S.C. Gov. Nikki Haley wants to start drug testing recipients of unemployment benefits, but her cabinet employment agency can’t even manage its current responsibilities

At least not according to the results of a legislative audit released this week.

Making matters worse, the S.C. Department of Empl0yment and Workforce (SCDEW) still owes the federal government $782 million from its unemployment insurance fund, according to the S.C. Legislative Audit Council (SCLAC) report.

“Since 2000, there has been a significant difference between the amount of taxes collected from contributory employers and the amount of benefits paid, resulting in the state borrowing money from the federal government in order to pay state benefits,” the SCLAC report notes. “However, as of January 1, 2011, the tax system has been changed and is designed to have tax collections equal benefit payments.”

In other words, since January 1, 2011 businesses in South Carolina have been taking it up the yin yang to compensate for this deficit – despite Haley’s best efforts to spin this tax hike in a different direction.

Beyond the flood of red ink, other problems still exist at SCDEW.

Specifically, the agency was ripped for maintaining an unnecessary bureaucratic “contingency fund” that skims nearly $9 million from businesses each year to pay for additional “administration” at the agency. According to the SCLAC, a whopping 28 percent of the funds collected from this are spent … wait for it … collecting the tax.

Ah, bureaucracy in action.

As for the rest of the money, the audit found that SCDEW “does not have a system in place for measuring the effectiveness of the use of these funds.”

More damning to Haley, the agency is failing miserably at its job of reviewing the eligibility of benefit recipients – missing targets for both short-term and long-term claimants.

“Eligibility reviews are not being conducted at the required intervals,” the LAC report noted.

Additionally, the audit discovered that South Carolinians who use the agency’s reemployment services take an average of 26.5 weeks to get off of the public dole. Those who do not use SCDEW took only 22.3 weeks – further evidence that the government has no business whatsover being involved in the job placement industry.

That last statistic is especially problematic for Haley, who has been aggressively promoting SCDEW’s ability to find jobs for South Carolina’s estimated 200,000 unemployed workers.

Haley and state lawmakers have spent the last year touting the SCDEW as a success story … an example of structural reform at work. However it is clear from this report that nothing could be further from the truth.

In fact, this LAC report indicates that the same problems which previously plagued the old S.C. Employment Security Commission (the agency SCDEW replaced) still plague this new agency … which would make this yet another example of “reform in name only” in South Carolina.

“In our 2010 report, we noted that DEW was in the process of recruiting for a new director and stated that, once new management was in place, DEW should conduct a thorough review of the agency’s mission, how business practices support the agency’s mission, and how to ensure public confidence in the agency’s ability to serve employees and businesses,” the report concludes. “Based on the issues identified in our current review, we believe a thorough review of the agency’s processes is still warranted.”

Indeed …

Haley and state lawmakers have imposed a massive tax hike on South Carolina businesses to fund this “reformed” agency – and to help it pay back its debt to Washington, D.C. In light of that its current performance is totally unacceptable – but more importantly it serves as yet another compelling example of government failing to efficiently perform a non-core function (job placement) that should be left exclusively to the private sector.

We’d have thought a “Tea Party” governor would have recognized that and proposed privatizing these functions … however Haley has decided (as she has on so many other issues) to bet on government, not the private sector.

SC DEW AUDIT (Summary Document)