Inspector: Bad budgets, not fraud, at S.C. State

2014-04-09T01:30:00Z 2014-12-06T15:08:54Z Inspector: Bad budgets, not fraud, at S.C. StateBy DALE LINDER-ALTMAN, T&D Staff Writer The Times and Democrat

State Inspector General Patrick J. Maley says his investigation into South Carolina State University revealed no indication of fraud, but identified a pattern of mismanaging unused 1890 program funds to cover up the university’s operating shortfalls.

The university released a statement Tuesday saying that it appreciates the inspector general’s work bringing, “transparency to a lingering financial issue that has plagued this university for more than eight years.”

In a summary letter, Maley said S.C. State essentially used the 1890 funds, “as an interest-free loan, drawn upon and repaid many times each year, which was also confirmed by SCSU’s external auditor several days prior to issuance of this letter.”

The university started out with a loan of $456,553 during the 2006-07 fiscal year, but by February of this year the sum had reached a total of $6.5 million, Maley said.

The 1890 program is a land-grant program established by the federal government and supported by matching state and federal public service activity funds.

The state’s PSA funds were pulled down each year and co-mingled with the university’s education and general fund and could be used for anything related to the 1890 program.

Maley said the university would have to immediately repay the $6 million.

S.C. State President Thomas Elzey reported to university trustees last week that the bill has already been paid and is included in the $13.6 million the university has asked from the state legislature.

Elzey noted that the university borrowed money from the 1890 program as recently as last year to meet payroll. About $2.5 million was taken last June and about $2.3 million to $2.4 million in December, he said.

However, the practice has been stopped on the advice of counsel, he said.

“We stopped that and so the PSA account, the 1890 money, has been made whole,” he reported to trustees.

Tuesday’s statement from university spokesperson Sonja Bennett-Bellamy also indicated that the public service activity funds will be separated from university funds in the future.

“The university has proactively taken steps to ensure that moving forward federal funds from the 1890 program are kept in a separate account and that this practice will not be repeated,” she said.

Maley said S.C. State has been harming the 1890 program, which provides agricultural, extension and community services, and the university itself.

“This practice deprived the 1890 access to these unused state PSA funds that could have been directed toward accomplishing its mission of helping limited-resourced clients,” he wrote.

The practice also worsened the university’s financial situation by allowing deficits to increase and by delaying action to address the business issues that caused the deficits, he said.

“What may have started out as a harmless, but still inappropriate, short-term borrowing for cash flow turned into substantively a permanent loan not formally recognized,” Maley said. The university became so dependent on the funds it became unable to let the 1890 program use its own carry forward funds.

Though it’s not the main cause of the university’s financial problems, it’s a force in S.C. State’s immediate cash flow deficit, he said.

Maley noted that the university has faced many fiscal difficulties it could not help, such as cuts in federal and state funding as well as changes in requirements for federal grants and loans that made it more difficult for students to get the money they need for school. However, the university did not take steps soon enough to address its financial issues.

He reported that the university needs both short-term and long-term help from the state to get back on stable financial ground.

“The solution to this complex business problem with a variety of both short- and long-terms factors is to build a seamless partnership between SCSU and state government,” he said.

Additionally, the university needs a mechanism that will assure taxpayers that the business structures that caused its underlying financial problems are addressed, he said.

Contact the writer: dlinder-altman@timesanddemocrat.com or 803-533-5529.

Copyright 2015 The Times and Democrat. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(21) Comments

  1. gritsngravy
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    gritsngravy - April 10, 2014 3:46 pm
    Huh? That is not the same thing. And this is , without doubt, the biggest lousy excuse I have ever seen on this site. And I've seen quite a bit.
  2. iDog76
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    iDog76 - April 09, 2014 7:01 pm
    There is a cry for SCSU leadership. Recently history indicates it is what has most challenged the school.

    Leadership is not a title; it is action and example. Who follows losers? Let winners LEAD the way!
  3. 2ndGenerationBulldog
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    2ndGenerationBulldog - April 09, 2014 12:32 pm
    Is it fraud when you don't have the money to pay your MasterCard bill that's due now, so you take money allocated for your phone bill due in 2 weeks and pay the credit card bill? Or maybe you take a portion of that money to make at least the minimum payment. Then Something happens, and you can't catch up. You needed your spark plugs changed or an inspection finds a bad O2 sensor. Now you've pulled more money from other bills to make these necessary payments. Is that fraud?
  4. truthorjustice
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    truthorjustice - April 09, 2014 11:39 am
    And the truth shall set you free.
    Anybody with any sense knew what was happening !!!! But, the ones who could do something just had their heads in the sand !!!
  5. gritsngravy
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    gritsngravy - April 09, 2014 10:55 am
    WTF? how is this not fraud?
  6. bruindog88
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    bruindog88 - April 09, 2014 10:16 am
    LOL!!!

    I agree 100%
  7. bruindog88
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    bruindog88 - April 09, 2014 10:11 am

    I see your point. However, those incompetent check collectors are going the way of the dinosaur slowly but surely. Elzy has a track record of fiscal responsibility and will not tolerate the freeloading idiots that put SCSU in its current state.

  8. 2ndGenerationBulldog
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    2ndGenerationBulldog - April 09, 2014 10:02 am
    ^^^^^^^^^ EXACTLY!!!! GOOOOO BULLDOGS!!!
  9. 2ndGenerationBulldog
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    2ndGenerationBulldog - April 09, 2014 10:00 am
    This is the opportunity SCSU and Elzey need to take advantage of and get some professionals in the finance office! Sieze this opportunity! An institution such as SCSU should not be run like people are sitting around a dining room table trying to figure out how to juggle phone, DPU, and Verizon bills.
  10. bruindog88
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    bruindog88 - April 09, 2014 9:54 am
    In some ways this is worse than embezzlement. We have entirely too many unqualified and just plain downright incompetent people running things on SCSU's campus. Alumni must demand better leadership, oversight, and competence of the those entrusted to run the school. I like what I have seen from Elzy in his short time there, but he still has alot of work to do. I will support him in doing it.
  11. 2ndGenerationBulldog
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    2ndGenerationBulldog - April 09, 2014 9:46 am
    Between 2006 and 2008, $450,000 might have been manageable. But in 2008 when everyone was in financial crisis. State governements were trying to figure out how to keep the State running, institutions were trying to figure out how to keep doors open, families were finding it hard to keep kids in school... and you mean to tell me, y'all are confused as to why this happened? Or escalated to this height? come on now... One thing you, the commenters here, will never be accused of is being fair...
  12. 2ndGenerationBulldog
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    2ndGenerationBulldog - April 09, 2014 9:42 am
    What's sad is that everyone is piling on top of the mismanagement of the dwindling funds coming into SCSU. Has anyone questioned why the State took the path of reducing aid to SCSU? So they confirm no corruption (like some of you were hoping to hear)... and you still aren't pleased... smh... turns out Peter was in fact paying Paul just to survive a difficult time. They say the trouble began in 2006... I would like to know when it escalated... 2008 perhaps?.. when the economy tanked?
  13. educationfirst
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    educationfirst - April 09, 2014 9:39 am

    " So when they continued asking him, he lifted up himself, and said unto them, He that is without sin among you, let him first cast a stone at her." ~John 8:7 ....Now tell me if anyone posting comments on this subject can answer to this post. GOOOOO BULLDOGS!!!
  14. educationfirst
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    educationfirst - April 09, 2014 9:35 am
    No need for name calling people....the report is in. It's about educating our future leaders. So put your personal bias aside and support the rebuilding of this great institution. Have a great day people. Live, Laugh, Love...and yes in that order.
  15. 2ndGenerationBulldog
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    2ndGenerationBulldog - April 09, 2014 9:28 am
    I said this before... I'll say it again... the people in control of the money need to be scrutinized moreso than anyone else. The business of SCSU finances has been handled like a household financial situation... and if the people in control can not budget their own money to pay household bills, how do you expect them to function with millions. We had a chance for an audit, and Washington and others blocked it. We had a chance to identify and address this... and we were blocked.
  16. ccpsinsider
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    ccpsinsider - April 09, 2014 8:59 am
    Can't you just be happy to know that everyone involved with the money pot are incompetent buffoons?

    Oh joy
  17. SCGuardian
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    SCGuardian - April 09, 2014 8:52 am
    PS: Why did the Finance VIP's allow this to happen in the first place? They are CPA's, aren't they? Then how about the in-house Auditors? Then how about all of the out-side Auditors? Hey, how about the Transportation money that was missing, then suddenly found? Makes one wonder!

  18. SCGuardian
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    SCGuardian - April 09, 2014 8:41 am
    Shades of gray! The Auditor is wrong. SCSU Administration has defrauded Students, Faculty, Staff, and Public by hiding this fact via shuffling funds, first done under Prez Hugene.

    A note: Dr. Kenneth Lewis has been vindicated. Remember he was fired by 1890 for insisting that certain funds were being misused.
  19. educationfirst
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    educationfirst - April 09, 2014 8:28 am
    O bless His Name....Now lets support this great institution and moved forward. Gooooo Bulldogs!!!!!!!
  20. ccpsinsider
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    ccpsinsider - April 09, 2014 8:27 am
    Yes how wonderful to know that they're not Crooks just incompetent mismanagement This is a positive story?
  21. SCState_University_Republican
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    SCState_University_Republican - April 09, 2014 7:40 am
    This is great news. The budget deficit is a problem but at least there was no fraud or stealing. I'm glad Elzey is continuing to bring these issues to light.
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