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The accounting allowed GPO to make gross profits of more than $90 million from Oct. 1, 2006, through Sept. 30, 2007, on the production of e-passports. The four subsequent months produced an additional $54 million in gross profits.

The agency set aside more than $40 million of those profits to help build a secure backup passport production facility in the South, still leaving a net profit of about $100 million in the last 16 months. GPO was initially authorized by Congress to make extra profits in order to fund a $41 million backup production facility at a rate of $1.84 per passport. The large surplus, however, went far beyond the targeted funding.

The large profits raised concerns within GPO because the law traditionally has mandated that the agency only charge enough to recoup its actual costs.

According to internal documents and interviews, GPO’s financial officers and even its outside accounting firm began to inquire about the legality of the e-passport profits.

To cut off the debate, GPO’s outgoing legal counsel signed a one-paragraph memo last fall declaring the agency was in compliance with the law prohibiting profits, but offering no legal authority to back up the conclusion. The large profits accelerated, according to the officials, after the opinion issued Oct. 12, 2007, by then-GPO General Counsel Gregory A. Brower. Mr. Brower, currently U.S. Attorney in Nevada, could not be reached and his spokeswoman had no immediate comment.

Fred Antoun, a lawyer who specializes in GPO funding issues, said the agency was set up by Congress to operate basically on a break-even financial basis.

“The whole concept of GPO is eat what you kill,” Mr. Antoun said. “For the average taxpayer, for them to make large profits is kind of reprehensible.”

Likewise, a 1990 report by Congress’ General Accounting Office stated that “by law, GPO must charge actual costs to customers,” meaning it can’t mark up products for a profit.

Like the security concerns, GPO officials brush aside questions about the profits. Agency officials declined a request from The Times to provide an exact accounting of its e-passport costs and revenues, saying only it would not be accurate to claim it has earned the large profits indicated by the documents showing the difference between the manufacturing costs and the State Department fees.

Questioned about its own annual report showing a $90 million-plus profit on e-passports in fiscal year 2007 alone, the GPO spokesman Mr. Somerset would only say that he thinks the agency is in legal compliance and that “GPO is not overcharging the State Department.”

Mr. Somerset said 66 different budget line items are used to price new passports and “we periodically review our pricing structure with the State Department.”

Public Printer Robert Tapella, the GPO’s top executive, faced similar questions during a House subcommittee hearing on March 6. Mr. Tapella told lawmakers that increased demand for passports — especially from Americans who now need them to cross into Mexico and Canada — produced “accelerated revenue recognition,” and “not necessarily excess profits.”

GPO plans to produce 28 million blank passports this year up from about 9 million five years ago.

A State Department consular affairs spokesman, Steve Royster referred questions to GPO on e-passports costs.

Congress to weigh in

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