By Joseph Mismas Managing Editor at Plunderbund.com The State Auditor’s Office released much-anticipated audit reports for JobsOhio and for Ohio’s Development Services Agency late last month that reveal some extremely disturbing shortcomings at both organizations, including a lack of procedures for identifying potential conflicts of interest and over one million dollars in undocumented payments. WHAT IS JOBSOHIO? Shortly after taking office, John Kasich, with the help of Ohio’s GOP-controlled legislature, created JobsOhio as a semi-private organization tasked with leading Ohio’s business development efforts. Much of the power and responsibility (and a lot of staff) from Ohio’s Department of Development (DOD) was transferred to JobsOhio, and the state agency was renamed the Ohio Development Services Agency (DSA). Unlike the state’s development departments, JobsOhio was made exempt from Ohio’s public records and ethics laws. The group was then given control of Ohio’s future state liquor profits to help fund its development efforts and pay its staff, some making over $200,000 per year. Over the lifetime of the liquor lease with the state, JobsOhio stands to bring in over $6 billion dollars from the Ohio’s liquor sales. From the beginning, critics have warned that a lack of transparency, oversight and accountability at JobsOhio, coupled with control over a huge sum of public money, was a recipe for disaster. JobsOhio supporters told us they would have plenty of processes in place to ensure nothing shady happened, and they insisted that all this secrecy was necessary to protect trade secrets and to help spur Ohio’s job creation efforts, which Kasich claimed were stalling in the current Department of Development. Neither claim is turning out to be true. Regarding the jobs, a recent study by the Cincinnati Enquirer found that JobsOhio, in its first full year of operation, performed much worse than the Department of Development. The number of job commitments JobsOhio received from businesses was much lower than the commitments the DOD received in its last full year of operation under state control. And the amount of money JobsOhio was doling out to businesses to get those commitments was dramatically higher under JobsOhio. In short: John Kasich’s semi-private development organization spent more money and brought in fewer jobs than the state-run organization it replaced. TRANSPARENCY, OVERSIGHT AND ACCOUNTABILITY And what about all those concerns about transparency, accountability and oversight? Back in March, Ohio Auditor Dave Yost won a battle with JobsOhio and Governor Kasich over his right to audit the organization. Shortly after receiving financial records from JobsOhio, Kasich and the legislature changed Ohio law to specifically prevent the state auditor from auditing JobsOhio. While Yost proceeded with his audit, new information came out about JobsOhio. In July, the Dayton Daily News revealed that six of nine JobsOhio board members had financial ties to companies receiving money from JobsOhio. JobsOhio spokesperson Laura Jones told the paper that “We have a conflict of interest policy that we have in place that we utilize here at JobsOhio. If there is a conflict, it’ll be brought to the attention (of the full board) and policy will be followed on how to go forward with that.” In September, the Ohio Ethics Commission also identified potential conflicts of interest at JobsOhio. Jones repeated her claim, telling the Dispatch that “we proactively conduct our own review for potential conflicts of interest pursuant to those policies. … We take our ethics seriously and we’d review that as well.” This month we finally got to see the the audit report for JobsOhio and it concluded that “JobsOhio had no clear formal procedure to screen for senior management and employee conflicts of interest or any mechanism for managing these situations” and that “safeguards for detecting, managing, and avoiding conflicts of interest at the staff level were missing.” The auditors couldn’t even find evidence that even basic informal actions were taken to ensure there were no conflicts of interest. Yost’s team only reviewed 28 random projects from the hundreds of deals JobsOhio has or is working on. And in those 28 projects, they found three possible conflicts of interest that the non-existent JobsOhio screening process had somehow missed. That’s over ten percent of the projects! Imagine what they’d find if they reviewed all of the deals. Unfortunately, this is likely the last public audit JobsOhio is ever going to get since Kasich and his Republican pals in the legislature passed that law earlier this year preventing the auditor from doing his job. Yay! Transparency! MISSING MONEY The JobsOhio audit also found that JobsOhio employees were issued business charge cards for personal expenses and, in a large number of cases, were submitting expenses for reimbursement without providing any receipts or proof that the spending was for actual business purposes. In a small number of cases, the auditor was able to identify personal expenses made on the cards that employees never paid back. The auditor warned that “unreimbursed personal use of corporate charge cards could lead to significant misuse of JobsOhio funds over time if proper control is not exercised.” Even more troubling, the auditors reviewed a sample of 131 credit cards reimbursements and discovered that 58 did not contain a receipt or invoice proving it was a valid business expense. The value of these mystery expenses totaled $124,633, almost half of which was paid using public funds. Kasich envisioned JobsOhio as a private company run by seasoned business professionals from Corporate America. People who know how to run a successful business. Fact: You do NOT run a successful business by losing track of hundreds of thousands of dollars. I have worked for some of the largest corporations in the US (and the world) for nearly two decades and I’ve been submitting expense reports for nearly all of that time. This is NOT how Corporate America works. If this was a real company, and it was discovered that nearly half of employee expenses were being reimbursed without any receipts, all hell would be breaking lose. The managers in charge of approving expenses would likely be fired. Employees who didn’t submit recipients would be reprimanded and tasked with providing the appropriate documentation. And an independent auditor would be brought in to review the expenses to ensure they were business-appropriate. Right now we just don’t know if these were valid business expenses or if these unsupervised JobsOhio employees were traveling the world and boozing it up with their friends on the state’s dime. We have no idea. Even worse: Yost doesn’t seem at all bothered by the fact no one knows. And this is the point where Yost’s audits break down, and politics takes over. PROBLEMS WITH THE AUDITS When faced with the information that a great deal of money was paid out under shady circumstances, Yost does not dig in and try to determine if JobsOhio and the State of Ohio are being ripped off by dishonest employees. Instead, he simply recommends that management update their user manuals for expense reporting to help “increase employee accountability.” Yost never even brings up the possibility that these undocumented expenses could be inappropriate, even though he made a big deal a few paragraphs earlier about the personal expenses that he was able to identify. A separate audit report for Kasich’s Development Services Agency (DSA) was released the same day and it found even more problems with missing documentation. According to that audit, JobsOhio billed the Development Services Agency $860,000 for “economic development and marketing services” but included no information regarding to what those amounts were attached. DSA just paid JobsOhio and didn’t ask any questions. The audit also found $165,245 in public money went to the the JobsOhio Beverage System. Again, those payments “were not supported by an invoice or other detailed documentation.” Together the two audit reports identify over one million dollars in undocumented spending involving JobsOhio, yet Yost makes no recommendations for recovering that money like he has in other audits. For example, earlier this month, Yost released the audit of an ambulance company that failed to keep accurate documentation. In that case, Yost found that the company owed the state slightly over $71,000 “due to inadequate documentation”. “There aren’t any shortcuts around the law,” Yost concluded. “Keeping an accurate and complete book is part of the job. Just get it done.” But when asked about JobsOhio’s missing documentation during a recent press event for the audit, Yost replied that it’s “not unusual that there is some lack of documentation. We don’t live in a perfect world.” So an ambulance company fails to document $70K and they need to “get it done.” But when JobsOhio can’t tell us where over one million dollars went, we’re going to just shrug it off? It was clear from the beginning of that press conference that Yost did not want to talk about the results of the audit. Instead of opening with a review of the findings, which might have given JobsOhio opponents some great sound bites, Yost started off by downplaying the significance of the findings: “None of this is headline making stuff,” claimed Yost. Really? REALLY? For years opponents of JobsOhio have warned that its lack of accountability and transparency were incompatible with an organization set to receive over $6 billion in public money over the next 25 years. And now we find out that JobsOhio has no process in place for determining conflicts of interest AND they seem to have misplaced the receipts for over a million dollars? This is EXACTLY the type of thing that makes headlines, as it should. While I’d like to give Yost some credit for conducting the audit, it’s clear that politics is preventing him from following through and doing his job. Campaign season has already started, and both Yost and Kasich are up for reelection next year. Yost needs Kasich to be strong at the top of the ticket to help improve his own chances of reelection. And Kasich needs JobsOhio to appear successful if his jobs and economy message is going to resonate with voters. We already know Yost’s former campaign manager, Ohio Republican Party Chairman Matt Borges, pressured Yost to avoid the audit. From my perspective, it appears they agreed to compromise on conducting it, then not making any recommendations for recovery and downplaying the results. Another fun political fact: The wife of Yost’s Deputy Chief of Staff, Tony Tanner, just happens to be JobsOhio Managing Director Kristi Tanner, who the Columbus Dispatch reports is likely paid$255,000 year. No word on whether Kristi turned in the receipts on her latest JobsOhio credit card expenses.