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An Administrative Review of the Department of Commerce
July 2002

FOLLOW-UP (PDF)     REPORT (PDF)     SUMMARY (PDF)

Members of the General Assembly requested that the Legislative Audit Council conduct an audit of the South Carolina Department of Commerce (Commerce). The review focused on whether the department’s administrative expenditures have been reasonable and if controls were adequate to ensure appropriate accountability. We found that the department has not emphasized cost-effectiveness in its operations, and some expenditures of public funds were not authorized by law.

  • In 2001 the department completed work on a $1.9 million presentation center where information about South Carolina could be conveyed to industrial prospects using state-of-the-art audiovisual equipment. The agency had no formal budget for the project. When the General Assembly did not appropriate funds for the center, Commerce obtained funds from the Coordinating Council for Economic Development and the department’s division of public railways.
  •  Commerce made decisions on equipment, furniture, and construction that significantly increased the cost of the presentation center. The department spent over $80,000 on video conferencing equipment that was unnecessary and has been dismantled. Overall, the department spent almost $800,000 renovating office space that is not state property. As of early 2002, usage of the center has been limited.
  • To supplement its revenue, Commerce solicits contributions from businesses and other organizations for its Special Events Fund. This practice creates a conflict of interest because Commerce officials have the authority to influence public subsidies for the organizations from which they solicit contributions. Some of the department’s expenditures for parties, picnics, lunches, dinners, and gifts for its employees were inappropriate uses of public funds and violated state law. For example, the department spent more than $5,000 for an employee picnic and more than $10,000 for dinner and alcohol for a staff Christmas party.
  • Some Department of Commerce employees were reimbursed for "prospect expenses" when no prospects were present. Also, we could not identify any legal authority for the department to fund state employees’ meals when they are not traveling or to pay for meals in excess of state limits.
  • We did not identify material noncompliance in a sample of the department’s travel vouchers. However, the department’s expenditures highlighted areas where the state could exercise more cost-effective management. In contrast to other states and the federal government, South Carolina has no limits on reimbursements for lodging expenses. Commerce employees sometimes spent more than twice the federal limits for lodging.
  • The department’s expenditures for commercial airline tickets illustrate why a state contract for airfare would be beneficial. Commerce staff sometimes have to travel at the last minute and change plans with little notice, causing them to pay high fares. The federal government and other southeastern states have contracts for airfare that increase convenience and result in significant savings. Because all of state government spent more than $8.3 million for airfare in FY 00-01, the potential for savings is great.
  • The department spent too much for the cars it leases from the Budget and Control Board. In FY 00-01, Commerce spent 47¢ per mile for the cars it leased. It could have saved approximately $60,000 if it had reimbursed its employees for the use of their own vehicles instead of leasing cars. Commerce should monitor costs and reduce the cost per mile.
  • The department uses its own aircraft for some of its travel. We found that the agency has not reported the full cost of operating and owning its aircraft. In FY 00-01, operating costs ranged from $1,814 to $3,877 per flight hour. We also identified some high-cost flights that indicate a need for the department to give greater attention to the use of its aircraft and consider less expensive alternatives.
  • The Department of Commerce adequately responded to citizens’ requests for public information submitted from FY 96-97 through FY 00-01. Amendments to the Freedom of Information Act (FOIA) in 1998 required the department to disclose more information about incentives offered to prospective industries. However, there may be a need for increased disclosure. Commerce does not disclose company-specific information regarding prospects that decide not to locate in South Carolina. Also, we found the department charged some requesters but not others for processing information requests.
  • We reviewed a sample of the department’s contracts for professional services and found that the services were provided. While we did not find material problems with contract management, in some cases the department reimbursed its contractors for travel expenses that could be considered excessive.
  • We found that expenditures from the state aviation fund, used for airport maintenance around the state, were appropriate. However, the ability to carry forward state appropriations for airport capital improvements is needed to complete ongoing projects.