The South Carolina state government has a big money problem, and it doesn't know if it is good or bad. The state has about $1.8 billion in its bank account and no one knows how it got there or what they should do with it. Reports suggest that the state has been plagued with accounting problems for decades, and now the Senate has established a panel to investigate the matter. Leading the senate panel and the investigation is Republican state Sen. Larry Grooms.
Story of the Mystery Fund
The story of the funds started when a junior staffer noticed the balance in a state account in late 2022. The error revealed Comptroller General Richard Eckstrom's ignorance of issues in his office. Eckstorm, who resigned last year, had received several warnings from experts, the SC Daily Gazette reported.
After the senate panel took charge of the investigation, it summoned state Auditor George Kennedy, who is responsible for independently reviewing the state’s financial record keeping. Kennedy told senators his office learned about the funds in 2017, in an off-the-radar account. However, they waived it off in the annual audits, believing it was a temporary measure, part of the accounting system changeover.
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The state went through a decade-long transition of shifting to a new accounting system between 2007 and 2017, according to the SC Daily Gazette. Eckstrom and other state officials had testified that it was a chaotic transition.
Thus, the mystery funds are estimated to be part of the fallout from a $3.5 billion accounting snafu that went unchecked for a decade. While Kennedy thought the funds had no “relevant” impact on the financial statements, they were proven wrong.
The bank account is now being examined by state and private accountants, CBS News reported.
Possible answers
Investigative accountants are still working through the mess to figure out the origin of the funds. According to the Senate leaders, it seems that every time the state's books were out of order, the money was shifted from somewhere into an account to possibly help balance things out, the CBS report said.
However, lawmakers said that the state's financial leaders are yet to provide any concrete answers as to why, the $1.8 billion was parked in the largely logistical account during the transition. Furthermore, Sen. Grooms has said that it is also unclear why nobody tried to fix it either. Thus, it is clear that despite Eckstorm's departure and Gov. Henry McMaster’s appointment, problems with the state's financial system remain.
A silver lining?
While lawmakers are demanding answers from State Treasurer Curtis Loftis as to why they didn't address the extra funds, Curtis in a statement said it wasn't his office's job. The comptroller general "is attempting to shift responsibility to clean up its mess to the Treasurer," Loftis wrote in a letter, CBS reported.
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Loftis also stated that his staff spent thousands of hours researching the account, while the Comptroller General's Office refused to meet with them or share information. He said it was impossible to find the source in the currently assigned timeline.
On the other hand, Loftis, whose job is primarily to write checks for the state, said that he invested the money in the mystery account and made the state nearly $200 million in interest. While this could be a silver lining, it also raised questions about why he didn't let the General Assembly know about the money.
