Tax-funded economic group overstated revenue by nearly $500k, audit finds

An independent audit of the Beaufort County Economic Development Corporation, a nonprofit that relies almost entirely on taxpayer funding from local government, found the organization had overstated revenue by nearly half a million dollars on financial documents, according to documents reviewed by The Island Packet.

The audit also cited a “material weakness,” or otherwise serious flaw in the corporation’s internal financial controls.

The audit, conducted by Maudlin & Jenkins, covered the 2024-25 fiscal year, concluded that the corporation misstated its finances by overstating its revenue by about $461,000 and understating its liabilities by the same figure.

Auditors also noted that the corporation lacked processes to properly review and classify complex funding agreements involving public dollars.

BCEDC Executive Director John O’Toole, however, told The Island Packet the revenue issue found by the audit was caused by an outside accounting firm and the error was corrected.

“An audit can serve as a valuable tool to identify opportunities for improvement, and this review fulfilled that role,” O’Toole wrote in an email to The Island Packet.

First time BCEDC audited after nearly a decade

This was the first time BCEDC, which has received millions in public funds to recruit industry and expand business opportunities in the county, underwent an independent financial audit after nearly ten years of operation. The audit request was one example of elected officials’ and community members’ growing scrutiny of the organization in recent years.

During budget season, the town of Port Royal and Beaufort County scaled back funding to the BCEDC. Since then, county officials implemented new guardrails for financial oversight of the corporation. Most recently, a local nonprofit sued the corporation over access to its public financial records.

Beaufort County, the corporation’s most substantial funder, requested the audit.

The county’s policy calls for organizations that receive property tax dollars to have an annual audit on file. Up until last year, there was no record that the county ever requested one from BCEDC, despite setting aside nearly $11 million for the corporation over time.

County Council will decide whether the audit report affects future allocations from the county’s Jobs & Site Fund, since it approves the corporation’s allocations, according to County Chief Financial Officer Pinky Harriot. The county will continue to monitor the audits, as they do with other county-funded agencies, she said.

What went wrong?

The $461,000 accounting issue stemmed from how the corporation accounted for funds granted by Beaufort County for a land purchase in Beaufort, according to audit report. In April, County Council approved funding the corporation’s purchase of 14.77 acres on Parker Drive for future, larger-scale developments.

According to the audit report, the money was an advance that was to be returned to the county if the property was sold. However, it was recorded as revenue rather than a liability in official financial documents.

Auditors noted that this error violated generally accepted accounting principles and resulted in a “material misstatement” of the corporation’s overall financial picture.

Auditors decide whether problems rise to the level of a “material weakness” or a less serious “significant deficiency.” In this case, auditors said the corporation’s problems were severe enough that its internal controls could fail to prevent major errors in its financial statements.

In response to the finding, auditors recommended that management put a formal, written review process in place for all new or complicated funding agreements.

Accounting issues came from outside firm, BCEDC says

While acknowledging the BCEDC audit findings, O’Toole, the corporation’s executive director, said the problems stemmed entirely from an outside accounting firm the corporation employed from 2017 to mid-2025. He said in an email to The Island Packet that after the auditor flagged the issue, a new firm hired in July moved to correct the error “immediately.”

O’Toole said the corporation has also put a new procedure in place to more closely review and document complex, high-dollar or conditional transactions.