COLUMBUS – A state audit has confirmed the key elements of a scandal that tore through the Ohio Bureau of Workers’ Compensation over the past two years, including abuse of power by its chief financial officer, and a lack of proper oversight and internal checks and balances.

State auditors also found during the routine review of operations for 2005 and 2006 that some key financial documents had been destroyed. State Auditor Mary Taylor is asking the bureau to review the situation.

The audit was released yesterday by Taylor, a Republican whose party was toppled from power amid the scandal at the bureau over lost investments.

Though such findings would normally serve as an important red flag to state investigators, most were already known due to months of news reports, investigations and legal proceedings surrounding the bureau investment scandal, which began with rare coin dealer Tom Noe, imprisoned for stealing from a $50 million rare-coin investment by the workers’ comp bureau.

“What we’re learning is all of the things that created the environment that allowed the Tom Noe thing to happen – a lack of internal controls, a lack of oversight of management,” Taylor said.

Gov. Ted Strickland, a Democrat elected Nov. 7, has promised to restructure the agency, including the creation of an independent board to oversee investments.

The audit found:

– Former chief financial officer Terrence Gasper entered into inappropriate relationships with financial managers by accepting cash and other benefits in exchange for business with the bureau, which provides benefits to injured workers. Gasper pleaded guilty in June to accepting bribes in exchange for doling out agency business, and awaits action as he cooperates with authorities.

– Bureau private equity investments were not properly monitored by management, allowing external investment managers to make improper investments. The review found the ability to accurately track investment activity and determine its value was seriously compromised.

– Rate-setting policies for employers seeking injured workers’ insurance were inadequate and lacked oversight. An override policy at the bureau that allowed staff members to change the rates of employers at the behest of some lawmakers is under investigation.

– Communication was lacking between the bureau’s legal and financial staffs, allowing omissions in financial reporting requirements.

Taylor made a series of recommendations for addressing ongoing financial issues at the bureau, including better information sharing and most rigorous monitoring of investment managers. She is conducting a special audit of the override system.

“There is an ongoing discussion on this issue. Stay tuned,” she said.

Since the scandal broke in April 2005, first reported by The Blade, the agency has begun to rebound, Taylor said.

“They are taking steps to improve the management structure,” she said.