Ohio State Auditor Betty Montgomery received permission Monday to replace the auditing agency the embattled Bureau of Workers’ Compensation fired in May for holding back its opinion of the bureau’s finances because of ongoing criminal investigations.
The state Controlling Board, a legislative panel that must approve unbid contracts, approved a $550,000 request to hire Pittsburgh-based Schneider Downs & Co. to conduct the 2005-2006 financial audits of the bureau and the Ohio Industrial Commission, which handles appeals of claims for which the bureau has denied benefits.
The vote to approve the contract was 4-2 along party lines, with Democrats Rep. Sylvester Patton of Youngstown and Sen. Ray Miller of Columbus objecting.
In an April 4 meeting with Montgomery, KPMG representatives cited their inability to have access to documents from the criminal investigations in their decision to withhold their findings and the auditors’ opinion on the bureau’s financial soundness, according to a letter Montgomery sent to KPMG.
The contract was put up for bid in June, but no one responded and it was given to Schneider Downs, auditor lobbyist Mark Hamlin told the board.
The bureau has been scarred by scandal since media reports beginning in April 2005 tied bureau investments to rare-coin dealer and top Republican fundraiser Tom Noe. Since then, the bureau has acknowledged investment losses of at least $300 million.
Noe has been indicted on theft and other charges stemming from shortfalls in the $50 million in rare-coin investments he has overseen. He was to be sentenced Tuesday on federal charges of illegally funneling contributions to President Bush’s 2004 campaign.
The state paid KPMG $297,095 for work the company did on the audit it did not complete. Miller chided Hamlin for allowing KPMG out of its contract and making Schneider Downs start from scratch.
“The state of Ohio paid $300,000 to KPMG and we get nothing out of it. Now, the public does not benefit at all,” Miller said.
While the public does not have access to documents used by KPMG in its audit work, the auditor’s office can look at them and assess some of the problems within the agency, Hamlin said. The audits for both years are expected to be completed by the end of the year, he said.
The audit is one Montgomery’s office conducts annually on state agencies. It was scheduled before media reports of poor performance in the bureau’s managed health care system.
Bureau Administrator William Mabe planned to meet Tuesday with the 26 contractors that operate managed care organizations for the bureau. Payments from have jumped more than 40 percent since the arrangement began in 1997, though the state is seeing about half as many claims, state records show.
Mabe said he intends to ask the contractors why costs have skyrocketed when claims are down, bureau spokeswoman Nancy Smeltzer said.
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