COLUMBIA, SC — It turns out that $1.8 billion in South Carolina state funds wasn’t just sitting around in a bank account waiting to spend Instead, it was an accounting error rather than compounded over years, an independent forensic auditor has determined.
Wednesday’s announcement shot down ideas like giving taxpayers money back or using the money on roads. But it also led to more questions: why the bug wasn’t reported when it was discovered around 2018, and elected officials should have been. state treasurer, Curtis Loftis, resign or impeach.
“In the private sector, if someone had made an $1.8 billion mistake — whether it was error, negligence, malpractice, omission, fraud or cover-up, they would be out of a job,” said Republican state Sen. Larry Grooms. , who heads a commission that investigates accounting problems.
The private auditAt a cost of millions of dollars, it is the most comprehensive look to date at the South Carolina Office of the Treasurer and Comptroller General. These agencies are usually run by elected officials and are responsible for ensuring this government accounts are kept balanced.
Audit is not the last word on the matter. Investigators, including the Securities and Exchange Commission, are trying to determine whether it was just a series of mistakes or whether state employees figured out what was going on and tried to cover it up, Grooms said.
Depending on how serious the allegations are, the state may face increased lending rates, fines, or other penalties.
In a separate case, the Republican-elected general counsel — the state’s chief accountant — resigned in 2023 after his agency doubled the amount the state sent to colleges and universities over a decade, resulting in a $3.5 billion miscalculation. everything on paper
While Richard Eckstrom recused himself from the case, Loftis has defended himself and his office.
Problems with the $1.8 billion error began in the 2010s when the state changed its computer systems. Grooms said the initial mistake occurred when Loftis, whose job it is to write checks for the state, switched accounts from the old system to the new one.
Loftis testified under oath in front of the senators that he invested the money in the mysterious $1.8 billion account last year and made nearly $200 million for the state, which Grooms said seems impossible since there was no money there. The senator said Loftis also lied under oath when he said there was no federal investigation into his office.
Loftis issued a statement Wednesday thanking the auditing firm Alix Partners for its work. He did not address Grooms’ statements.
“South Carolina citizens can rest assured that their money is safe,” Loftis said. “We, along with our state partners, look forward to reviewing the report in its entirety.”
Governor Henry McMaster said that he has confidence in managing the state’s affairs going forward and that he does not believe that there is any intention to deceive anyone.
“It was an accounting error, no criminal conduct, no wrongful intent, no intent to make a mistake — mistakes happen sometimes and unfortunately it was a big one,” McMaster told reporters.
Among other recommendations, the audit said South Carolina should hire a third-party auditor to look over the shoulders of the Treasurer and Comptroller General’s offices to make sure the state’s accounting books are being kept properly.
The state has its own auditor, but that person is hired by a five-person committee that includes the treasurer and general counsel. Lawmakers are likely to look into why that person didn’t raise the alarm earlier about the accounting problems, Grooms said.
Meetings have already been scheduled with a House subcommittee, and the Senate Finance Committee will likely call Loftis to testify by the end of the month, Grooms said.
South Carolina has a long history with accounting problems.
The Treasury Office was created in 1776 when the state’s first constitution was written. Then, the General Assembly elected the treasurer. But by the early 1800s, the state’s finances were in “terrible confusion” and no one could “tell the amounts of the debts or appropriations of the State,” according to the History of South Carolina, a 1920 book. Yates Snowden and Howard Cutler.
The first general counsel determined that he owed the state about $750,000, which today would be about $20 million.
