting an audit of all public sector agencies around purchasing. It also asked that the Public Sector Standards Commissioner consider lowering the value of gifts requiring to be considered nominal.