S.C. Treasurer Curtis Loftis on Tuesday, April 2, 2024, during a Senate Finance constitutional subcommittee meeting concerning $1.8 billion that has been discovered in an account. (Travis Bell/Statehouse Carolina/Special to the SC Daily Gazette)
COLUMBIA — A Washington, D.C., firm continues to comb through 16,000 files and 27 gigabytes of data to find the origins of $1.8 billion in South Carolina tax dollars that sat unidentified and untouched — on paper, at least — for more than five years.
The state awarded the $3 million contract for a forensic audit to AlixPartners in mid-July with the goal of investigating the mystery money and the extent those funds exist beyond just a forgotten ledger entry.
The $1.8 billion came out as part of a Statehouse investigation into a $3.5 billion accounting error by the state’s former top accountant.
That blunder, discovered in 2022, came from a computer coding glitch in which public colleges’ revenue was mistakenly double-counted for more than a decade in the state’s annual financial report provided to Wall Street investors.
The financial fiasco led to last year’s resignation of Richard Eckstrom, who had been the comptroller general since 2003.
This year, the focus of a Senate panel investigating the debacle shifted to the office of state Treasurer Curtis Loftis.
During hearings, state officials said the $1.8 billion was overlooked in the wake of a chaotic, decade-long transition from the state’s old accounting system to a new one.
In 2016, when Loftis’ office was going through the accounting system swap, someone started putting $17.3 billion in a “pass-through” account that was opened at the request of a staff member in Loftis’ office. That account was meant to temporarily funnel money between agencies as part of the changeover.
By 2018, all but $1.8 billion of that was transferred back out and into the agency accounts to which it belonged.
What remained did not have special ownership tags to mark where those dollars should go, Loftis told lawmakers in April.
While the “movement” of money was really only on paper, it’s still a problem because without an accurate record, officials do not know for which agencies or entities the money was meant. Or if there’s even still real money behind what it says in the state’s books.
That’s where Alix Partners comes in.
In a five-page interim report filed with the state Department of Administration last month, the company said it had spent the first couple months of its contract interviewing employees of several state agencies — including the treasurer’s and comptroller general’s offices — to learn how the state processes its cash and investments.
The firm also began going through documents, including bank statements and accounting entries, compiled by a working group formed by Gov. Henry McMaster. That group includes the State Treasurer’s Office, Comptroller General’s Office, State Auditor’s Office, Department of Administration, Attorney General’s Office and the Governor’s Office.
Under its contract, Alix Partners has two months remaining to complete its comparison of cash and investments entered into the state’s ledgers to statements from the banks where the state does business. The process, referred to as reconciling, will determine if the state’s ledgers are accurate. The firm’s review will go back for a decade.
The process involves examining “voluminous” documentation on thousands of daily, weekly and monthly accounting entries to confirm the existence of tax dollars recorded in the state’s books and screen for potential fraud or unusual activity.
In its interim report, the firm said it had yet to confirm the existence of the $1.8 billion, as well as determine how the funds were accounted for and their original ownership, if the dollars do indeed exist.
According to Loftis’ office, investment of the $1.8 billion had earned $194 million in interest since 2017. His office, which acts as the bank for state government, transferred those earnings to the state’s general account as revenue for the Legislature to spend, spokeswoman Karen Ingram has said.
Alix Partners must make its final report to the governor, Senate president, speaker of the House and the House budget chairman by the end of December. The report will include any recommendations for corrections or changes to state procedures.