'The funds do not exist;' Mysterious case of $1.8b found in state's bank

COLUMBIA, S.C. (WCIV) — $1.8 billion found in a state bank account in 2024 has been deemed to “not exist,” Gov. Henry McMaster announced Wednesday.

The governor’s statement comes following the release of AlixPartners’ final report on their State Treasury Forensic Accounting Review. Read his full statement below:

This comprehensive forensic accounting report confirms that there is no $1.8 billion surplus. There is no missing or stolen money. The funds do not exist. It also confirms that there were unintended accounting mistakes made by different parties involved in state government’s transition from an old accounting system to the new accounting system. I am confident that the corrective measures recommended in the report will be embraced by the parties and the General Assembly so that this does not happen again.

In March 2024, the state comptroller general’s office “discovered” and reported nearly $1.9 billion in a bank account that appeared to be slowly collecting money over the span of several years.

Lawmakers expressed frustration with Loftis, Republican Sen. Larry Grooms going as far to say at the time that the state treasurer “breached the public trust.”

READ MORE | “Where did $1.8 billion go? A S.C. senator says the state treasurer breached public trust“

Now there finally appear to be some answers.

The report, available to read in full here, appeared to largely corroborate the McMaster’s assessment. It stated that the issue stems back as far as 2007, when South Carolina transitioned away from its legacy STARS accounting system to the new SCEIS system.

The report explained that the $1.8 billion represents the efforts of the State Treasurer Curtis Loftis’ office to balance the bank general ledger accounts in the new SCEIS accounting system to the cash balances in individual banks. The state treasurer’s office planned to record entries into their new accounting system into two funds to make the balances match those in the individual accounts before netting the state’s historical bank transactions from the old STARS accounting system against those two fund’s entries, according to the report.

READ MORE | “Lawmakers search for answers after $1.8B found in state’s bank account“

AlixPartners said the intent was for the sum of the cash balances in those funds to be zero at the end of the bank conversion, however, the conversion “did not go as intended and Fund 30350993 ultimately accumulated (and still reflects) the $1.8 Billion cash balance,” the report reads.

They concluded that through incorrect journal entries made during the second part of the treasurer’s office’s conversion plan, around $1.6 billion of the $1.8 billion “is not actual cash,” meaning it cannot be spent or appropriated by the state. The report said that the remaining $200 million is not excess cash and was included in the cash balance submitted by Loftis’ office, belonging to the state’s General Fund.

The report made several recommendations to prevent further issues of this magnitude with the state’s finances while also recommending ways to remedy the inaccuracies leading to the illusory $1.6 billion to balance the state’s books.

Treasurer Loftis posted a video to YouTube, thanking AlixPartners for validating “what we’ve known all along,” and said he was looking forward to reviewing the report and “helping institute any changes to the system as necessary.”