The Second Inspection

Seventeen of the auditors' thirty-nine fixes got done. The fourteen that would have checked the money did not.

The Second Inspection

In 2020, the state’s auditors finished their review of South Carolina’s business incentive programs and left behind thirty-nine fixes, addressed to the Department of Commerce, the council that approves the grants, the Department of Revenue, and the General Assembly itself. In August 2024, they went back and counted: seventeen done, six partly done, fourteen not done, two no longer applicable. Four years is enough time to know which items an agency intends to do. The fourteen are the story, because of what they have in common.

First, give the record its due. Take the Department of Revenue’s audit shop. It was down to one auditor for the whole tax-credit program by 2020. It has five now, and says it is completing the audits the law requires. Clawbacks and write-offs, the money taken back and the money given up on, started appearing in the Council’s annual report in 2021, where before that they appeared nowhere. Those are real fixes, and an agency that intended to do nothing would not have done them.

Now look at what was declined. The recommendation to verify companies’ claimed jobs beyond their own paperwork: not implemented, with Commerce answering that the fix “is not practical to implement and would be unduly cumbersome on staff.” The recommendation to check job claims against the wage records the state already holds at the Department of Employment and Workforce, the answer key from last week’s piece: not implemented, and still no data-sharing agreement exists. The recommendation to run fraud risk assessments: not implemented, with Commerce answering that only three known grant frauds have turned up in fourteen years, all three in a county where the agency had been advised to accept more risk. That is a strange comfort. You only know about the frauds you went looking for, and looking is what was just declined. The recommendation to check, after the fact, whether the incentives pay for themselves: not implemented, with Commerce answering it has “not found a credible way” to measure it. And when the auditors pulled ten grant files at random from the newer awards, 2020 through 2024, four of the ten contained no supporting financial documents at all.

Set the two lists side by side and the pattern names itself. Not one fix the agencies adopted tests whether a promised grant job is real. Every fix that would have tested one, the extra verification, the wage-record match, the fraud screens, tax-record access for the auditors themselves, sits on the declined list. What got adopted, nearly all of it, publishes numbers. What got declined would have checked them. The state now publishes better numbers about the program. It still does not check whether the jobs behind them are real.

Here is the household version of the fourteen. A home inspector walks your house and hands you a written list of what is broken. You fix the things that show from the street, the paint, the doorbell, and you leave the crack in the foundation alone. Four years later the inspector comes back, writes down that the crack is still there, and hands you the new list. Nothing else happens. Nothing else can happen, because the inspector’s only power is to inspect again. That is the enforcement system for South Carolina’s audit findings, stated exactly: the penalty for ignoring a state audit is a second audit. And there is one difference between you and the agencies on that list. When you put off your own foundation, the penalty is real: the crack grows, and the bill is yours. Their penalty is the one you just read. The bill still lands on you.

The auditors did their job, twice, and did it well; none of this lands on them. It lands on the arrangement above them, where a finding creates no duty for anyone, so the fixes an agency likes get done and the fixes it finds cumbersome sit in a report on a shelf. Six years of your money have moved through these programs since the first inspection, counted the same way as before: by the companies that received it. You counted that money every payday, to the dollar, while it was yours. It left your check before you ever saw it, and nobody asked. What the state owes you back is small: findings that somebody must answer, and somebody whose job is to keep counting after the inspectors go home.

Next week: One Sentence in the Code

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Sources: Legislative Audit Council, Follow-Up Review of the S.C. Department of Commerce Incentive Programs, August 2024: status table and counts p. 1; job verification (Rec. 16) and look-back analysis (Rec. 10) p. 2; DEW/DOR data sharing (Rec. 17), DOR audit staffing (Rec. 20), and clawback and write-off reporting (Recs. 18-19) pp. 2-3; fraud risk assessments (Rec. 37) and grant file sample (Rec. 35) p. 4. Coordinating Council for Economic Development, 2025 Annual Report of Fund Activity, March 2026: clawback and write-off disclosure pp. 26-27.