State House

SEC Probing South Carolina’s Finances

Recent “anomalies” attract attention from the feds …

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Investigators with the U.S. Securities and Exchange Commission (SEC) are conducting a “non-public review” of South Carolina’s finances following recent “anomalies,” multiple sources familiar with the status of the inquiry confirmed to this media outlet.

According to our sources, the focus of the investigation is a $5.8 billion accounting imbalance – the full extent of which was hidden from the public by former S.C. comptroller Richard Eckstrom.

In December 2022, Eckstrom issued an annual report which referenced a $3.5 billion “downward restatement” of general fund balances. According to Eckstrom, this restatement was the result of a “mapping error” which arose when the state converted its accounting software in 2007. As a result of the error, a decade’s worth of Annual Comprehensive Financial Reports (ACFRs) submitted by the comptroller included inaccurate information overstating South Carolina’s financial position.

“Upon being discovered in 2022, this mapping error impacted the ACFRs for fiscal years 2012 through 2021, overstating general fund cash and fund equity in those ACFRs by a cumulative amount of $3.530 billion, which necessitated the restatements of beginning fund equity reflected above,” Eckstrom reported.

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News of the $3.5 billion anomaly was first reported by this media outlet in February of 2023. It prompted Eckstrom to resign from office in disgrace.

What Eckstrom failed to report at the time is that his office concealed a much larger “anomaly” by appropriating $1.8 billion to the state’s general fund – and effectuating a separate transfer in the amount of $517 million. Both of these transfers were intended to reduce the size of the “downward restatement.”

The problem? Eckstrom’s office failed to disclose these transfers to the public, to lawmakers or to the man responsible for cutting South Carolina’s checks, treasurer Curtis Loftis. SEC investigators want to know why Eckstrom hid the ball.

“They are investigating the circumstances surrounding the anomaly,” a source familiar with the probe confirmed.

According to our sources, the SEC investigation began in September 2023 and involves the comptroller general’s office and the office of the state auditor. Numerous documents have been subpoenaed in connection with the probe, and multiple state employees have been summoned to Atlanta, Georgia for questioning.

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RELATED | $1.8 BILLION MISDIRECTION

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Because the mapping error only impacted the state’s financial reporting – not its outlays – it had no impact on the state’s available cash or its annual appropriations process. As a result, the money Eckstrom appropriated in an effort to “soften the blow” not only remains intact, it has been sitting in a “flow-through” account for the past five years.

Last fall – in a classic “cover your ass” move – Eckstrom’s replacement as comptroller, Democrat Brian J. Gaines, penned a letter to Loftis asking him to “research cash balances,” a curious request coming from the individual who is responsible for maintaining and reporting on those balances. Loftis was able to verify that no money was missing and that – in fact – the state had a $1.8 billion surplus owing to Eckstrom’s mystery appropriation.

News of this surplus was exclusively reported by this media outlet back in February. In that report, I promptly called on state lawmakers to return “every penny of it” to taxpayers. As previously noted, an estimated 1.44 million working South Carolinians would receive average rebates of as much as $1,250 were lawmakers to return this latest “anomaly” to them in its entirety.

South Carolina lawmakers, of course, have no intention of giving the money back – and have launched into some serious political theater in an effort to keep from having to do just that. Remember, though, these are the same politicians blowing through a record $38.8 billion in the current fiscal year budget – and who are set to blow through a record $40.1 billion the coming fiscal year.

And the same ones who have done everything within their power to keep this surplus hidden from the public view …

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ABOUT THE AUTHOR …

(Travis Bell Photography)

Will Folks is the founding editor of the news outlet you are currently reading. Prior to founding FITSNews, he served as press secretary to the governor of South Carolina and before that he was a bass guitarist and dive bar bouncer. He lives in the Midlands region of the state with his wife and eight children.

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