Ohio2006 Blog

News, analysis, and comments on Ohio elections.

Tuesday, September 12

Atty Gen: Dann (D) Renews Call for MCOs Audit; Montgomery (R) Secures $500K No-Bid BWC Audit Contract

There are new developments in the unfolding scandal involving managed-care organizations (MCOs) certified to conduct private care administration on behalf of the Ohio Bureau of Workers' Compensation (BWC), a function that was out-sourced by Republicans after taking control of the General Assembly in 1994 and has resulted in inflated expenditures (approximately $1.6 billion too much) to companies operated by political insiders even as the number of workers compensation claims has declined.

Yesterday attorney general candidate State Sen. Marc Dann (Liberty Township) asked William Mabe, the new Director of the BWC, to formally request that Dann's opponent, State Auditor Betty Montgomery (R), conduct a performance audit of all BWC-certified MCOs. Dann had asked Montgomery to undertake such an audit last week but she refused, saying she had not been asked to do so by the BWC and that she lacked the legal authority to audit the companies.

I had surmised that Montgomery's authority to conduct such audits could be based on the MCOs contracts with the state. However, Dann relies on Section 117.10 of the Ohio Revised Code, which states that the auditor “may audit the accounts of private institutions, associations, boards, and corporations receiving public money for their use and may require of them annual reports in such form as the auditor prescribes,” and the new Supreme Court case of Oriana House v. Montgomery, 108 Ohio St.3d 419 (2006). Leo Jennings of the Dann campaign describes the Oriana case:
Ms. Montgomery fought for years to clarify the fact that she had the authority to audit Oriana House because one of her biggest supporters and campaign contributors, Alex Arshinkoff, the Summit County Republican chair, had a vendetta against that agency. Now, when she has an opportunity to perform the same type of audit on behalf of taxpayers who may be out $1.6 billion, she makes excuses and says ‘I don’t have the legal authority to do it,’ when she clearly does. I guess it’s a question of whose ox is being gored. Apparently, unless the ox writes big campaign contributions, she’s more than happy to sit and do nothing.
Dann said that since taking the helm at BWC, Mr. Mabe has demonstrated that he is attempting to right the troubled agency and rebuild the public trust that has been shattered by the Coingate and MDL scandals, and Dann is hopeful that Mabe will request the audits from Montgomery.

Also yesterday, Montgomery received permission from the Controlling Board, a legislative panel that must approve unbid contracts, to enter into a $550,000 unbid contract with Pittsburgh-based Schneider Downs & Co. to conduct the 2005-2006 financial audits of the BWC and the Ohio Industrial Commission. Schneider Downs will replace former auditor KPMG, fired last May when KPMG representatives told Montgomery that they would withhold their findings and the auditors' opinion on BWC's financial soundness because of their inability to have access to documents from the criminal investigations. The state paid KPMG $297,095 for work the company did on the audit it did not complete, and will now pay Schneider Downs to start over from scratch.

The partisan vote to approve the contract was 5-2, with Rep. Sylvester Patton (D-Youngstown) and Sen. Ray Miller (D-Columbus) in opposition. Yesterday Miller said he objects to the use of a private accounting firm which does not fall under the public records law, and allows for the audit findings to be hidden from full public disclosure. “It doesn’t make sense to me to allow the Auditor of State to pay for a private audit of a state agency,” Senator Ray Miller said. “It’s our job to make sure taxpayer’s money is properly spent and not wasted. But, with a private audit we might never know.” Dann had also objected to the use of private accountants in his request to Montgomery for performance audits of the MCOs.

“So once again, the taxpayers of this state are the losers,” Miller continued. “I have to question what Auditor Montgomery’s office is doing, shouldn’t they be auditing the BWC and releasing the findings publicly? While Montgomery touts her reduction in financial auditors during her tenure, does she realize that she is not only allowing, but encouraging the cover up of scandals taking place within the BWC?”

Finally, the editorial board of the Cleveland Plain Dealer today joins in the denunciation of these Republican "reforms" that have caused such massive waste:
Now, more than a decade later, a growing body of evidence suggests that those reforms have come with a huge price tag and the odor of political influence-peddling. ... The BWC trough has fattened the politically connected for far too long. It may no longer be the silent killer of jobs, but it cannot continue as an ATM for political insiders, either.

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