Twelve state agencies are violating Colorado law by amassing $25.6 million beyond the savings they’re allowed to hold on to without lowering fees or increasing services, an audit released Tuesday found.

“How do they get away with that?” asked Sen. Lucia Guzman, D-Denver, after the report was made public before the Legislative Audit Committee hearing.

She learned, however, that agencies face no penalties for going over the limit without reducing fees.

“I’m feeling a little embarrassed in that I’ve indeed carried some bills about moving fees up,” said Guzman, vice chair of the audit committee and the Senate’s second-in-command.

Sen. Steve King, R-Grand Junction, the committee’s chairman, said he intends to schedule a special hearing to have the head of each department tagged by the audit explain why they’re hanging on to the money without lowering costs to the public.

Some of the departments in violation of the budget law are charged with assessing fines and enforcing laws and regulations on the public. None of the 12 sent representatives to Tuesday’s audit hearing.

The agencies are the Department of Agriculture, Department of Education, Department of Higher Education, Department of Human Services, Department of Law, Department of Natural Resources, Department of Personnel and Administration, Department of Public Health and Environment, Department of Public Safety, Department of Regulatory Agencies, Department of Revenue and Department of State.

Under law, state agencies are supposed to retain just two months of reserve cash for each program funded by a fee. The limit on each fund was set by a 1998 statute aimed at keeping the state government, as a whole, from violating Colorado’s Taxpayers Bill of Rights, which would trigger direct refunds to taxpayers.

Henry Sobanet, the director of the Office of State Planning and Budgeting, said the legislature built flexibility into the budget law, because sometimes there are good reasons agencies are hanging on to cash, including planned programs that might soon need the funding.

The biggest offender is the Medical Marijuana Cash Fund, accounting for $12.5 million when the fiscal year ended last June. As a result, the $35 fee for a medical marijuana license dropped from $35 to $15 last month.

The annual fee to medical marijuana users fell from $90 to $35 in 2011, but money continued to pile up. The fee was $140 when licensing began in 2000.

“I think there are reasons behind every single one of these,” Sobanet said. “But I don’t know what those reasons are right now. We are working with each agency on their agreed-upon plans to comply with the law.”

The second-largest excess reserve belongs to the Department of Natural Resources’ oil and gas conservation fund to enforce operating permits, one of the programs that has been in violation for five years. The fund had more than $2.3 million in excess at the end of the past fiscal year.

The Oil and Gas Conservation Commission, however, replied to auditors that it expects to add 19 new employee along with “several large one-time projects” to use the money. Money spent from the fund is expected to increase from about $6.4 million last year to more than $11 million in the current fiscal year, according to the commission’s response to auditors.

The Department of Natural Resources also is supporting a bill to increase its cap on reserves.

The Department of State, run by Secretary of State Scott Gessler, had amassed $486,143 over the limit in fees from notaries last year — the 10th year the fund was over the limit, auditors said. Gessler’s office said legislation has since moved the fee, along with other smaller accounts, into the department’s overall budget, which is in compliance with the law.

Gessler kept that fund in balance by reducing most fees to $1 for six months to reduce reserves by $3.5 million.

“I share the Audit Committee’s frustration that government shouldn’t be hoarding taxes and fees, which is exactly why my office took deliberate actions to reduce our excess reserves and keep $3.5 million in the hands of businesses, notaries public, charities and nonprofits,” Gessler said.

The increasing funds — beyond their legal limits — haven’t escaped notice.

Twelve of the 34 programs cited by auditors have been out of compliance for five years or more, and four others that have been in violation for three years.

Each time department heads were cited, many of them promised to address the growing reserves, State Auditor Dianne Ray said.

“Every year they give us the same story,” she told the audit committee.

Joey Bunch: 303-954-1174, jbunch@denverpost.com or twitter.com/joeybunch

Holding the money

Of the 34 accounts operated by state agencies that have retained more money than state law says they should, the 10 worst offenders at the end of the 2013 fiscal year are.

Department of Public Health and Environment Medical Marijuana Cash Fund: $12.54 million

Department of Natural Resources Oil and Gas Conservation Fund: $2.36 million

Department of Public Health and Environment Newborn Genetics Fund: $2.06 million

Department of Personnel Electronic Procurement Program: $1.77 million

Department of Regulatory Agencies Division of Registrations: $1.08 million

Department of Agriculture Inspection and Consumer Service Cash Fund: $724,084

Department of Revenue Liquor Law Enforcement Fund: $581,702

Department of Public Health and Environment Health Facilities General Licensure Fund: $520,041

Department of Revenue Colorado Dealer Licensure Board: $488,433

State Department Notary Administration Cash Fund: $486,143

Source: Office of the State Auditor