Ohio auditor scolds JobsOhio for conflict handling

COLUMBUS, Ohio (AP) — The state auditor cited Republican Gov. John Kasich's signature job creation office on Thursday for sloppy handling of ethics and conflict-of-interest procedures in its first year but cleared its staff of the business conflict questions that have dogged it.

Ohio-Jobs-Agency-Audi Sidd

In this Nov. 2, 2010 photo, then Ohio Auditor-elect Dave Yost speaks to supporters during the Ohio Republican Party celebration in Columbus, Ohio. Auditor Yost scolded Gov. John Kasich’s signature job-creation office on Thursday, Nov. 21, 2013, for some sloppy handling of ethics and conflict-of-interest procedures in its first year, but he cleared JobsOhio’s staff of the business conflict questions that have dogged the office. (AP Photo/Tony Dejak)

The formal review by Republican Auditor Dave Yost followed his high-profile fight for access to JobsOhio's private financial accounts. The audit found eight procedural deficiencies at JobsOhio, a private nonprofit development corporation, during its first year of operation.

JobsOhio, which began operating in 2011, said all the processes have been addressed since then, many of them voluntarily identified and remedied.

The audit's relatively benign findings after two years of wrangling over JobsOhio's activities angered the office's many vocal critics, mainly the liberal think tank ProgressOhio and Ohio Democrats.

"This is not an audit; this is a whitewash," said state Rep. John Patrick Carney, Yost's 2014 Democratic challenger. "They made no attempt to see that money was properly spent."

Yost said JobsOhio's fiscal soundness was left to accounting firm KPMG, which gave it a clean fiscal bill of health in October.

The JobsOhio compliance audit came the day Yost released an independent auditor's evaluation of documents and dollars submitted to Ohio's new Development Services Agency under its agreement with JobsOhio. That report identified transactions of more than $5.2 million for which the proper paperwork was lacking and detailed other issues.

Agency spokesman Todd Walker said Ohio "received back every penny of its contract."

Yost's JobsOhio review found the office didn't have "sufficiently robust" procedures in place to assure potential conflicts and ethical violations were avoided.

It required multiple requests and extended efforts by his office, for example, to vet potential conflicts of interests that might have existed between JobsOhio directors, executives and employees and the companies the office was recommending for state tax incentives.

"JobsOhio had no clear formal procedure to screen for senior management and employee conflicts of interest or any mechanism for managing these situations," Yost said.

Yost's office selected 28 project files to review based on media reports, Ohio Ethics Commission referrals and the auditor's staff recommendations. It identified potential conflicts in three instances. Two were fully cleared; the other was determined to be inconsequential.

Those results, JobsOhio wrote in its response, "point out the danger of those who would — with limited information — rush to judgment on matters involving an individual's reputation."

The audit said some JobsOhio directors failed to sign ethical conduct pledges or make written assurances they'd follow its self-imposed gift or conflict-of-interest policies until well after related business was conducted.

The review found about $60,000 in mostly public spending that was undocumented. JobsOhio received $1 million in taxpayer dollars to start and recently offered $1.5 billion in bonds backed by its long-term rights to Ohio's liquor business.

With a subpoena, Yost had ordered JobsOhio to turn over its private and public books for the review. The move was criticized by Kasich and fellow Republicans in the Legislature as outside the parameters of his duties.

JobsOhio complied under protest in March. It also returned $1 million in taxpayer startup money in a move possibly aimed at shielding it from future government scrutiny. Shortly after, lawmakers changed state law to clarify the disagreement, shielding future private spending from the state audit process.

Yost said Thursday that new law doesn't completely cut Ohio's independently elected auditor out of the process. He said the firm hired to conduct the next JobsOhio audit must first strike a deal with his office and JobsOhio.

He said transparency would be something he would do what he can to fight for during that three-way negotiation.

"I just have one seat at that table, probably over in the corner," he said.

ProgressOhio's executive director, Brian Rothenberg, said too much remains unknown about JobsOhio's inner workings and the new law will only exacerbate the problem.

"The great Republican Ronald Reagan once said, 'Trust but verify,'" he said. "JobsOhio seems to keep saying, 'Just trust us.' I think the public deserves verification."

JobsOhio received $1.5 billion from the sale of bonds backed by 25 years of state spirituous liquor profits. Its executives have said the profits are public money but the bond proceeds aren't.