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POLITICSState House

South Carolina’s Missing $1.8 Billion: A Smoking Gun?

Comptroller general told treasurer in 2023 to put “phantom” $1.8 billion in the state’s general fund for lawmakers to spend…

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Powerful South Carolina legislative leaders have been working overtime of late in an attempt to force state treasurer Curtis Loftis to walk the plank…

The reason? According to them, the fourth-term incumbent failed to properly account for a $1.8 billionamalgamation” of thousands of financial journal entries. According to a recent report commissioned by the administration of governor Henry McMaster, these entries were made so that Loftis could “balance the bank general ledger accounts” with separate balances held “in the individual bank accounts.”

Loftis was reportedly attempting to reconcile the data in the aftermath of multiple errors made by the office of former S.C. comptroller general Richard Eckstrom.

Eckstrom was the state’s accountant, while Loftis is responsible for cutting its checks and managing its bank accounts and investments. Eckstrom resigned under pressure in March 2023 not long after revealing that his office had uncovered a $3.5 billionanomaly” in the state’s general fund budget. Later revelations pushed this imbalance to a whopping $5.8 billion. According to Eckstrom, the anomaly was attributable to “differences in the way the state was accounting for cash that was transferred over to colleges and universities” during the Covid-19 pandemic.

No one bought that explanation… and the sixth-term comptroller paid for the error with his job.

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Lawmakers were supposed to choose a replacement for Eckstrom, who – like Loftis – was independently elected by voters, but they couldn’t agree on whom to appoint. So they wound up punting the matter to McMaster’s office. The governor eventually chose veteran S.C. Department of Administration (SCDOA) budget analyst Brian J. Gaines – a controversial appointment given the latter’s left-of-center political leanings.

It’s been nearly two years since Gaines was appointed… but the recent report (.pdf) commissioned by McMaster revealed a host of flaws in the comptroller’s office that have yet to be addressed.

What, exactly, has Gaines been doing for the last twenty-one months?

Good question… in fact it’s an excellent question seeing as the state remains under federal investigation related to these accounting irregularities.

While Loftis has been drawing ferocious criticism from state lawmakers – most notably from fiscally liberal “Republican” Larry Grooms – Gaines has been doing his level best to deflect culpability for the ongoing mismanagement. Is that fair? Not really. As I noted last month, “recommendations contained in the report highlighted the extent to which the onus should fall on the shoulders of the comptroller general.”

Last week, Loftis directly addressed his critics – stating that their “flawed accusations” had the potential to “harm our state’s vaulted credit rating and impact our ability to issue debt on behalf of the state and its agencies.”

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RELATED | FALSE ALLEGATIONS IMPERIL S.C. CREDIT RATING

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Citing the ongoing investigation by the U.S. Securities and Exchange Commission (SEC), Loftis concluded last week “the most conservative and prudent approach is for the state to avoid the issuance of general obligation bonds, which are securities, until this matter has been resolved.”

As for the allegations against him, Loftis made it clear his office was not to blame.

“The assertion that my office failed to disclose critical information for years is categorically false,” the treasurer wrote last week. “From the moment concerns arose, my team acted swiftly and within legal parameters to address them. To suggest otherwise ignores the collaborative nature of state financial oversight and unfairly assigns blame for systemic issues.”

“Suggesting that I was untruthful to legislators about the existence of funds is not only inaccurate, it is irresponsible,” Loftis continued.

For several months, our media outlet has been poring through documents related to this issue in an attempt to get to the bottom of the mess. One document we recently uncovered – a letter from Gaines to Loftis written on his chief of staff’s letterhead in December of 2023 – was particularly instructive.

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S.C. comptroller general Brian Gaines in his office last fall. (S.C. Comptroller/X)

In the letter (.pdf), Gaines told Loftis his office, the state auditor and an external audit firm were “all confident to a reasonable degree of certainty” that the $1.8 billion in question was “part of the (state’s) general fund balance.” Furthermore, Gaines – who had been on the job for seven months at the time – urged Loftis to move the money into the “appropriate” general fund account so it would be “accurately reported and fully visible to the General Assembly.”

The purpose of such a transfer? To enable “the state (to) gain the benefit of the money.”

In other words, so lawmakers could spend it.

While Gaines’ letter blamed Loftis’ office for the accumulation of the $1.8 billion, as the state’s accountant it was his job to reconcile the money in the state’s annual reports. His repeated demands that the treasurer move the money into lawmakers’ piggy bank made it abundantly clear his office (and the state auditor and external auditing firm) believed the money was real. And not only real, but “part of the general fund balance.”

I.e. available to spend…

Not only that, Gaines signed off on this “treatment of the money” in the state’s 2022 annual report – which was prepared by his scandal-scarred predecessor – as well as the 2023 report, which was prepared by his office.

So… if the money isn’t real, it would mean Loftis’ previous statements under oath about its existence were not only shared by Gaines and the internal and external auditors, they were the ones who supplied him with the erroneous information in the first place.

Either way, Gaines’ credibility has taken a huge hit… and his fitness for the office to which McMaster appointed him nearly two years ago is very much in doubt.

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THE LETTER…

(S.C. Comptroller General’s Office)

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ABOUT THE AUTHOR …

Will Folks on phone
Will Folks (Brett Flashnick)

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. He lives in the Midlands region of the state with his wife and eight children.

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9 comments

E of AS February 3, 2025 at 6:46 pm

The Comptroller General’s office is known to have blockheads at the top. Democrat Gaines is the latest to join, but one senior staffer that oversaw that conversion is still there and protecting his ass and his job.
I used to work for state government and dealt with that crew on the regular. Fire the top tier and improve the office.

Reply
Captain February 3, 2025 at 6:52 pm

The state senate is going to cost SC its AAA credit rating and that will cost us all more money. It is a hidden tax.
Everyone knows Sen Larry Grooms is an idiot, but why are the conservative senators allowing this to happen?

Reply
Larry’s Mom February 3, 2025 at 7:09 pm

Grooms is an idiot. Ran for congress and it was a bust. Ran for governor and dropped out because no one took home seriously. He lied to us about lower Santee Cooper Elec bills.
Trust anybody but Larry Grooms.

Reply
DR P February 3, 2025 at 7:44 pm

SC has a shortage of 3000 doctors and SC can’t borrow money for the MUSC medical teaching facility?
SC needs better health outcomes.
Senator Grooms is an idiot.

Reply
Loftis For Governor February 4, 2025 at 6:26 am

Curtis Loftis has been a great State Treasurer. Hard to imagine, but I think he would make an even better Governor.

Reply
Vance February 4, 2025 at 6:34 am

Grooms is set to take over senate finance because Senator Peeler’s health is failing. Groom’s people want puppets at treasury, the comptroller’s office and state auditor.
They want Senator Goldfinch as attorney general and Nancy Mace as governor. Get in their way they will destroy you.

Peeler does not know they are writing him out of the script. No one wants to be on the wrong side of Grooms’s as he will be chairman of Senate finance for 20 years.

The Trump revolution missed SC’s state government. The people don’t matter.

Reply
CongareeCatfish Top fan February 4, 2025 at 11:00 am

That sounds truly terrifying – at least the Grooms and Goldfinch part.

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CongareeCatfish Top fan February 4, 2025 at 9:19 am

How in the hell does Loftis get raked over the coals about earning interest on money that “does not exist” when he was told by the CG – the guy who hold the legal authority over the state’s accounting- that it WAS real money and that he needed to move it to the state’s General Fund? Is he not allowed to receive, rely upon, and act upon the official opinion of the CG? And FURTHERMORE, Larry Grooms had to have known about the CG’s declaration before he put Loftis through the wringer (and I wonder what the state auditor told Grooms before those hearings, hmmm?), BUT DID NOT SAY ONE SINGLE WORD ABOUT IT in public. If Grooms was really being an objective, rational, even-handed official – trying to get to the bottom of what happened – there is NO WAY he should have allowed the CG to skate by for over a year without even so much as asking him under oath about his letter to the Treasurer. This smells to high heaven like an inside-baseball hit job by Grooms and his lackeys to oust more fiscally conservative elected officials and consolidate power with more economically liberal allies.

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CongareeCatfish Top fan February 4, 2025 at 10:55 am

Maybe FITS has already done this but somebody who actually is a real investigative journalist [a truly dying breed] needs to obtain every document that was sent by offices of the Treasurer, the CG, dept of Admin, and the Auditor to any member of the Senate Finance Committee or the body as a whole, or any of their subcommittees. Pretty sure its available through the state FOIA laws – the Legislature is exempt, but not the executive branch agencies sending them stuff!!

Reply

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