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Legislature’s Watchdog Agency Lives on Bare-Bones Diet

South Carolina receiving an “F” in a recently released good-government study suggests state government needs a vigorous, well-funded watchdog looking out for the public’s best interests.

Does South Carolina have such an entity?

Landmark legislation, which became law earlier this year, codified the creation of an inspector general’s office with broad powers in the executive branch of state government.

But what about the General Assembly’s inspector general, the Legislative Audit Council?

The LAC conducts audits and performance reviews of state agencies at the Legislature’s request. The Audit Council consists of a nine-member board, which decides by vote whether to approve audit requests, and an administrative staff that performs the reviews.

It takes five legislators, or the House speaker or Senate president pro tempore individually, to formally seek an audit for the LAC board to consider it.

Four of the board members are lawmakers, but they do not vote on audit requests; only the other five members do.

“We work for the Legislature,” LAC director Perry Simpson says.

Nevertheless, it would be hard to argue that the LAC is well funded, even as the Legislature has no problem pouring millions of dollars into economic development projects and special tax favors and the like.

In the current fiscal year, the Legislative Audit Council is authorized for 26 full-time employees. When the fiscal year began, 10 of those positions – more than one-third – were vacant, according to the LAC’s budget request for the 2012-13 fiscal year that begins July 1.

The number of vacancies at the agency remains about the same, Simpson told The Nerve recently in a wide-ranging interview at the Audit Council’s offices in downtown Columbia.

In its funding request for next fiscal year, the LAC says its mission “is to conduct performance audits of state agencies and programs to help ensure that their operations are efficient and that they achieve their performance goals and comply with the law.”

It is a formidable undertaking.

In the good-government study, South Carolina received a failing grade in categories that included “state civil service management,” “state budget processes” and “public access to information,” along with the Palmetto State’s overall “F” and a lowly 45th ranking.

Released in March, the study analyzed anti-corruption measures among the states. The Center for Public Integrity worked with Public Radio International and Global Integrity to conduct the review, dubbed the “State Integrity Investigation.”

That report, however, serves as just one big-picture example of the challenges confronting the Legislative Audit Council.

Specific cases are legion.

In 2010, for instance, the LAC released a damning report on the S.C. Employment Security Commission. The report cited a laundry list of failures by the agency that contributed to the state running up nearly $1 billion in debt to the federal government for unemployment benefits.

The LAC’s findings led to a legislative overhaul of the Employment Security Commission into what is now called the Department of Employment and Workforce.

Yet for all the potential good the Audit Council could do, the agency operates on a shoestring budget with a limited staff.

The LAC has 15 full-time employees, according to Simpson, the LAC director.

This fiscal year the LAC is budgeted at a touch under $1.4 million; and just 70 percent of that, a little less than $1 million, is recurring state funding.

The rest, $420,000, comes from “other” funds, or fees the Audit Council is authorized in a limited number of cases to charge other agencies for reviews it conducts of them.

For 2012-13, the LAC is seeking a $65,000, or roughly 4.7 percent, increase, to about $1.45 million.

But within that request, the Audit Council asks that its recurring state dollars be bumped up by $125,000, along with an extra $60,000 in nonrecurring state money, and that its other funds be decreased by $120,000.

Simpson says the LAC’s other funds can be an up-and-down source of operating dollars. “So what we’re trying to do is replace those other funds with general state funds in order to stabilize our budget,” he says.

Such a change also would help the Audit Council increase its staff size to 19 and recover from the Great Recession, when its funding declined to $847,000 in 2010-11, Simpson says.

The House, which originates budgets in the Legislature, granted most of the LAC’s request. Passing a 2012-13 spending plan in mid-March, the House funded the Audit Council at $1.4 million, decreasing the agency’s other funds from $420,000 this year to $300,000 next year.

The budget process now has shifted to the Senate Finance Committee.

A panel of that committee chaired by Sen. Mike Fair, R-Greenville, recently signed off on the House’s recommendations for the LAC.

Fair, as it happens, is one of the four non-voting legislators on the LAC board.

Asked recently by The Nerve where the Audit Council ranks as a budget priority, Fair said it’s at the top.

 “It’s at the very, very top,” he said. “They need to be, I almost said unfettered completely. But the funds will always be a problem, because if transparency and accountability had its way they would be the most well-funded agency in government.”

Was Fair suggesting that the Legislature deliberately underfunds the Audit Council?

“No,” he said without hesitation, adding, “One of the reasons I would answer so quickly on that is that the members of the General Assembly … generate consideration for the audits.”

Thus, Fair contended, “The General Assembly’s not going to let them go terribly underfunded.”

Early during this year’s legislative session, when the Senate was debating a bill to create an executive branch Department of Administration, senators pondered what it would take for the LAC to review all state agencies every five years.

“It would take a significant increase in resources to do every agency every five years,” Simpson says.

So, is there a right size for the Legislative Audit Council?

“That’s kind of a hard question to answer,” Simpson says, “because I mean we always have a backlog of requests.”

Speaking to the LAC’s mission, Simpson cites an old adage among auditors: “In God we trust – everybody else we audit.”

It’s pithy, no doubt. But the Audit Council can’t even come close to meeting that mantra at the level the Legislature has been funding the agency.

Reach Ward at (803) 254-4411 or eric@thenerve.org.

Accountability Budget General Assembly Other Funds State Agencies Transparency

Center for Public Integrity S.C. Legislative Audit Council Global Integrity Public Radio International Perry Simpson Sen. Mike Fair