By Debra Jasper
and Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - Saying it's inexcusable for government contractors to get away with misspending tax money, state Attorney General Jim Petro and State Sen. Jeff Jacobson announced a plan Monday to enact major reforms.

They vowed to push for a series of new laws, including one that would force government agencies to stop doing business with firms that don't repay misspent tax money.

That proposal, which Jacobson plans to add to the budget bill being considered next week by the Ohio Senate, would require the state Auditor's Office to list companies that owe money to public agencies. Officials must check the list and, if money is owed, work out a repayment plan or hire a different firm.

"It's basic common sense that we should not be allowing people to steal our money and continue to work for us," said Jacobson, a suburban Dayton Republican.

SPECIAL REPORT

An Enquirer special report, published May 18-19, disclosed that government contractors and public agencies misspent more than $346.5 million in tax dollars since 2000. Worse, government officials rarely chased after lost money. • May 18 report • May 19 report

The reform measures come in the wake of an investigation by The Cincinnati Enquirer that showed little has been done to recover $346 million that state auditors said was misspent.

An analysis of state audits since 2000 revealed that foster-care companies alone spent nearly $16 million on questionable items, including a Mercedes Benz, plastic surgery, stocks and Rolling Stones tickets. The companies have repaid just $117,000 - less than a penny on the dollar.

Gov. Bob Taft will discuss the issue with his cabinet directors after he returns on Wednesday from a trade mission in Mexico.

The governor, according to spokeswoman Ann Husted, believes that "contracts clearly need to be stronger. Enforcement clearly must be tougher. We need to hold contractors' feet to the fire."

Petro says businesses will repay more money when they realize they could lose state contracts if they don't.

"It's a very good idea to make it clear to those who have been accused of misspending that this will not just go away," says Petro, who was state auditor for eight years before becoming attorney general in January.

State Auditor Betty Montgomery says the plan sounds like a good idea and is "something we should have been doing in the past."

Montgomery is also planning to meet with Jacobson next week to discuss changing state law to give her more power to audit private firms.

Montgomery wants to clarify her authority, in part, because the Ohio Association of Child Caring Agencies filed a lawsuit last year arguing that public money becomes private when firms are paid.

Penny Wyman, executive director of the association, which represents 67 foster-care firms, says she welcomes some of the reforms, but thinks private firms still shouldn't be subject to state audits.

Wyman says her organization believes that once private nonprofits have fulfilled their contracts, they can use any remaining money to "further their mission."

Jacobson and Petro want agencies to beef up contracts to spell out exactly how companies can spend tax money. Petro wants agency contracts that dole out $1 million or more to be reviewed by his office.

These ideas could emerge in other bills this legislative session. Jacobson and Petro also say contracts should require private firms to agree to be audited by the state as a condition of getting the government's business.

"Bad contracts are allowing people to get away with doing something wrong. It's a killer," Jacobson says. "Right now, if a company misspends money, their officials can just say, 'I didn't know I couldn't spend money on that,' and nothing happens to them."

In addition, Petro says the state should be required to closely scrutinize companies that misspend money improperly under federal rules and seek repayment, regardless of whether it comes from the state or federal government.

Democrats also favor stepping up oversight. State Sen. Mark Mallory, D-Cincinnati, plans to lobby for a bill to create an office for an independent auditor who keeps an eye on spending and answers only to lawmakers.

"We need fiscal accountability and fiscal responsibility," he says. "As things stand now, it's a pretty good deal for those who want to defraud the government."

E-mail djasper@enquirer.com and shunt@enquirer.com