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Published: Thursday, 11/21/2013 - Updated: 11 months ago

Ohio auditor scolds Kasich job-creation entity for conflict handling after subpoena fight

BY JIM PROVANCE
BLADE COLUMBUS BUREAU CHIEF

COLUMBUS — In perhaps the only such audit that will ever be performed by his office, State Auditor David Yost today reported finding instances of JobsOhio corporate credit cards being used for personal expenses and questioned $68,744 in expenditures.

The audit, covering the fiscal year through June 30, 2012, is likely to be the last of its kind from his office of the non-profit, job-creation entity that was Gov. John Kasich’s top priority upon taking office in 2011. The General Assembly, controlled by fellow Republicans, cut off Mr. Yost’s access to the entity’s books.

The auditor had taken the position that the entity’s use of profits generated by the state’s lucrative liquor monopoly were still public funds, despite the fact that JobsOhio had paid the state a lump $1.4 billion to lease the system and use those profits to fuel its job-creation efforts.

The audit covered the expenditure of about $14 million spent by the corporation and the entity that ultimately accepted the liquor system.

The audit covered what was essentially the start-up period for JobsOhio during which it partly relied on state-supplied seed money and private contributions and before its liquor sales deal was fully enacted.

Questions have been raised about potential conflicts between the role of board members of JobsOhio and the corporations they represent. The Ohio Ethics Commission, for instance, recently flagged a list of potential conflicts that could occur without saying conflicts had indeed occurred.

Mr. Yost’s office said it “haphazardly” selected 28 project files for potential conflicts of interest and found three that could have been “potential” conflicts. The audit noted that the initial files provided by JobsOhio did not contain enough information to determine the extent of the conflict or if one actually existed. It received further documentation from JobsOhio suggesting that the conflicts were either non-existent or very minor.

Those “officials” were unnamed, but JobsOhio, in its response to the audit, indicated none involved a member of the board and just one involved a company previously cited by the ethics commission. Fifteen of the 25 files selected involved a single company that the ethics commission had previously cited as a “potential” conflict.

“In (two) cases, the project occurred in calendar year 2012, but the financial interests of the employee involved existed in calendar year 2011 — and had been divested prior to January 2012,” JobsOhio stated in its response accompanying the audit.

“In the third instance, the potential conflict, which involved ownership of common stock in a large, publicly traded corporation, ‘was so slight as to constitute a de minimus conflict’,” it wrote. “In fact, the employee’s stock represented an approximate 0.000000000646 percent ownership interest in the company.”

Even so, the audit suggested that these instances demonstrated a problem with JobsOhio’s procedures.

“Each of these instances reveals that, during the audit period, JobsOhio had no clear formal procedure to screen for senior management and employee conflicts of interest or any mechanism for managing these situations,” the audit reads. “Safeguards for detecting, managing, and avoiding conflicts of interest at the staff level were missing. Moreover, JobsOhio did not document any actions that it may have taken to informally screen for potential conflicts or avoid or mitigate actual conflicts of interests.”

The amount of dollars involved in the use of corporate credit cards for personal expenses in five instances was “inconsequential,” but the auditor again raised a red flag about a potential problem.

“There was no evidence of reimbursement to JobsOhio for personal expenses in five instances,” the audit reads. “The amount of these expenses was inconsequential, but continued unreimbursed personal use of corporate credit cards could lead to significant misuse of JobsOhio funds over time if proper control is not exercised.”

It also noted that JobsOhio paid for the lunches of state employees on five difference occasions. Again, the amount involved was deemed “inconsequential,” but the audit noted that such expenditures are not permitted under JobsOhio policy.

The audit also questioned the sufficiency of documentation submitted to support authorized credit card purchases.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.



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