‘Questionable’ transactions and bowl games. USC office misspent $1.7M in public funds, audit says
Using public funds for trips to the 2022 Gator Bowl, consistent overspending and “questionable” financial transactions by a University of South Carolina office and its affiliates, are among findings in a critical new report by the state’s Legislative Audit Council.
The audit — which investigated USC’s Office of Economic Engagement and its work with the USC/Columbia Technology Incubator and the South Carolina Research Foundation — was performed at the request of a bipartisan group of lawmakers in 2022. An investigation spanning 26 months found that the university’s Office of Economic Engagement had misspent $1.7 million of grant money and potentially violated state ethics codes.
USC’s Office of Economic Engagement, which is a self-proclaimed intersection of industry, research and policy with the goal of innovating and meeting industry needs, had other problems, too, the audit showed. The incubator’s role is to support Columbia-area businesses. Though connected, the incubator is independent from the university.
The USC office failed to comply with federal grant regulations, failed to disclose a conflict of interest, consistently exceeded its budget by thousands of dollars and spent taxpayer money on football bowl games and golf tournaments for an employee, according to the Dec. 5 report.
And despite receiving more than $10 million in grant funding between 2018 and 2023, the office never had a grant administrator to properly manage its money, instead relying on other university factions, like the College of Engineering and Computing.
But the university doesn’t agree with all of the audit’s findings, including the time it took to perform the audit and “the methodology employed, and a number of the findings and recommendations contained in the (report),” USC President Michael Amiridis wrote, as the university had already moved to correct many of the problems identified in the report.
Misspent emergency COVID-19 funds
South Carolina received $48,467,924 in Governor’s Emergency Education Relief funds by the U.S. Department of Education to provide assistance in response to the COVID-19 pandemic, $6 million of which was given to USC to establish Apple computer labs statewide. USC’s Office of Economic Engagement was responsible for the project, and the S.C. Department of Administration was supposed to monitor any expenditures.
The university did open eight computer labs in across the state, though the audit said it failed to consider counties will less access to reliable broadband internet. But about $1.7 million of the that money was spent on “questionable” transactions, the report found.
- $635,600 on contracts for two computer labs that were never opened
$400,000 for marketing the labs, some of which was spent in 2023 to market the office itself
$286,553 for salaries and benefits for eight office employees who said they never worked on the grant, despite previously signing reports that they had
$237,500 for a computing systems membership, which benefited USC, instead of the computer labs for which the money was intended
$149,835 for a research database and expert portal that was not fully accessible as of June 2024
$4,589 for Apple Watches for 11 staff members of USC’s Palmetto College.
According to the report, the money USC spent on marketing was through a contract with a public relations firm whose chairman and former CEO was a friend of the Office of Economic Engagement’s management.
Spending deficits and questionable travel expenses
USC’s Office of Economic Engagement was also consistently over budget, the audit found.
In five of the six years studied, the office had expenses that exceeded its funding, with deficits as high as $846,647 one year. It would have topped $1 million, if it hadn’t been for the governor’s emergency funding, the audit said.
The report also noted that six of 162 travel reimbursements paid to office employees from 2019 through 2023 were for one employee to attend two galas and four sporting events, including golf tournaments and the 2022 Gator Bowl in Jacksonville, Florida.
The office claimed that the gala trips were “reasonable travel expenses” for outreach and networking for USC; that the golf tournament trips promoted corporate and industry engagement; and that the trip to the Gator Bowl was justified because the employee had hosted a businessperson and their family to discuss internship opportunities and potential partnership at the university’s future health sciences campus.
According to the report, that businessperson denied attending the 2022 Gator Bowl.
Five other reimbursements were paid to an employee who lived out-of-state to attend meetings in Columbia.
The university said it will follow-up on the audit’s conclusions regarding this spending.
‘Vague’ financial boundaries
USC and the USC/Columbia Technology Incubator have worked together since 2015, via a partnership of shared ideas, resources and personnel time, according to the audit, and used memorandums of understanding.
Agreements between the two led to “vague” financial boundaries, allowing them to transfer money to each other without sufficient oversight, including two instances of the Incubator’s incorrect use of USC procurement cards. Employee compensation and responsibilities between the two were also murky. The report was also critical of the incubator’s practices, and claimed it had little oversight by its board of directors and had a “poor graduation rate” of its member businesses.
The incubator, according to the report, failed to comply with nonprofit best practices and IRS guidelines. And its tax filings have been consistently filed late, have missing information and discrepancies. The incubator’s facilities also fell into disrepair and the city of Columbia terminated its lease. Member businesses complained of health and safety issues like rats, faulty wiring, broken smoke alarms, mold, loiterers and “human excrement” outside of building.
The university has “disengaged” with the incubator for the time being.
The State has reached out to the incubator for comment.
Disagreements and next steps
Despite the issues found in the audit, the council concluded that USC’s Office of Economic Engagement does not need to be eliminated.
In a six-page letter dated Dec. 4, Amiridis wrote that while the university welcomes reviews of its practices to identify potential waste or abuse of taxpayer resources, the university disagreed with some of the findings.
The university argued that the grant expenditures questioned in the audit were “permissible and appropriate,” and that many of the recommendations in the report apply to outside organizations, not USC itself.
Between the time Amiridis began his tenure as USC’s president in July 2022 and when the audit was requested that September, he had already implemented new leadership and changes to the business practices of the Office of Economic Engagement.
More than half of the audit’s recommendations did not apply directly to the university, the university pointed out.
“Regardless, USC accepts responsibility for and has already resolved the issues giving rise to the substance of (the Legislative Audit Council’s) Recommendations,” Amiridis wrote.
University spokesman Jeff Stensland declined to comment further on the report, citing the president’s letter as the university’s official response.
“The University of South Carolina is committed to prudent use of taxpayer funds,” Amiridis wrote. “The important work of (the Office of Economic Engagement) in forging new business partnerships and encouraging innovation and entrepreneurship is essential to the University’s mission of serving the State.”
Amiridis wrote that necessary changes had already begun prior to the audit, and new leadership is working to make the office “more efficient and more productive.”
This story was originally published December 11, 2024 at 1:51 PM.
