COLUMBIA — State senators investigating $1.8 billion in unaccounted state funds placed the blame for the eye-popping accounting error on S.C. Treasurer Curtis Loftis in a scathing 116-page report.
No one knows where the $1.8 billion came from and to which state agencies or fund it belongs.
Though the April 16 report reveals little new about the ownership of the money, it contained explosive details about threats the treasurer allegedly made to post highly sensitive banking information on the internet in the days after a confrontational Senate hearing April 2.
Loftis was eventually talked down by Gov. Henry McMaster and several other administration officials over the course of a hectic afternoon April 4, according to the report.
“There is a veneer of righteousness (that) has been breached by the absolute facts,” Sen. Larry Grooms, a Bonneau Republican who led the investigation, said from the Senate floor. “It’s an issue of honor. I do think he should resign.”
In a statement, Loftis, a Republican elected for a fourth time in 2022, said he would not read the report, nor would he watch the Senate proceedings.
He blasted the senators as attempting to “overturn” the results of his election and install a “puppet.”
“It is unfortunate to see a handful of State Senators more interested in character assassination than solving problems that affect our State,” Loftis said. “Fortunately, most state leaders realize that problems are usually best solved at a conference table, not by grandstanding in front of TV cameras.”
On April 8, the governor convened a multiagency task force to investigate the origin and ownership of the $1.8 billion that includes the offices of state treasurer, the department of administration, the attorney general and of comptroller general, which acts as the state’s chief accountant.
The report did not include a recommendation that Loftis resign or be removed due to the governor’s suggestion that the task force be given time to make progress, Grooms told reporters.
The report recommends the Legislature pay for a forensic audit of the account with the $1.8 billion sitting in it. Both the House and Senate budgets include about $4 million to pay for the audit.
A page in the South Carolina Senate passes out copies of a 116-page report about $1.8 billion found in an account created by the state Treasurer’s Office on April 16, 2024, in Columbia.
The report also recommends the legislature put a constitutional amendment on the ballot to make the treasurer’s office an appointed, rather than elected, office. The House is likely to amend such a measure onto an existing bill that would put questions on the ballot both to make the treasurer and the comptroller as gubernatorial appointees, Grooms said.
The report offers a clarified timeline of the $1.8 billion.
In 2017, when the treasurer’s office finished converting the state’s investments from an old accounting system to the current one, they found $1.5 billion left over, the report found. The treasurer’s office shunted the money to a transfer account that was under the exclusive control of the treasurer’s office and was not visible to the comptroller, the report states.
In 2018, an additional $300 million in unaccounted funds was added to the transfer account, the report found.
“These differences have remained unresolved and undisclosed to the General Assembly and the people of South Carolina for more than seven years,” the report reads.
The report contains an October 2022 email exchange that appears to show comptroller’s office employee Katherine Kip finding the $1.8 billion error.
“So in theory, it should be zero?” Kip asked a treasurer’s office employee about the balance of the transfer account.
“Should be for the most part,” the treasury employee responded. “Is there an issue we need to review?”
“So it has a cash balance of $1,852,455,573.29,” Kip responded.
The senators became aware of the $1.8 billion when Comptroller Brian Gaines, appointed by McMaster to replace former Comptroller Richard Eckstrom in May of last year, sent a letter to Loftis requesting more information about the account Oct. 31, 2023.
Eckstrom resigned in the wake of last year’s $3.5 billion accounting snafu, which Kip also uncovered.
The report additionally alleges auditors initially concluded that while the state is in a good financial position, the general fund balance may have been allowed to go negative at the end of the last fiscal year, which would violate state law. The auditors omitted that finding from a report after a conversation with Loftis’ office.
South Carolina Treasurer Curtis Loftis attends a meeting of the State Fiscal Accountability Authority on March 26, 2024, in Columbia. Loftis was in the hot seat April 16 with the release of a scathing state Senate report that blamed him for $1.8 billion in unaccounted state funds.
There was nothing untoward about that conversation as treasury staff were clarifying their processes, Loftis said during the April 2 hearing.
The other revelation in the report concerns the dramatic events that occurred in the days following the April 2 hearing.
At the hearing, Sen. Thomas McElveen, D-Sumter, asked Loftis whether he was complying with statutory requirements to post information about the state’s investments. Loftis said the law is antiquated and that posting the information would give hackers too much information. McElveen clarified that he did not want anything posted that would endanger the state, but he also wanted the treasurer to comply with the statutes.
Loftis then instructed a staff member to “post this by the close of business.”
Loftis appears to have been serious. Sometime before April 4, he requested a risk analysis of posting the highly detailed information online from the Department of Administration. In a letter on April 4, Marcia Adams, executive director of the Department of Administration, urged Loftis not to do so.
Sometime midday, several senators learned Loftis was considering posting the information and scrambled to find the governor, who was at the governor’s mansion recuperating from an early morning surgery, Grooms told reporters.
The governor called Loftis around 2 p.m. on April 4 and “strongly requested” Loftis not post the information, Brandon Charochak, the governor’s spokesman, said. Chief Mark Keel of the State Law Enforcement Division also called Loftis, Charochak said.
Meanwhile, the attorney general’s office was preparing to request an emergency hearing before the state Supreme Court to stop Loftis, Grooms said.
Loftis eventually relented.
The report blasted Loftis’ conduct as “baffling,” “reckless” and a reflection of “poor judgment.”
