Education department breaking law, lottery audit finds
The South Carolina Department of Education isn't following the law in the way it disburses $30 million of South Carolina Education Lottery funds to state schools, according to a review by the watchdog arm of the Legislature.
The department also isn't giving priority to underachieving school districts and doesn't evaluate academic performance when it disburses funds, as required by law, a Legislative Audit Council review found.
The $30 million is the education department's share of the $309 million the education lottery made in 2013-2014. The majority of the lottery funds went to higher education scholarships.
State law requires the education department to issue funds through grants and to give more weight to underachieving school districts, but the department has created its own funding formula instead, the audit found.
The state Department of Education reviewed the audit but didn't offer comment on the final draft, the audit states. A department spokesman couldn't be reached for comment on Wednesday.
Sen. Larry Martin, R-Pickens, a member of the Senate Education Committee, called it "obvious" that the funds are designed to be issued through grants.
"That's what needs to occur until the law is changed," Martin said.
If the department wants to change the way it handles lottery funds, it needs to present its plan to the Legislature, not write its own formula, Martin said.
"I have every confidence that we will address it now that it's been brought to our attention," Martin said.
Sen. Mike Fair, R-Greenville, also an education committee member, said the Legislature must correct the Department of Education's violation of the law when a new superintendent takes over after the November election.
The audit found the education department also has inconsistent oversight on how districts spend the lottery funds, which are supposed to go to kindergarten through eighth grades to pay for instructional coaches and instructional staff, instructional improvement materials, stipends for teachers for additional duties, and for teachers to attend conferences that promote teaching grade-specific standards.
The lottery funds aren't allowed to be used for furniture, air conditioners, expenses by district-level employees or building renovations or construction.
The department lets school districts self-report spending in a survey, but doesn't independently verify whether the funds have been spent correctly.
Only about one-half of the districts completed the survey, "so there is no information on how the other half of the districts are spending their proceeds," the audit found.
Though the Legislature gave school districts flexibility on how they spent lottery funds during the financially tight Great Recession years, the districts still should have been accountable for how they spent the money, Martin said.
The surveys are an accountability tool, and the Legislature expects school districts to comply, Martin said.
He added that the Legislature may have to strengthen the law to provide more accountability for school districts to report how they spend lottery funds.
"If you don't comply with it, don't expect the money this next fiscal year," he said.
The lottery took in $309 million in proceeds in 2013-2014, including $8 million in unclaimed prizes.
Of that total, $263 million went to higher education with the vast majority, $222 million given as grants or LIFE, HOPE and Palmetto Fellows scholarships.
Just over $44 million went to the education department. Of that, $30 million went to K-8 educational programs. And $1.8 million went to other educational programs, including $150,000 to help those with gambling addiction.
The audit also found that the Commission on Higher Education, which distributes the $263 million lottery funds for college scholarships and grants, doesn't currently verify that scholarships are going to eligible recipients.
The commission doesn't verify whether students who receive scholarships from institutions hold in-state residency or whether the scholarship amounts exceed cost of attendance.
Until 2008, the commission conducted on-site visits every three years at institutions and reviewed a sampling of students to verify eligibility, but that program was cut during the recession, the audit states.
In a response to the audit, the commission said it is taking steps to reinstate its oversight program.
After looking at how the lottery funds are spent, Fair said the Legislature should reconsider where lottery proceeds should go to give more balance between higher education scholarships and public education.
He wondered if voters would approve the lottery by referendum again if they knew that most of the funds were going to higher education and not to the public school system.
Public education programs received 11 percent of lottery funds in 2013-2014, but Fair, who opposes the lottery, said he believes most residents assume the money they pay for lottery tickets goes to the state's public schools.
"The public certainly believed more than 11 percent … was going to the K-12 classroom," Fair said. "That is ridiculously low."