Two SC senators call on McMaster, others to audit millions in earmarks given to groups
Two South Carolina senators are calling on the state’s most powerful political leaders to audit groups that received millions of taxpayer dollars through a secret funding process that has little accountability and is built on political influence.
Sens. Wes Climer, R-York, and Dick Harpootlian, D-Richland, earlier this week sent a letter to the State Fiscal Accountability Authority, whose members are Gov. Henry McMaster, state Treasurer Curtis Loftis, Comptroller General Richard Eckstrom and top budget writers Sen. Hugh Leatherman, R-Florence and Rep. Murrell Smith, R-Sumter.
The state laws are clear, the letter reads. A detailed plan about the intended use of the money, along with other financial statements, must be given to state agencies. This must be done before payments are sent to receiving organizations. Then, the groups are required to follow up and show how they spent the money. Agencies are also required to give those reports to the General Assembly to determine each program’s success for future funding decisions.
But that doesn’t always happen — and the board with the power to look more into the issue hasn’t asked why.
“I’m flummoxed that government (officials) at the highest levels are not doing their jobs,” Harpootlian said.
For the past 18 months, The State Media Co. has extensively reported on the secret world of earmarks, finding that the process has centered around political influence and been used as a negotiation tactic to gain support for other bills and pet projects.
In several cases, funds have gone to groups with close tied to lawmakers or their close friends, and have sometimes gone toward questionable expenses, such as lawn care, rent and to pay political allies. A disproportional amount of funds have also gone to counties whose local leaders have the most say in the budgeting process. Meanwhile, some of South Carolina’s poorest counties received nothing.
The new audit request covers the past three fiscal years — from 2017 to 2020 — and would shed light on how hundreds of recipients spent tens of millions of taxpayer dollars, something that has largely remained a mystery.
Eckstrom, who helped create the state’s fiscal transparency page that allows the public to search payments made to organizations, said he largely agrees with Harpootlian and Climer’s call for transparency, adding that the laws in place are poorly written and have no teeth.
“I think the (laws) are written to appear as if somebody actually cares,” said Eckstrom, adding that he would tighten up the state laws if he could.
But it’s unclear why the existing laws simply aren’t followed. Other members of the authority board did not return calls for comment Wednesday. Smith, the chairman of House Ways and Means, said he had not seen the letter yet and would not comment.
A report released last year from the state’s inspector general’s office found that 73% of the groups receiving money over a two year period failed to show on how they spent approximately $43 million, as required by law. But that inquiry only provided a snapshot of the total funds appropriated from 16 agencies over two years.
An investigation by the newspaper found that more than $100 million has flowed to groups through the hidden earmark process over the past five years and the laws and rules on the books that are intended to provide accountability and transparency haven’t always been followed or enforced.
One reason for that is largely because state agencies that disburse the earmarks lack any enforcement mechanism to hold the receiving groups accountable even if they wanted to. The agencies simply act as pass-through entities, cutting checks to organizations hand picked by lawmakers.
This year, in an unprecedented move, the House and Senate each released a list of all earmark funding requests prior to voting on the budget, earning praise from many lawmakers. Still, both chambers failed to fully disclose all receiving organizations and the purpose of the funding. Instead, vague project titles or the names of buildings where organizations were housed were given.
“What’s missing is who all these organizations are,” Eckstrom said. “You can’t tell ... (Lawmakers) are holding these groups close to the vest.”
McMaster, who serves on the fiscal authority board, vetoed $150 million in funding request in June, citing a lack of transparency and noting the lack follow-up from organizations and dispersing agencies. But lawmakers overrode the governor’s vetos anyway so the money could be doled out.
On July 2, the governor required that 24 different state agencies begin providing the Executive Budget Office with an explanation of how earmarked funds will be spent by the recipients, and what accountability measures are in place to ensure proper spending.
McMaster on Wednesday said he thought an audit would be a step in the right direction to fix the issues of transparency, adding that his proposal to let agencies have an open competitive grant-like process for projects would also be a solution and allow the public to see where their money is going.
“Ultimately, that is the ultimate solution, and I think it’s the best one,” he said. “But we’re heading, trying to head in that direction.”
In May, The State and McClatchy’s other S.C. papers surveyed General Assembly members about hidden earmarks, finding that 83% of lawmakers said they would support budget reform that would provide more transparency and accountability.
Harpootlian, who previously said he too would support those changes, said on Wednesday that the existing laws in place just need to be enforced to resolve the issues, adding that the money should be taken back from all the non-compliant organizations.
Harpootlian and Climer also sent letters to the S.C. Revenue and Fiscal Affairs Office and Executive Budget Office and Capital Planning, asking whether the offices ever received forms signed by recipients that allow them to be audited — something also required by state law.
To date, no audit has been conducted on the groups receiving hidden earmarks, despite the opportunity being available for years, according to State Auditor George Kennedy, who added he had the available staff and resources to do so.
“It’s baffling that an audit hasn’t been asked for by the Fiscal Accountability Authority before,” Climer said.
This story was originally published July 15, 2021 at 5:00 AM.