Columbia, South Carolina — State auditors faulted the South Carolina Commerce Department for setting up a nonprofit organization with the South Carolina Coastal Conservation League to disperse $5 million to offset the destruction of wetlands at what is now Boeing's manufacturing site near Charleston.
The Legislative Audit Council said Commerce didn't provide enough oversight for the nonprofit's complex dealings and advised the agency not to take similar action in the future.
"We could not determine the benefit of creating a nonprofit entity to accomplish this particular purpose," the Council said.
In its report, auditors said that only $743,000 was needed to buy or preserve property to meet federal requirements to offset the loss of wetlands caused by building the plant. Yet, auditors found, the nonprofit set up by Commerce and the League actually spent $5.3 million.
The $5 million was part of an incentive package drawn up by the Commerce Department in 2004 to attract Vought Aircraft Industries to South Carolina.
Boeing later purchased the property, and the site is home to Boeing's manufacturing plant for its 787 Dreamliners in North Charleston. About 6,000 people are employed at the complex.
Auditors said the nonprofit entity — the Ashley-Cooper Rivers Environmental Trust — ended up making purchases that were not wetlands, that were outside the target watershed, that were a substantial distance from the Vought site and that were protected with less-stringent easements.
In essence, the auditors said, the trust's purchases "were inconsistent with (Army Corps of Engineers) standards for wetlands mitigation and the purpose for which the trust was created."
The trust was expected to use its funds within three years but took six years to spend the money, the audit said.
The $5 million for wetlands mitigation was part of a larger general obligation economic development bond approved for up to $160 million as part of the package to entice Vought to the site.
The report said that besides wetlands mitigation, the bond "funded a manufacturing facility, road improvements, airport improvements, site preparation and a multipurpose center."
Members of the General Assembly asked the council to conduct the review.
Commerce Department Secretary Bobby Hitt said in a statement included in the report that "in hindsight, a decade later, perhaps Commerce staff should have or could have done more to oversee the process. ..."
Hitt said Commerce staff "believed at the time that the necessary controls were in place" and added that the Trust's purchases were approved by the Corps of Engineers.
The secretary said he believed the formation of the Ashley-Cooper Rivers Environmental Trust "was an innovative way to implement Commerce's commitment to mitigate the Vought/Boeing site and obtain buy in from environmental stakeholders to support the impacts associated with a significant economic development project."
Commerce has no plans to create such an entity in the future, he added.