Pronoun capitalization.

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My civil service staff write internal reports that refer to the agency with a capital letter, as the "Department," instead of using the whole formal title, for example: "John Smith was appointed to the Department on July 12, 1995. "This strikes me as incorrect, since my guess is that since "department" is not a proper pronoun, it shouldn't be capitalized. If it is somehow correct for internal use, would it still be correct in an external report such as a press release, or newspaper article?

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