Daugaard Proposes Board of Internal Control to Catch Corruption on Federal Grants

Last month Governor Dennis Daugaard said the apparent corruption in the GEAR UP program administered by the Mid-Central Educational Cooperative for the state was “ridiculous.” Evidently sick of ridicule over GEAR UP and the EB-5 scandal, the Governor offered legislation today aimed specifically at cracking down on corruption of federal programs run by state agencies and subcontractors.

Senate Bill 162 would immediately create a State Board of Internal Control (Section 2). Its seven members—four gubernatorial appointees (including the commissioner of the Bureau of Finance and Management), an appointee of the Chief Justice (who is an appointee of the Governor), a designee of the Board of Regents administrator, and the state auditor—shall establish and maintain “(1) Guidelines for an effective system of internal control to be implemented by state agencies that is in accordance with internal control standards; (2) A code of conduct for use by state agencies; and (3) A conflict of interest policy for use by state agencies.” SB 162 also orders every state agency to designate an “internal control officer” (Section 8), someone to manage the (Section 1) “process that integrates the plans, activities, policies, attitudes, procedures, systems, resources, and efforts of an organization and that is designed to provide reasonable assurance that the organization will achieve its objectives and missions and to detect and prevent financial malfeasance.”

You’re telling me that South Dakota’s state agencies don’t already do these things? That’s ridiculous.

Section 10 requires that state agencies post every grant they award online (red meat for bloggers!) and that recipients and sub-recipients post their IRS Form 990s and audits on their websites (potatoes for bloggers!). Section 11 requires state employees to report suspected conflicts of interest, frauds, or thefts to their immediate supervisors, the Attorney General’s office, or the Department of Legislative Audit. Section 12 allows employees who feel such reporting of crimes has provoked retaliation to file a grievance with the Civil Service Commission… which again makes me ask in wonder, “What? We don’t have whistleblower protections already?”

Senate Bill 162 looks like a set of common-sense anti-corruption measures that would think would have been on South Dakota’s books long ago. But with scandals like GEAR UP and EB-5 going on, apparently they haven’t been. Whether these rules and a seven-member board consisting of a majority of the Governor’s people will make a difference is an open question, considering that the abuses of EB-5 were perpetrated by the Governor Mike Rounds’s Office of Economic Development, while the abuses of GEAR UP were perpetrated by friends of Governor Rounds and allowed to continue for three years by an appointee of Governor Daugaard.

Rep. Lee Schoenbeck (R-5/Watertown) says the Governor’s proposal sounds like a good first step, but Rep. Peggy Gibson (D-22/Huron), who has pushed for a state ethics commission for years, says the State Board of Internal Control is too internal; she wants an independent corruption watchdog.

Senate Bill 162 does not go as far in tackling corruption as Initiated Measure 22, the Anti-Corruption Act that we have on the 2016 ballot. IM 22 offers a state ethics commission (five members, three appointed by the Governor, but at least limited to lists of nominees from the Senate majority and minority leaders) to take whistleblowings but also to enforce campaign finance rules, plus reforms in lobbying and campaign finance. Given how often state government is getting caught with its pants down, maybe belt and suspenders is the way to go: pass SB 162 now to create the State Board of Internal Control and pass IM 22 to create a state ethics commission to help catch corruption!