Strickland OKs law empowering internal auditors

11/16/2007

COLUMBUS Despite concerns over cost, Gov. Ted Strickland yesterday signed a new law giving a stronger voice to internal state auditors whose warnings of wrongdoing are ignored by superiors.

Unfortunately, the earlier theft at the [Ohio Bureau of Workers Compensation] by Tom Noe was real and could have been avoided had the concerns of one internal auditor been adequately addressed, said state Auditor Mary Taylor, who proposed the changes.

The enactment of House Bill 166 means that an allegation of fraud, waste, or abuse of state tax dollars will not be ignored by management again like it was at BWC, she said.

State agencies employ roughly 100 internal auditors. Although they would remain in their current locations, the new law would have them answer to Mr. Strickland s Office of Budget and Management. The law also makes internal audit reports public records and open to scrutiny.

And it would create an independent committee of financial experts to review and publicly comment on audits submitted by internal auditors.

The passage of the law and creation of the independent audit committee are one of the most concrete legacies of the biggest state scandal in a generation, sparked by The Blade s 2005 investigation into the BWC.

The Coingate scandal, as it became known, revealed that an internal auditor at the workers compensation bureau had raised red flags in 2000 about the agency s $25 million investment in a rare-coin fund operated by Noe, a Toledo-area coin dealer and influential Republican fund-raiser.

The warnings by internal auditor Keith Elliott were ignored. In fact, bureau officials gave Noe an additional $25 million to invest after the auditor raised questions about conflict of interest and insider trading by Noe and his associates.

After The Blade revealed the existence of problems in Noe s rare-coin funds, several state and federal investigations were launched.

Investigators eventually found Noe had bribed a top bureau finance official.

Noe was convicted last year of stealing millions from the coin funds and sentenced to 18 years in state prison. His state sentence begins after he completes a 27-month federal sentence for illegally laundering $45,000 to President Bush s 2004 campaign.

The Blade s investigation also led to Administrator James Conrad s forced resignation from the bureau, and the criminal conviction of former Gov. Bob Taft on ethics charges for failing to disclose gifts received from Noe and others seeking to do business with the state.

Mr. Strickland, however, resisted the suggestion that mechanisms similar to those in the new law should be spread across all of state government outside the executive branch.

He said he believed some of the changes instigated at the BWC during the Republican administration of then-governor and now-U.S. Sen. George Voinovich were a mistake and had the effect of politicizing the agency.

This BWC issue goes back a long way across at least a couple of administrations, he said.

It is something that should not have occurred, and should have been recognized a long time ago.

He noted his administration again has overhauled the bureau s governance, replacing what he characterized as a paper tiger oversight committee with a stronger board of directors and hiring a new administrator from outside government.

I think that s the way to deal with these situations, he said. I don t feel the need to try to impose a global system upon all of state government. That is perhaps costly and unnecessary. I don t think there s any evidence that what happened [at the BWC] was the result of anything other than dishonest persons and dishonest behavior.

Voinovich spokesman Chris Paulitz said Mr. Voinovich inherited an insurance fund for injured workers that was collapsing upon itself.

[Mr. Voinovich] said, Make me governor, and I will turn this place around, he said.

I think if the bureau had finished with a $3.50 surplus at the end of his administration, people would have been thrilled. There was a surplus of $3.5 billion when he left there, Mr. Paulitz said.

There was wrongdoing, and justice is being served, he said. But people should not forget that this was a miraculous turnaround during his time as governor.

At one point, Mr. Strickland had threatened to veto the bill, which was proposed by Ms. Taylor, the sole Republican statewide executive officeholder, and introduced by a pair of GOP lawmakers.

Yesterday, they sat together at his desk as he signed it into law.

The governor said he feared the original version would have usurped some of his authority and given it to another entity. He continues to have questions about the potential price-tag.

It costs money to have government work properly, but it costs a lot more when government doesn t work properly, said Catherine Turcer, of government watchdog Ohio Citizen Action.

Think about the embezzlement of millions of dollars Tom Noe.

She said reforms initiated in the wake of the BWC scandals the auditing bill, restrictions on the awarding of contracts to campaign contributors, and limits on BWC investments will help prevent a future scandal.

These will make a difference, but we shouldn t rest on that, she said.

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