COLUMBUS, Ohio — Fraud was widespread at the Ohio agency that provides prison jobs for inmates, including granting employees improper freebies and discounts on prisoner work and building an illegal shack for smoke breaks, the state watchdog said in a report issued Thursday.

In addition, Ohio Penal Industries improperly gave Republican state Rep. Larry Householder an office table and chair set made by the inmates and valued by the agency at more than $9,300, according to the report by Inspector General Randall Meyer.

Two employees at the agency have been fired and a third resigned since the investigation began. A spokeswoman for the agency said it was reviewing the report but had already made policy and personnel changes.

Householder said in a statement he was told there was no cost to him or the Ohio House because the furniture was a "display set" and owned by the penal industries agency.

He said he agreed to display the table at the state office building "to promote the good work that the inmates at OPI do."

When he learned the agency acted improperly, "my office asked that OPI pick up the table immediately, which they did."

Householder is a former House speaker who has returned to the Legislature and is once again considered a candidate for the speakership.

The official he dealt with at the agency, Dan Kinsel, resigned immediately last year when he learned an investigation had begun, according to the report.

Kinsel told The Associated Press on Thursday that he hadn't seen the report and declined to comment.

Problems came from the Ohio prison system's "top-down approach," Meyer said.

Top brass at the prison industries agency called themselves "the Lancaster mafia," referring to the small southeastern Ohio city where many were from, he said.

"It just doesn't make a lot of sense that that much control was given to a small group of people, and they can hand pick who they want to be their seconds and their thirds," Meyer said.

In the course of the investigation, the state fired agency chief Sheri Duffey and assistant chief Todd Cordial. Neither returned messages seeking comment. Their attorney, Mike Moses, declined comment.

The prisons agency is reviewing the report, said spokeswoman JoEllen Smith.

"Aggressive actions have already been taken to improve overall operations, including leadership and personnel changes within the Ohio Penal Industries and significant changes in policy and procedures," she said.

Among the allegations in the report:

— Duffey and Cordial had inmates perform work on their vehicles "at no or significantly reduced cost."

— Ohio Penal Industries built two large barbecue grills that didn't fit any training program for inmates, and later had to sell them at a loss of $5,200 to taxpayers.

— Duffey authorized the construction of a "smoke shack" at the agency's Columbus headquarters where employees were allowed to smoke, in violation of state law.

— Three employees wrongly accepted free hotel rooms and meals from a vendor during a trip to Iowa meant for training on tractor equipment. After an hour of training, the employees spent most of their time touring a factory, visiting a museum, and taking a riverboat cruise.

— The prison system failed to adequately supervise inmates driving prison vehicles outside prison walls on "multiple occasions."

The report also faulted the Department of Rehabilitation and Correction for not finding an alternate use for barns when the state shuttered two dairy farms at prisons in Madison County that it had built at a cost of $13 million through the sale of state bonds. The state sold off its prison dairy cows two years ago.

The buildings “continue to sit idle, remain unusable for their intended purpose, and to date have yet to be repurposed for an alternative use,” the report found.