Here’s Why We Need More and Bigger Audits

August 28, 2015

Inside Insight

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budget and audits

REPORT BY LEGISLATIVE AUDIT COUNCIL BACKS UP NERVE STORY, REMINDS US WHY WE NEED MORE AND BIGGER AUDITS

The Legislative Audit Council has done a terrific job on its latest report, and taxpayers should be grateful.

First, let me back up and give The Nerve’s Rick Brundrett a little credit. In 2012, Rick broke a story on a proposed $16 million line item in the Agriculture Department’s budget for an undisclosed expansion project at the State Farmers Market. As it turned out, Agriculture Commissioner Hugh Weathers was pushing his agency to purchase property at the market – property owned by S.C. Ports Authority Chairman Bill Stern.

That might not have been wrong, but, as The Nerve detailed in a follow-up story, it looked very wrong. What it looked like is a state agency buying a piece of property owned by a well-connected politico for a comically exaggerated sum of money. Rep. Ralph Norman led the call for the agency to be audited by the Legislative Audit Council, or LAC, and the appropriation was dropped.

Now the audit has been completed and published. The LAC faulted the Agriculture Department for getting only one appraisal of the property – the $6 million price tag for an approximately 10-acre parcel was thought by Rep. Norman and others to be grossly inflated – and for the cozy relationship between the head of Agriculture (the purchaser) and the head of the Ports Authority (the seller). “In 2010,” the LAC says, “the seller contributed $3,500 to the Commissioner of Agriculture’s campaign, which occurred prior to the purchase of the seller’s land by the State of South Carolina.”

Well, well. Isn’t that interesting.

It’s exceedingly rare in South Carolina, and especially so when the guilty party includes state lawmakers in any capacity, for government entities to bring corrupt or unethical conduct to light. And so the LAC, a small operation with a tiny staff and very limited resources, deserves much credit for this report. The criticisms and recommendations could have been sterner, but the report is competently done and sufficiently clear to let media and the public know what’s happened.

So why doesn’t the LAC do these kinds of audits on all state agencies, all the time, the House and Senate included?

I’m glad you asked. In 2011, when the Legislature first began serious debate on the creation of a Department of Administration, the South Carolina Policy Council recommended the LAC be revitalized and empowered to conduct rolling audits of every state agency on a staggered five-year schedule. By law, the LAC can conduct only certain kinds of audits, and it can only conduct them at the request of the General Assembly (audits may be requested by either of the legislature’s chambers, a standing committee, the Speaker of the House, the President Pro Tempore of the Senate, or not fewer than five lawmakers). With just a little over $2 million for FY 2016, the agency is also severely limited in what it can do.

Its strength, however, is objectivity. It is nonpartisan; it is not a tool of the Legislature or of legislative leaders; and it therefore has credibility.

Which is precisely why lawmakers won’t increase its capabilities and refuse to give it either statutory or budgetary enhancements. Instead, lawmakers voted in 2014 to assume even more power over the executive branch by creating “oversight committees” to investigate state agencies. This authority, according to a majority of lawmakers, was necessary to counterbalance the vast powers transferred to the governor by the “historic” restructuring legislation passed last year. Of course, the bill did , no such thing.

As evidenced by the creation of a new standing committee in the House and a $500,000 budget increase in the Senate, lawmakers didn’t appreciate the magnitude of the oversight powers they were arrogating to themselves: They were just making sure the governor didn’t get too much power. And so when they realized what they’d actually have to do in order to exercise these new powers, they just increased their budget in order to pay more staffers to do the work. In the Senate, three new research positions exceed half of the total increase, which is nearly one quarter the size of the total LAC budget. Further, additional costs are likely in the House, according to the chairman of the House Legislative Oversight Committee.

All this is despite the fact the House and Senate are carrying over about $23.3 million and $6.6 million, respectively, in unspent general-fund revenue from fiscal year 2015.

Good grief. We already have an agency that’s repeatedly proven itself entirely capable of providing objective and nonpartisan oversight of agencies. We don’t need lawmakers to do it – they’ll just use the power to punish their adversaries and reward their friends – and we don’t need lawmakers to farm the job out to new staffers simply because they, the lawmakers, are too lazy to do it themselves.

Put the LAC in charge. That is what it’s for.

Jamie Murguia is Director of Research at the S.C. Policy Council, The Nerve’s parent organization.