SC Senator accuses state treasurer of failing to identify $1.8B in undisclosed funds, alleges breach of public trust

During a Senate Finance constitutional subcommittee meeting on April 2, 2024, S.C. Treasurer Curtis Loftis discussed the discovery of $1.8 billion in an account.

The search for the whereabouts of $1.8 billion in overlooked taxpayer funding in South Carolina has hit a roadblock after a tumultuous six-hour hearing. The session, marked by heated exchanges and accusations, failed to bring any clarity to the situation. Both the state treasurer and the Senate panel engaged in a combative back-and-forth, with papers being waved in frustration. The mystery surrounding the missing funds remains unsolved, leaving officials no closer to finding the answers they seek.

Lawmakers bombarded South Carolina Treasurer Curtis Loftis with inquiries on Tuesday regarding the funds that have remained dormant in a bank account for over five years, and the extent to which the treasurer’s office is responsible for this oversight. None of the state’s financial authorities are aware of its intended destination.

During a Senate Finance subcommittee meeting on Tuesday, April 2, 2024, Sen. Larry Grooms attentively listened to state Treasurer Curtis Loftis as they discussed the remarkable discovery of $1.8 billion in an account. The meeting was captured by Travis Bell from Statehouse Carolina, and the image depicts the engagement between the two individuals.

During the hearing, a senator went as far as suggesting that the treasurer had completely lost control over the state treasury.

According to Sen. Larry Grooms, the Senate committee investigating the financial blunder, the General Assembly cannot depend on him to address the issues that happened under his supervision.

According to Representative Sottile, the state treasurer, Curtis Loftis, has misled the General Assembly, the people of South Carolina, and other stakeholders by misrepresenting the financial condition of the state. Sottile, a member of the Bonneau Beach Republican party, believes that Loftis has not fulfilled his duties and has breached the public’s trust.

Loftis strongly defended his office’s operations, dismissing inquiries into his management style, collaborations with other agencies, and financial reporting as “grossly unfair,” “disingenuous,” “shocking,” and “highly irresponsible.”

In a surprising turn of events, he expressed his frustration at being caught off guard by lawmakers and likened the hearing to a grueling courtroom cross-examination. He vehemently criticized the panel for compelling him to testify in a public setting, all while under oath. He argued that the senators’ probing of certain practices within his office posed a potential threat to the state’s esteemed AAA credit rating.

According to Loftis and other state financial officials, the mysterious money is believed to have originated from a tumultuous transition period spanning a decade, during which the state’s old accounting system was replaced with a new one.

During the hearing, Loftis informed lawmakers that funds coming into his office, which functions as the state “bank,” are expected to be accompanied by a specific code indicating the respective agency to which they belong.

In 2016, during the transition of the accounting system in Loftis’ office, a staff member requested the opening of a “pass-through” fund. This fund was intended to temporarily transfer money between agencies as part of the system swap, and a total of $17.3 billion was deposited into it.

SC senator wants misplaced $1.8B kept in ‘lockbox,’ earning interest until mystery solved

In 2018, almost all of the remaining amount, except for $1.8 billion, was transferred back to the respective agency accounts.

Loftis stated that the remaining items no longer had the distinctive ownership tags attached to them.

The movement of money was primarily on paper, but it remains a problem as it hinders officials from accurately determining which agencies or entities the money was intended for.

The state’s financial officials, including former Comptroller General Richard Eckstrom, Loftis, and state Auditor George Kennedy, were aware that the funds were sitting in the account without an owner. Surprisingly, they did not notify lawmakers about this until Halloween, when the current Comptroller General Brian Gaines sent a letter.

Loftis simply stated that it was not his responsibility to inform them.

During a heated exchange, Grooms pointed out to the treasurer, “You have been sitting on it since 2016.”

Loftis responded defiantly, denying any wrongdoing. “I didn’t sit on anything,” he retorted. “We followed protocol and fulfilled our responsibilities.”

Grooms found the treasurer’s response almost laughable, pointing out that it was only after the Senate committee began making inquiries that the treasurer started taking action.

Senators vehemently opposed the notion that the issue could have been resolved privately, without the need for a public hearing.

“I strongly disagree with the previous suggestion that we should conduct any form of oversight without transparency,” expressed Senator Thomas McElveen, representing Sumter, South Carolina.

The state’s former top accountant made a $3.5 billion accounting error that is intertwined with the $1.8 billion. This mistake occurred due to a computer coding glitch, resulting in the double-counting of public colleges’ revenue in the state’s annual financial report for Wall Street investors. Over a decade, this miscalculation accumulated until it was discovered by a junior staffer in the office of then-Comptroller General Eckstrom in 2022.

If Eckstrom, a Republican who was first elected in 2002, had not resigned last year, lawmakers would probably have removed him from office. However, in his absence, Governor Henry McMaster appointed Gaines, who has 16 years of experience in state budgeting and compliance roles, as the governor’s budget director.

In this scenario, the unaccounted funds refer to actual cash, rather than being a mere paperwork discrepancy.

Loftis proposed a solution for tracing the source of the money. He recommended assembling a team of state officials and enlisting the services of an external forensic accountant to thoroughly investigate the system and financial records.

Fifteen individuals in his office have been working diligently, putting in overtime, working nights and weekends, to the best of their abilities, in order to reconstruct the state’s old ledgers. He once again criticized the comptroller general’s office for their lack of cooperation and for transferring the responsibility of addressing the issue to the treasurer’s desk.

“I feel like I’m being put on the spot as if I’m not putting in any effort,” Loftis expressed, emphasizing that this will be his final term in office after being elected in 2010.

According to Grooms, the committee has taken the recommendation into consideration and is currently exploring the implementation details and determining the appropriate individual to oversee it. Grooms clarified that Loftis will not be entrusted with this responsibility.

Lawmakers have made a commitment not to tamper with the $1.8 billion funds. The proposed budget for the next fiscal year by the House does not utilize any of the funds. Instead, it sets aside $3 million to hire an external firm that will be responsible for uncovering the necessary solutions.

According to Grooms, the investigation is still ongoing.

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