Taylor Announces New Plan to Fight Fraud, Corruption and Protect Ohio Tax Dollars

Wednesday, April 18, 2007

Columbus -

In an effort to fight fraud and other illegal activity in state government, State Auditor Mary Taylor announced a legislative proposal to overhaul the internal audit function of state government today. The plan establishes a centralized office staffed with internal auditors required to report fraud and other findings to an independent state audit committee.

State Senator Bob Spada, R-North Royalton, and State Representative Carol Ann Schindel, R-Leroy Township, are supporting the initiative by introducing companion measures in both chambers of the legislature.

Taylor developed the concept in response to the rare coin investment scandal which occurred at the Ohio Bureau of Worker’s Compensation.  According to several published reports, an internal auditor within the bureau raised concerns regarding the investment; however, those concerns were dismissed by agency administrators.

“The current internal audit structure of state government agencies is severely flawed and has failed the citizens of Ohio,” Taylor said. “This is a common sense approach that will assist in improving accountability and oversight across state government and help prevent another BWC-type scandal from happening again.”

Taylor says the proposal is consistent with federal legislation passed in 2002. The Sarbanes/Oxley Act focused on two main issues: requiring internal auditors to report to an independent committee and protecting employees who report suspicious or illegal activity. 

The legislation seeks to establish an independent state audit committee responsible for reviewing and reporting the results of internal audits to the public in a timely manner.  The proposal creates:

  • The Office of Internal Auditing to be located within the Office of Budget and Management and would centralize state employees currently classified as internal auditors. The bill requires the OBM director to appoint a chief internal auditor with specific qualifications and focus resources on developing and implementing an annual plan to conduct internal audits of state agencies.
  • A State Audit Committee to consist of a five-member panel including the director of the Office of Budget and Management. The Speaker of the House and President of the Senate would each appoint two public members consisting of one financial expert as defined by the legislation, one active or retired certified public accountant, one member familiar with government accounting standards and one representative of the public.

The responsibilities of the State Audit Committee include identifying high risk government agencies, particularly areas of state spending where accounting errors and fraud are most likely to occur. The committee would enforce compliance with industry internal auditing standards and the internal auditors’ code of ethics and is required to make the final audit reports available to the public in a timely manner.

“Internal auditors are in the best position to detect fraud or corruption at its earliest stage and we need to empower these individuals to do their jobs,” Taylor said. “Requiring internal auditors to report their findings to an independent committee provides much needed independence and transparency to the process.” 

Internal auditors differ from external auditors in that internal auditors are employees of the organization they are auditing. Their main function is to evaluate policies, procedures, internal controls, and financial reporting. Internal auditors play an important role in making sure the organizations they review have controls in place to reduce the risk of irregularities going undetected for any extended period of time. External auditors, such as those employed by the Auditor of State’s office, are independent of the organization they are auditing and evaluate an entity’s financial statements for significant deficiencies that impact the overall financial health of an organization.

“I am pleased to be working with Auditor Taylor to help restore public trust by ensuring stronger safeguards against waste, fraud and abuse of taxpayer dollars,” Spada said.

“This plan will create efficiency within state government, while increasing quality service and lowering costs to the taxpayer,” Schindel said. 

The Ohio Auditor of State’s Office is one of the largest accounting offices in the nation.  The Office strives to ensure that all public funds are spent legally and appropriately and works aggressively to root out fraud, waste and abuse in public spending. Taylor encourages anyone suspecting fraud or misspending of public dollars to contact her office toll free at 1-866-FRAUD-OH (1-866-372-8364).

For more information about the Auditor’s Office, please visit www.auditor.state.oh.us.