Hunley audit unlikely

Legislative Audit Council chief says it would be conflict of interest for agency to probe legislators’ spending on sub

By JOHN MONK

jmonk@thestate.com

Government by Stealth series

The state financial watchdog agency should not investigate how public money has been spent on the Hunley submarine project, according to the agency’s director.

Both the Legislative Audit Council and the money spent on the Hunley are under the jurisdiction of the Legislature; thus, it would be inappropriate for the council to audit a program in the same branch of government, council director George Schroeder said Wednesday.

He also has told his five board members of the conflict.

About $13 million in state and federal money, including other direct public support, has gone to the Hunley submarine project since 1999, according to Hunley records.

“It’s a conflict of interest,” Schroeder said, speaking of whether his agency could audit Hunley finances. “In the world of auditors, this is a fundamental principle.”

Rep. Nathan Ballentine, R-Lexington, and seven other lawmakers called for the audit in May, after a series of articles in The State newspaper about the Hunley’s finances.

The Hunley’s main promoter, Senate President Pro Tem Glenn McConnell, R-Charleston, has said an audit is not needed because the Hunley project issues yearly audits. Efforts to reach McConnell on Wednesday were unsuccessful.

John Crangle, director of the citizens’ watchdog group Common Cause/South Carolina, said Schroeder’s concern about auditing jurisdiction appears to be legitimate.

If the Legislative Audit Council doesn’t audit Hunley spending, Crangle said, the wisest course might be to hire an outside auditor.

“That way, whoever did it would be free from retaliation by state politicians if they didn’t like the results.”

Asked how much a Hunley audit would cost, Schroeder said that question can’t be answered without an examination of Hunley records to see how complex and in what condition they are in. He said the average cost of his agency’s audits is $200,000.

Reports by the Legislative Audit Council don’t just crunch numbers; they issue judgments on how money has been handled and make recommendations.

Schroeder, who has been Legislative Audit Council director for 30 years, said he could not recall the agency ever considering disqualifying itself from a legislative branch audit. That’s because nearly all state spending takes place in executive branch agencies, such as the Department of Public Safety, or the judicial branch, he said.

But spending on the Hunley submarine project is a rare instance of legislators keeping a spending program.

In the General Assembly, federal and state money appropriated for the Hunley submarine project has been sent to special accounts in the State Budget and Control Board.

McConnell reviews and approves requests for that money by the Friends of the Hunley, a foundation he helped set up. The foundation oversees Hunley expenses including preservation, which costs about $800,000 a year.

McConnell chairs the Hunley Commission, a nine-member panel that includes six legislators. He also appoints members of the foundation board after consulting with the Hunley Commission.

Though Friends of the Hunley issues annual audits, they for the most part do not break down revenue and expenses with specificity. For example, in the 2004 audit, the latest available, a category under “expenses” says $232,379 was spent on “education and membership,” but does not describe the programs.

Hunley foundation spokesmen recently said the foundation is in good financial health. But a Clemson University official who inspected the Hunley’s financial books last year said in internal university documents obtained by The State newspaper that the Hunley preservation project badly needs Clemson’s future yearly contribution — $800,000.

With McConnell’s help, Clemson has made plans to pay for the Hunley preservation and create an 82-acre campus-research park around the Hunley laboratory in North Charleston.

Ballentine said Wednesday he still wants an audit of Hunley spending. He said he would monitor the Legislative Audit Council to see what happens.

In a memo to Legislative Audit Council board members, Schroeder suggested the audit could be performed by the state auditor’s office, which comes under the executive branch of government.

But first, the Legislative Audit Council members would have to formally decline to perform an audit.

A decision by the Legislative Audit Council on whether to audit Hunley finances could come at the agency’s July 25 meeting, council chairman Dill Blackwell said.

“If we aren’t going to do it, we ought to make that clear as soon as possible,” Blackwell said.

Reach Monk at (803) 771-8344.