A new audit questions the effectiveness of South Carolina’s small business development program, noting many of the consultants the program uses have no experience working with small business and that the information about businesses it aids is kept secret.
The Legislative Audit Council on Monday released its audit of South Carolina’s Small Business Development Centers (SBDC), which uses state and federal money to consult and help new small businesses. The centers are divided into four regions supported by an area college — Clemson University, the University of South Carolina, South Carolina State University and Winthrop University. The centers say they helped create 189 new businesses and “created or saved” 1,277 jobs last year.
However, auditors said they have no way to verify those numbers. The LAC report states they tried to access SBDC’s client database to confirm the numbers cited. However, they were denied, with the program’s management citing confidentiality and federal Small Business Administration (SBA) rules. Auditors said they reached out to the Small Business Administration, noting there had been precedent in other state audits like Montana. However, the SBA would not allow “unrestricted access” to the database without the written consent of the businesses affected.
The state legislator who requested the original audit said he was very concerned inspectors could not “confirm or deny” the jobs numbers the agency cites. “Taxpayers have a right to know that they’re being told the truth and that their tax dollars are being used in the most effective manner,” State Rep. Jonathon Hill, R-Townville, told South Carolina Radio Network. “So when the SBDC comes out and says they’ve created 1,000 new jobs this year. We should be able to verify those claims.”
SBDC said federal law does not allow auditors to go through the database. “As we explained to the audit team, the SC SBDC is accountable to the SBA and is obligated to comply with the regulations, policies and procedures in alignment with federal law,” the network said in its response.
Auditors also expressed concern about the backgrounds of consultants that the centers paid to help small business clients. The report notes that only 17 percent of consultants in the SC State region and 25 percent in the Winthrop region had previous small business experience. None of the state’s four regions require the experience. The report also recommends SBDC streamline its human resources policies so that the same qualifications are required in each region.
The audit notes a former employee in the USC region who did not have a bachelor’s degree for a position that required one. USC also did not require a background check for the job. When that employee was promoted to regional director of SC State’s office, the school did a background check and realized its new manager had a criminal record and had lied about a college degree on his application. He was terminated from his position when the school discovered the discrepancy.
In its response, SBDC said it now requires background checks across all regions. However, it cautioned that it can be more difficult to find fully-qualified consultants in some regions due to lower average education levels. The agency also notes funding limitations cause it to pay below-market wages.