South Carolina mulls mystery $1.8bn in account: ‘We don’t know why it’s there’

To put it mildly, the South Carolina state government faces an unusual problem: what to do about $1.8bn found in a state bank account when no one knows how it got there, how it should be spent or even whether it really exists.

Discussing the problem, the Republican governor, Henry McMaster, made a play for political understatement of the year.

“There’s something wrong somewhere,” McMaster told reporters, adding: “We don’t know why it’s there, what it’s supposed to be used for, how long it’s been there – that’s a problem.”

Last year, the state comptroller resigned after the discovery of a 10-year, $3.5bn accounting error. State lawmakers say the $1.8bn sum could be related to that scandal, the New York Times reported. Or it may not be. No one knows.

Working out the truth is not proving easy, particularly because the new comptroller, Brian Gaines, a Democrat, is fighting with the state treasurer, Curtis Loftis Jr, a Republican, over where the $1.8bn came from and what to do about it.

State officials say the sum was discovered last October – though the state auditor, George Kennedy III, recently told a hearing he knew about it in 2017 but presumed it was in the account temporarily, the Times said.

This week, Larry Grooms, a state senator, told News19, a CBS affiliate in Columbia: “The governor appointed a new comptroller. The new comptroller trying to close the books alerted us to what appeared to be something wrong with one account within our state’s finances.

“Out of thousands of thousands of accounts, here’s one account with $1.8bn associated with it.

“Having $1.8bn in an account that’s supposed to be zero tells us that something is clearly wrong with our state’s accounting and the problems aren’t solved.

“The state treasurer’s office operates a bank. He’s like our state’s chief banker. The comptroller general is our state’s chief accountant. Right now we know the bank has so much money in it. No one disputes how much cash we have. But what’s in dispute is what accounts those monies belong [to].”

On Wednesday, at a public hearing, Loftis said the problem “got dumped on us because of the failure of [the comptroller’s] office. We are reconstructing the books as best we can over the last seven years, and nobody will give us information.”

But Gaines told News19 it was the treasurer’s responsibility to track balances in government accounts, then told the Times: “The treasurer believes his own PR, which flies in the face of evidence. Every treasurer for 80 years or more has been able to reconcile cash, including Treasurer Loftis until 2016.”

The Wednesday hearing produced exchanges that, as the Times said, verged on the existential. A senator, Tom Young Jr, asked Loftis if he was “sure [the $1.8bn] exists?”

Loftis said: “We believe that to be the case.”

Grooms said: “We believe that it is real cash, but we have not been able to prove that it is real cash … That’s a real problem if your banker can’t certify if you have $1.8bn or not. It’s a problem if the banker can’t tell you whose money it is.”

Nonetheless, Grooms said, “Everyone wants a piece” of the possibly phantom $1.8bn.

“You’ll have the house and senate fighting over how to appropriate it,” Grooms said, whether for “taxpayer rebates, highway construction, new school construction” or other uses.

In his session with reporters last week, McMaster counseled caution on spending the money – if it actually exists – too soon.

The situation “does not inspire confidence”, the governor said, “but the good news is no money was lost. No money was stolen. The question is, what to do with it …

“One thing I would say is, ‘Let’s don’t rush out and spend that money, there is a lot of money, there’s no need to hurry up and try to spend money. We don’t know where it was supposed to go, what [its] purpose was supposed to be, anything else at this point. I think we need to find that out. But it’s a blow to confidence. But we get better after things like this.”

Asked about the feud between the treasurer and the comptroller, McMaster said: “I recommend a cup of coffee. That always seems to do the trick. I think these are grown men and they have staffs. This is a serious question for all the people.”