By Julie Carr Smyth
COLUMBUS: Opponents of the nonprofit job-creation entity JobsOhio believe they have found new ammunition for their legal arguments embedded in the wording of an independent audit.
In a financial review released Friday, the accounting firm KPMG deemed JobsOhio a “component unit” of the state of Ohio.
To plaintiffs in two lawsuits against Gov. John Kasich’s signature economic program, that’s proof that JobsOhio is not private but associated with the government.
Under Kasich, the state Legislature created JobsOhio to replace the Ohio Department of Development. The first-term Republican governor said he wanted a job-creation entity that was more nimble and could “move at the speed of business.”
“The audit says what our court case has said all along, which is that this is using public money in a private corporation, something that our Ohio Constitution prohibits,” ProgressOhio executive director Brian Rothenberg said.
The liberal think tank joined two Democratic state lawmakers in filing a constitutional challenge to JobsOhio, which is now before the Ohio Supreme Court.
Apparently anticipating the fallout of the phrasing, JobsOhio executives sought to dispel such assumptions in the overview attached to the audit. They said “component unit” is merely an accounting term.
“This accounting term has no legal bearing on JobsOhio’s status as a private, nonprofit corporation; nor does it imply that JobsOhio is a state agency or part of state government,” the audit overview said.
The audit covered the fiscal year that ended June 30, during which the beverage system issued $1.5 billion in bonds to purchase a 25-year exclusive franchise of Ohio’s spirituous liquor business.
Accounting guidelines used in Friday’s audit say legally separate, tax-exempt entities are considered component units when their economic resources are entirely or almost entirely for the benefit of the primary government unit or its constituents; the primary has or is entitled to access to those resources; and the resources are considered significant to the government.
Victoria Ullmann, a former ProgressOhio lawyer who’s filed her own lawsuit against JobsOhio, said she believes KPMG’s determination that JobsOhio is a component unit of the state indeed has legal bearing.
Her suit asks justices to declare JobsOhio the “functional equivalent” of a state agency, which would subject it to public records requests and other forms of scrutiny that were prevented under its enabling legislation.
Besides categorizing JobsOhio as a component unit of the state, the audit revealed that JobsOhio has moved from using accounting standards of the Financial Accounting Standards Board — which generally apply to nonpublic entities, public business entities and not-for-profits — to the public-sector standards set by the Governmental Accounting Standards Board.
JobsOhio’s overview said management determined early this year that the switch was necessary because of the appointment of JobsOhio’s Board of Directors by a government official. Board members are appointed by Kasich.
It was also early this year, in mid-March, that State Auditor Dave Yost first sought access to JobsOhio’s private books as part of an audit. That review is ongoing.