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A Review of the South Carolina Research Authority
August 2005

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

Members of the General Assembly requested the Legislative Audit Council to conduct an audit of the South Carolina Research Authority (SCRA). Established in 1983, the SCRA is a public non-profit corporation which does not receive annual state appropriations and has broad authority to manage its own business. The audit requesters wanted to know how the SCRA has benefited the state and how these benefits could be increased. They were also interested in the SCRA’s spending and management practices. Overall, we found that the SCRA has provided substantial benefits to the state. We did not identify significant problems with how it has managed its resources. The results of our review are summarized below.

Benefits to the State
The SCRA has provided substantial benefits to the state through activities related to its mission — advancing the research capabilities of the state’s universities and promoting the development of research and technology-related industries in South Carolina.

  • SCRA has earned significant revenues primarily for doing research and development projects for the federal government. SCRA developed a strategic plan in 1997 when its revenues were approximately $40 million. For FY 03-04, its revenues increased to $68 million. It has generally been successful in meeting operational performance goals, increasing its revenues, and keeping indirect costs low. We found that SCRA generally has adequate documentation to ensure that its performance data is reliable.
  • SCRA has succeeded in other strategic goals, such as establishing research institutes in cooperation with the state’s research universities and increasing employment in the research parks it is mandated to operate. It has been less successful in starting for-profit companies, another of its strategic goals.
  • We confirmed SCRA’s data for direct spending in the state and bringing companies to the state. SCRA has also completed projects that may impact citizens directly and contributed to other economic development activities, such as bringing research dollars to universities. A recent study from Charleston Southern University estimated the SCRA’s return on investment for the state; the study found for every dollar the state has invested, SCRA returns $6,542 annually.
  • SCRA could improve its communications to state officials. While the agency regularly communicates with the federal government, its annual reports do not contain adequate information about agency structure and operations, as well as performance results.
  • The financial contributions SCRA must make under state law for the establishment of research innovation centers ($12 million in three years) could have a harmful effect on SCRA’s operations and its benefits to the state.

SCRA's Operations

  • The majority of SCRA’s revenues and expenditures are directly related to its contracts to conduct research and development programs for the federal government. Contracts comprised more than 96% of SCRA’s revenues for FY 03-04. We found that SCRA’s financial operations are generally sound. However, SCRA has expended some funds that do not meet criteria for the expenditure of public funds.
  • SCRA’s executive salaries may be higher than those of most other state agencies. However, a 2004 compensation study found that SCRA’s salaries were below the market for comparable organizations. Some SCRA employee benefits exceed those offered to other state employees, while in other cases their benefits are less generous. SCRA offers additional benefits to six executives, including extra insurance and deferred compensation.
  • SCRA has appropriate oversight and administration of its indirect costs. These costs are sometimes referred to as overhead expenses. Although state agencies are required to remit reimbursements of indirect costs to the state’s general fund, SCRA does not benefit from the services of central state government and is not required to do this. SCRA’s indirect cost practices have regularly been audited and approved by the federal government.
  • SCRA’s efforts to meet its strategic goal of starting new companies have not yet resulted in profits. SCRA has invested in or loaned funds to four companies, and has not yet received financial benefits. In one case, SCRA had a loss of nearly $300,000.
  • As required by statute, SCRA manages three research parks, one each near Clemson, the University of South Carolina in Columbia, and the Medical University in Charleston. We found that SCRA has managed its property appropriately. We did not identify problems with SCRA’s rent or other charges to tenants.
  • We did not identify significant problems in our review of SCRA’s expenditures for travel. We reviewed a sample of travel vouchers for SCRA’s executives and top travelers and found that SCRA generally has appropriate controls over travel expenses. SCRA has generally adopted the federal government’s travel guidelines, which have more controls than state policies.
  • SCRA generally has appropriate controls to prevent conflicts of interest for staff and board members. We did not find evidence of significant conflicts for SCRA’s board members or executive management team. However, we noted two cases in which documentation of apparent conflicts could be improved.