SC Treasurer to be blamed for $1.8B account, avoid removal recommendation

A state Senate panel investigating how the state had $1.8 billion sitting in an account without knowing who it belongs to will lay the responsibility at Treasurer Curtis Loftis.

However, unlike last year when Comptroller General Richard Eckstrom resigned, the committee will not recommend Loftis be removed from office at the request of the governor’s office, said state Sen. Larry Grooms, R-Berkeley.

Grooms, who said earlier this month Loftis had abrogated his responsibilities and breached the public trust, plans to present his subcommittee’s report Tuesday on the Senate floor.

The report will come after Loftis, who was reelected in 2022 and has said this will be his last term, announced Friday the formation of a task force which included representatives from treasurer’s office, the comptroller general’s office, the state auditor’s office and the Department of Administration. The task force is to “determine the existence, purpose and intended destination” of the $1.8 billion, the governor’s office said.

During a meeting Thursday, which was also attended by an assistant attorney general, the group was charged by Gov. Henry McMaster to complete its work by July 1.

“These agencies were involved in the statewide computer conversion that created the fund,” Loftis said in Facebook post. “After a year of confusion and division it is heartwarming to see collaboration and communication. Many thanks to the governor, the four agency heads and their staffs for making this happen.”

The lack of a removal recommendation from the Senate Finance panel will allow the task force to work to resolve to which agencies the $1.8 billion belongs.

“The governor believes the public’s confidence is best maintained when elected officials and agencies work together to solve problems through collaboration, cooperation and communication,” said Brandon Charochak, spokesman for the governor. “In that spirit, the governor suggested to Sen. Grooms that this group be given some time to work.”

The creation of the committee comes after Loftis met with McMaster on Monday of this week and a phone call with the governor the week before.

“The rules we use all communicate, collaborate and cooperate,” McMaster told reporters earlier this week. “And there’s several different parties involved in that situation right now and I’m confident that if they can do that they will determine what has happened, how it happened or what’s left and what’s there is to do.”

The treasurer’s office declined comment about the upcoming report.

However, Loftis posted on Facebook he would not read the report and characterized it as “politically motivated.” He repeated a message that the contentious public discussion over the $1.8 billion would hurt the state’s AAA credit rating and lead to higher interest rates when the state borrows money.

“This computer conversion error has become a very, very expensive publicity stunt by Chairman Larry Grooms, and instead of waiting a few months on the governor’s task force report, the committee will magically determine what happened and publicize it next week,” Loftis posted. “It may be an expensive decision for the taxpayers.”

Grooms said his subcommittee’s report will say the $1.8 billion account was the result of a mistake made in the treasury, and employees under the direction of Loftis were responsible.

The flow through account was created by comptroller general’s office in 2017 at the request of the treasurer’s office when the state was switching to a new accounting system.

Loftis contended the comptroller’s office and auditors knew about the account. However, lawmakers didn’t learn about it until last year.

Lawmakers were alerted to the existence of the $1.8 billion account by Comptroller General Brian Gaines, who was appointed last year to replace Eckstrom.

Eckstrom acknowledged last year he inflated the state’s cash balances in annual financial reports by $3.5 billion over the course of 10 years by double counting money allocated to colleges and universities. The double counting is believed to be as high as $5.9 billion, but Loftis said Eckstrom used the $1.8 billion account to help reduce the size of the accounting error.

A group of senators proposed removing Eckstrom from office for willful neglect of duty, a move requiring a two-thirds vote of both chambers and action by the governor.

Eckstrom resigned before votes in both chambers could take place.