Richland’s review of millions in meal-tax uses finds no evidence of misspending

A three-year review of Richland County’s spending of about $9 million in meal-tax revenue found no instances of impropriety, county staffers said in a report released Friday.

Recent media reports have questioned how some of the taxes collected largely from restaurant and bar patrons were spent by recipient organizations during the current fiscal year. But the report states, “The audit tests did not reveal any instances of malfeasance or impropriety either in the (county’s) decision to fund or in the (organizations’) utilization of funding.”

Despite finding no malfeasance, the report recommends better monitoring by county staff of the money the county awards to local organizations and events that are supposed to use to spur tourism.

Of all the recipients of the public money, often called “hospitality tax” or “H-tax” funds, 20 did not comply with the requirements that govern the program, according to the findings. That’s about a 14 percent non-compliance rate with County Council’s rules, according to the review, which calls the violations “minor.”

The most common reason for not meeting the rules was failure to provide records of how the some of the $8,926,681 was spent, the report states.

Five of the recipients did not meet the rules in two of the three fiscal years examined: S.C. Pro Am, which is sponsored by the Richland County Recreation Commission; SCALE Inc., which put on the Horrell Hill Festival and the Carolina Sunsplash event; Latino Communications; the SC HIV/AIDS Council; and the 3 Rivers Music Festival.

SCALE Inc. received $176,000 during the time it was not in compliance. The 3 Rivers festival received $98,225; Latino Communications, $82,000; the AIDS Council, $40,000; and the Pro Am tournament $34,727, according to the report.

Not singled out in the report, but listed as non-compliant in fiscal 2016 is the Pinewood Lakes Foundation, which got $15,454. The review states that the foundation’s documentation of its spending was “not in accordance with the established guidelines.” But county staffers were able to resolve the issue “after meeting with the organization and having discussions with council member (Norman) Jackson,” who sponsored the group’s request for the money.

The review, which the county is calling an “internal audit,” was completed in December. It examined spending in three previous fiscal years – not the current one.

A key to better monitoring is to begin annual audits of the spending, to standardize requirements and to tighten release of disbursements until after staff reviews requests, the report recommends. Recipients have been getting the money up front.

“These internal enhancements are needed to prompt increased compliance and will be installed prior to (July 1),” county administrator Gerald Seals said in a statement that accompanies the more than 500-page report. The report reviewed money that went to 151 organizations and projects between July 1, 2013, and June 30, 2016.

The disbursal of meal taxes was monitored by county staff in what the report calls an “informal system of internal controls.” That system is supposed to require twice-a-year reports from each recipient to “outline the use of the allocated funds.”

“The intent of this internal control system,” the report states, “was to provide county staff with reasonable, but not absolute, assurances that the allocated funds were protected against abuse.”

This story was originally published January 20, 2017 at 6:12 PM with the headline "Richland’s review of millions in meal-tax uses finds no evidence of misspending."