Twenty separate individual grants of up to $125,000 failed to provide invoices, proof of payments
By RON AIKEN
Despite clear evidence of fraudulent behavior reported by Quorum strong enough to open FBI, Attorney General and S.C. Secretary of State investigations into charities receiving money from the Richland County Hospitality-tax program — fraud that including using phony invoices to pay relatives, submitting no invoices whatsoever and failing to provide proof of payments made on grants totaling $776,000 — an internal county audit released last week concluded it could find no “instances of malfeasance or impropriety.”
In a comprehensive review of the 529-page document released Friday that covered the three previous fiscal periods dating back to FY2013-14 and other data accumulated through Freedom of Information Act requests, Quorum found numerous examples of of malfeasance (wrongdoing, and especially by a public official) and impropriety (the state of being improper or incorrect) spread across 10 separate violations of guidelines and procedures meant to protect the public from improper use of hospitality-tax funds that were serious enough to classify a charity as being “noncompliant,” including:
- failure to provide invoices for expenses claimed (17 cases);
- failure to provide proof of payment for expenses (nine cases);
- spending funds on expenses not permitted (four cases);
- expending funds outside the fiscal year (one case);
- failure to provide paperwork proving 501(c)(3) status (one case);
- failure to provide certification by the S.C. Secretary of State of having filed as a business (two cases);
- failure to submit required financial reports on time or at all (three cases);
- failure to file a grant application (two cases);
- re-granting award money to other entities without authorization (one case);
- and the extraordinary clearing of non-compliant proofs of payment due to direct interference of council member Norman Jackson on behalf of a charity he personally sponsored for $125,000 in FY2014-15 and $75,000 for FY2016-17.
In addition to the examples of legal noncompliance discovered by the county audit, Quorum also found multiple instances of:
- vague and inadequate reporting of tourism-related outcomes;
- minimal-to-no compliance with advertising requirements to promote events;
- cash payments to individuals without description or proof of work performed;
- inadequate oversight and follow-up by staff;
- irregular applications of what constitutes a tourist draw;
- awards made to entities that did not meet the county’s own criteria; and
- no punitive action taken on repeat offenders or for the worst cases of unaccounted-for dollars.
According to the the Richland County Grant Noncompliance Procedures that govern the hospitality tax, accommodations tax and discretionary grant programs, entities found to be non-compliant can fall into into two categories, “Level 1” (a warning giving the charity 10 days to comply or make arrangements to comply) and “Level 2” (noncompliance after the 10-day period with a 30-day window to comply).
After failing to comply following the 30-day period, the policy states, “All County grants for this organization are suspended until the noncompliance issue is resolved, meaning that all payments for this grant and any other active County grants are suspended.” Should the issue fail to be remedied after that notice is sent, “Richland County may initiate the grant fund’s recovery process,” the procedures state, allowing the county to “follow all available legal steps for debt recovery.”
Quorum’s review of the three-year audit, however, found no examples of that policy having been followed.
In spite of 16 of the 20 charities cited having ended a fiscal year with unresolved deficiencies, according to the audit, no collection efforts were initiated and five of those 16 — the S.C. Pro Am; SCALE, Inc.; Latino Communications; the SC HIV/AIDS Council; and the 3 Rivers Music Festival (now the Richland Music Festival), received funding in multiple years in violation of the prohibition against funding grantees in non-compliance. A sixth, the Pinewood Lake Park Foundation, will receive money this year after a non-compliant 2015-16.
What’s more, three of those multi-year offenders (Pinewood Lake Park Foundation, SCALE and Latino Communications) not only have remained unsanctioned, they will receive more than a quarter of a million dollars combined ($338,500) this fiscal year alone.
For a hospitality-tax program facing evidence of fraud, unaccounted-for funds in the tens of thousands of dollars and under investigation from multiple law enforcement entities, the question remains as to how, if the audit’s conclusion is that all the problems surrounding missing and inadequate paperwork for $776,000 worth of grant money are categorized as “minor,” what, exactly, would be “major?”
And if the problems indeed were as inoffensive as the county report suggests, why did it not release the audit’s findings in December when it was concluded but instead only made them public a day after Quorum made a Freedom of Information Act request for it?
The audit’s major finding was that “staff failed to implement a system of internal controls that were proactive in monitoring the expenditures of the organization(s),” and it’s major recommendation was that “that staff install a set of rules to better monitor compliance.”
Nothing was mentioned anywhere about the severity and scope of the issues surrounding the program’s greatest problem, which is that in case after case, year after year expenses could not be justified nor proof of payments verified on three quarters of a million dollars worth of grant awards despite clear internal guidelines stating that “County staff checks to ensure that the organizations have signed the grant agreement, have an updated W-9 form, have a list of expenses in accordance with its previously submitted budget, a current balance sheet and a list of expenses that are equal to the amount of funding being requested.” The expenses are to be proven in every case by “copies of valid invoices and proof of payment for each grant expenditure.
“Proof of payment is a copy of a cancelled check, bank statement showing a cleared check or credit card receipt.”
In case after case, however, and year after year those standards were not met, with handwritten receipts on check register stubs (see photo at left), scribbled notes in the margin of invoices saying “paid in cash” and outright phony invoices to benefit the family members of charity personnel (see photo, above right) being just some of the more egregious examples.
Broken down by year, here are the audit’s offenders, the amount of their awards and their offenses as reported by the audit beginning in FY 2013-14, which by any measure was the worst year for compliance. In that year alone $408,825 (21 percent) of the total grant money distributed to non-mandated entities ($1,994,354) was awarded to charities subsequently flagged for significant spending and reporting irregularities. They were:
FY 2013-14 ($408,825)
- 3 Rivers Music Festival, $98,225, expenditure of funds outside grant period
- Auntie Karen Foundation, $5,000, all funds went to entertainment (entertainment can be no more than 50 percent of grant), only one check was written for the entire amount to “SES Entertainment,” no invoice was submitted for the expense, no IRS letter certifying 501(c)(3) status provided.
- Black Pages, $49,600, organization provided only a list of expenses and check numbers, no proofs of payment or invoices were provided.
- Athletes United, $95,000 ($65,000 for Carolina Sun Splash Reggae Concert, $30,000 for Fight for Life event), no proof of payment for any expenditure, some expenses listed were ineligible.
- Greater Columbia Community Relations Council (Famously Hot New Year), $50,000, no grant application provided, invoices missing.
- Latino Communications CDC, $41,000, organization re-granted/paid funds to other organizations without authorization, documentation missing.
- SC Pro-Am, $15,000, expense not eligible (insurance), since cleared up.
- SC HIV AIDS Council, $10,000, no proofs of payment were provided, no letter from the Secretary of State was provided.
- SCALE, Inc., $60,000, documentation did not support expenditures, missing invoices, invoices provided but incomplete, invoice for $3,000 “administrative fee” with no supporting documents, $1,500 check written to cash with no proof of payment, SCALE CEO wrote $1,000 check to self with no supporting documentation.
- Jam Room Music Festival, $1,029, documentation to support expenditures inadequate.
- Latino Communications CDC, $41,000, organization re-granted/paid funds to other organizations without authorization.
- Ray Tanner Foundation – Miracle League, $75,000, funding meant for construction but funds not expended at end of FY, no Mid-Year report filed, no grant application filed.
- SC HIV AIDS Council, $30,000, inadequate documentation of expenses, only check numbers, not cleared checks, provided.
- SC State Museum Foundation, $12,500, inadequate documentation provided, only check numbers, not cleared checks, provided.
- SCALE, Inc., $125,000, documentation incomplete and inadequate, $6,000 unexplained “administration fee,” more than 50 percent of money spent on entertainment (not allowed), spending documentation missing, missing Mid-Year report, invoice for $2,000 Richland County Sheriff expense not provided, compliance directives not followed.
- SC Pro-Am, $19,727, expenses not eligible (insurance, trophies), since cleared up.
- Blues, Bluegrass & Barbecue, $30,815, inadequate documentation, expense not eligible (insurance), invoices out of funding cycle.
- Pinewood Lake Park Foundation, $15,454, inadequate documentation of expenses, invoices not provided for checks issued, proof of payment not provided, cash payments made to employees, check numbers provided unverifiable. NOTE: This entry is marked with the notation that despite the severe deficiencies mentioned that were never rectified, “Staff was able to resolve the issue of non-compliance after meeting with the organization and having discussions with Council member Jackson (sponsored the request for Pinewood Lake Foundation.)” Quorum reported on this extraordinary sequence of events last week.
- Richland Music Festival (3 Rivers Music Festival), $5,000, funding not disbursed due to non-compliance related to a change of artists and the nature of the concert after the grant application was made.
- SC Hispanic Outreach, $2,000, no proof of payments submitted, final report not submitted, organization non-compliant.
Calls and emails to Richland County chief public information officer Beverly Harris and county administrator Gerald Seals have not been returned.
Reach Aiken at (803) 200-8809. Email him at email@example.com. Follow him on Twitter @RonAiken and @QuorumColumbia and like Quorum on Facebook.