COLUMBIA, S.C. — A recent independent forensic audit has revealed that the perceived $1.8 billion surplus in South Carolina’s state funds was, in fact, the result of a long-standing accounting miscalculation rather than accessible cash waiting for allocation. This finding, announced on Wednesday, has effectively dashed hopes for tax returns or infrastructure investments, yet it has raised additional concerns regarding the oversight of financial discrepancies, particularly the timing of when the error was first identified around 2018. Questions are also being directed towards the state’s elected treasurer, Curtis Loftis, with some advocating for his resignation or potential impeachment.
Republican state Sen. Larry Grooms, who heads the committee investigating these accounting issues, voiced strong criticism, stating, “In the private sector, if anyone had committed a $1.8 billion mistake—whether through negligence or fraud—they would undoubtedly lose their job.” The private audit, which incurred millions in expenses, marks a significant examination of the operations within the offices of the South Carolina Treasurer and the Comptroller General. These entities, typically overseen by elected officials, are responsible for ensuring government accounts are accurately maintained and balanced.
Nonetheless, the audit’s findings are not the conclusive end of this matter. Ongoing investigations by authorities, including the Securities and Exchange Commission, are probing whether the miscalculations were merely accidental or if state employees attempted to conceal the situation after becoming aware of it, according to Grooms. The gravity of the accusations could lead to increased borrowing costs for the state, alongside potential fines or further consequences.
In a related development, the Republican comptroller general, considered the state’s foremost accountant, resigned in 2023 after it was revealed that his office had erroneously double-posted financial transfers to institutions for an entire decade, resulting in another considerable discrepancy amounting to $3.5 billion, all of which was purely a clerical issue. Unlike Eckstrom, who stepped down, Loftis has publicly defended both himself and his office’s actions during this unfolding situation.
The origins of the $1.8 billion discrepancy can be traced back to the transition of computer systems within the state during the 2010s. Grooms indicated that Loftis made a critical error during the transition of accounts from the outdated system to the new one. Loftis, under oath, claimed last year that he had invested this unidentified $1.8 billion and accrued nearly $200 million in interest for the state. Grooms contested this assertion, arguing that such returns were implausible given the absence of actual funds. Additionally, Grooms pointed out apparent inconsistencies in Loftis’s testimony regarding federal investigations into his office.
In his response to the audit, Loftis expressed gratitude to the auditing firm Alix Partners but refrained from commenting on Grooms’ statements. He assured the public that South Carolina’s financial resources are secure and stated that he looks forward to thoroughly reviewing the report alongside his colleagues in government.
Governor Henry McMaster has voiced his confidence in the officials managing the state’s financial accounts, describing the situation as an unintentional accounting oversight without any malicious intent. “It was an accounting error with no criminal conduct, no wrongful intent,” McMaster asserted, acknowledging the unfortunate scale of the mistake.
The audit has proposed several recommendations, notably the hiring of an independent third-party auditor to scrutinize the accounting practices within the Treasurer and Comptroller General offices. While South Carolina does have its own appointed auditor, concerns have arisen about why this individual failed to flag the accounting issues sooner.
Already, meetings are being organized with a House subcommittee, and it is anticipated that the Senate Finance Committee will summon Loftis to testify by the month’s end. The history of South Carolina is riddled with accounting challenges; the Treasurer’s Office was established under the first constitution in 1776, initially selected by the General Assembly. However, by the early 1800s, the state’s finances faced notable turmoil, leaving observers unable to ascertain the state’s debts or credits, as noted in the historical account “History of South Carolina.” The first comptroller general assessed that the state was owed approximately $750,000—a sum equivalent to roughly $20 million in today’s values.