November 28,
2012
DEW mistake
spurs debate about governor's cabinet operations
Capital Bureau
COLUMBIA — Barbara League, the chief executive officer
of G.F. League Manufacturing in
Greenville, says she isn't surprised to hear that a programming error at a state
agency failed to pick up almost $9 million in unemployment charges that must now
be billed or used in calculating taxes for nearly 12,000 businesses in the
state.
“We've been in business
for 95 years and we are so used to those little surprises,” she told
GreenvilleOnline.com.
But others are not so
open-minded about the mistake caught in an audit this year by the state
Department of Employment and Workforce.
“How could you make
such an asinine mistake?” asked Frank Knapp, president and chief executive
officer of the South Carolina Small Business Chamber of
Commerce.
The mistake is also
raising questions about the operations of agencies in Gov. Nikki Haley’s
cabinet, coming soon after other high-profile lapses that are costing taxpayers
money. A spokesman for the governor rejected criticism.
Sen. Kevin Bryant, an
Anderson Republican who chairs a Senate subcommittee that deals with issues
involving Employment and Workforce, said he was upset that so many businesses
would be affected by the error.
“I'm just shocked that
we still have this kind of irresponsibility over there that they can't read a
calendar,” he said, referring to the programming error.
However, Lewis Gossett,
president of the South Carolina Manufacturers Alliance, praised the agency for
finding the mistake and bringing it to the surface.
“This is exactly what
this agency should be doing,” he said. “I'm giving them credit for catching
it.”
The mistake is just the
latest headache this year for agencies in the governor’s
cabinet.
In April, Department of
Health and Human Services officials disclosed allegations that an employee had
taken personal data belonging to more than 220,000 Medicaid recipients, while
last month, Haley disclosed a foreign hacker had breached the Department of
Revenue, potentially taking 3.8 million Social Security numbers, 3.3 million
bank
account![clip_image002[1]](cid:8505469E243740FDAD3742464666F819@ownerPC "clip_image002[1]")
numbers and information belonging to nearly 700,000
businesses.
“What is going on in
this administration?” Knapp asked.
Sen. Thomas Alexander,
a Walhalla Republican and the likely incoming chairman of the Senate Labor,
Commerce and Industry Committee, said lawmakers should be looking at the events
collectively, not just as isolated problems.
“To me, it's not
acceptable that we are continuing to have these events occur,” Alexander said.
“We'll need to address it in some regard. I think it is a bigger picture that we
are going to somehow take a look at.”
Rep. Kenny Bingham, the House
majority leader who pushed reform legislation when the agency was called the
Employment Security Commission![clip_image002[2]](cid:42AB31C09C4A4F619742ADD322E8E69D@ownerPC "clip_image002[2]")
,
said the events are a reminder that agency directors have to focus on their
organizations just as business leaders do.
“It certainly shows
there has to be attention paid to the running of these agencies,” he
said.
State Democratic Party
Chairman Dick Harpootlian said the problems are not unfortunate
events.
“They are a lack of
diligence and scrutiny and work,” he said.
But Rob Godfrey, a
spokesman for Haley, said despite some problems, the cabinet agencies are
producing results for taxpayers.
“State agencies aren’t exempt
from problems from time to time,” he said, “and that’s why we put strong,
business-friendly leaders in place at state agencies who continue to show
results for the people of our state – results like more than 29,000 jobs
announced and record-breaking investment![clip_image002[3]](cid:6483D88E75BC4145B91084ECBA509F6C@ownerPC "clip_image002[3]")
in
South Carolina, more than 12,000 welfare-to-work success stories, transforming
DJJ into an agency that trains young people for jobs and erasing deficits at
Corrections, Social Services, and Health and Human
Services.”
The employment agency
error was caused by a programming change in the agency in 2008, officials said,
when heavy unemployment claims prompted the agency to begin allowing claims to
be filed on weekends. However, the programming for businesses' statements did
not match and in three quarters — when the quarter ended on weekends — the
agency only counted claims filed Monday through Friday, leaving out about $8.6
million in charges, said Adrienne Fairwell, the agency’s
spokeswoman.
An audit during the
third quarter of this year caught the error, which could have ramifications for
businesses still reeling from the Great Recession.
League said she thinks
the programming error is an example of the impact government can have on
business.
Ben Homeyer, state
director for the National Federation of Independent Business, said he doesn't
believe most small businesses in the state will see much change in their taxes
next year as a result of it because they are typically in the lowest of the
state's 20 unemployment tax tiers.
“We should probably not
be affected,” he said. “It's going to be your Tier 20 guys who are truly going
to be affected by this issue.”
The agency said about
12 percent of the state's 98,000 businesses, non-profits or government agencies
liable for unemployment taxes will be sent revised statements because of the
error. However, only 399 of those — non-profits or agencies — will be asked soon
to pay additional charges, which total $542,249.
Those organizations
will have time to pay the additional bill, agency officials
said.
The other types of
businesses, known as “contributory” companies that make up the majority of
companies in the state, could have their tax bills for next year affected,
according to an agency fact sheet.
“While it is true that
contributory businesses will not receive a bill for these undercharged benefits,
each of these charges is counted in the calculation of that business’ upcoming
tax rate," the fact sheet states.
Businesses in the state
pay unemployment taxes based on their experience with claims, among other
factors, and those with more employees filing for unemployment are placed in a
higher taxing tier.
Bingham, who said he
knows no details of the error and has not been briefed, said it appears to be a
basic mistake in accounting, not catching an imbalance between costs and
revenue. He said he is bothered it took the agency so long to catch the
mistake.
“It's troubling when we
have these issues come up time and time again, especially with an agency that we
completely overhauled and the microscope is on it and it should be running like
a Swiss clock,” he said.
Businesses in the state
will get their bills for next year in January, Fairwell said, instead of
December as they have in recent years because it is taking additional time to
revise the bills because of the discovered claims.
The agency says it will
improve its audit process to try to catch such errors more
quickly.
That's fine for
Gossett, who pushed for reforming the agency in 2008 and believes it will take
some time for it to operate as effectively as it can.
“They are doing the
kinds of things we in the business community expect them to do,” he said. “And
right now, I don't feel the need to jump on them for that. This is exactly what
we hoped they would do. Not this example, but go find this stuff and starting
making that place an effective state agency as opposed to what it
was.”
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