Sunday, May 18, 2003

Wasted money? It all depends


Ohio disputes audits to avoid paying U.S.

By Debra Jasper
and Spencer Hunt
The Cincinnati Enquirer

If you trusted your business partners with $346.5 million and they misspent it, you'd probably try to get your money back.

But you're not the government.

In the complex world of state and federal regulations, state officials are often better off arguing that federal money wasn't misspent than they are trying to get it back.

That's because officials who admit that federal money cited in state audits was misspent have to send much of that cash back to Washington. That's required even if they don't get money back from the groups that misspent it.

Consider how state officials have handled state audit and inspection reports over the past three years. More than half of the $346 million questioned by those reports was federal money to pay for items from foster care to nursing homes.

When federal dollars are improperly used, federal officials don't wait for the state to get the money back from the people who misspent it. They simply subtract the amount from the next check written to the Ohio Treasury.

That makes state officials, who don't want to lose any money, inclined to argue that the audits were wrong and the money wasn't misspent at all.

The July 2002 audit of V. Beacon Inc., a Toledo foster care company, illustrates how it works. Among the $1.2 million in spending questioned by auditors: the purchase of a $70,800 Mercedes-Benz, $670,000 in bad stock market investments and $8,000 for plastic surgery, health club dues and a home security system for the owner.

Instead of going after that money, state officials told the federal government that only $35,402 was truly misspent.

Often, federal officials buy the state's arguments. All told, audits that questioned $3.4 million in spending by 16 foster care companies already have been settled with Washington - for $704,654.

Of course, it would be tough for state officials to go after money once they have argued it was never misspent. And if they never ask the Attorney General to go after the money, that office can't do anything either.

Attorney General Jim Petro says he'd like to go after the money, but "Lawyers can't act on behalf of a client without the permission of the client."




SPECIAL REPORT: OHIO'S LOST MONEY
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Lawsuits, new laws might help crackdown
Wasted money? It all depends
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