South Carolina lawmakers are taking steps to address financial mismanagement that has plagued the state for years. To fix accounting errors and ensure the state’s finances are managed correctly, legislators are considering hiring a third-party consultant. This decision comes after a recent audit revealed a massive $2 billion accounting error that went unnoticed for nearly a decade.
Background of the Financial Error
The problem dates back almost ten years when state accounts showed $2 billion in unspent funds with no clear owner. However, a detailed audit by AlixPartners, a consulting firm based in Washington, D.C., found that the money wasn’t real—it was simply an accounting error. Despite the mistake being known to state financial offices, including the treasurer, comptroller general, and auditor, it wasn’t brought to lawmakers’ attention until late 2022.
The audit also highlighted another issue—a $3.5 billion error from double-counted funds meant for South Carolina’s colleges. This earlier error led to the resignation of the state’s former Comptroller General Richard Eckstrom in 2023.
Plan to Hire a Consultant
To ensure better financial oversight, the state plans to hire a third-party consultant at a cost of $1.2 million. This consultant will monitor the state’s financial operations, particularly in the offices of the treasurer, comptroller general, and internal auditor. The funds for this hire were initially allocated to the state treasurer for audit compliance but remain unspent. Lawmakers now aim to reassign the money for hiring the consultant.
Senator Larry Grooms, who leads a Senate Finance subcommittee investigating these financial issues, emphasized the need for external help. He described the consultant as a “babysitter” to ensure accountability in managing the state’s finances.
Federal Investigation Looming
Adding to the urgency is a federal investigation led by the U.S. Securities and Exchange Commission (SEC). The SEC is probing South Carolina’s financial discrepancies, and lawmakers are concerned about potential penalties. These could include financial sanctions and damage to the state’s AAA credit rating.
While it’s unclear when the SEC investigation began, Senator Grooms confirmed he had known about it for about a year. He urged the General Assembly to act quickly to implement the audit’s recommendations and avoid further consequences.
Legislative Action
On Tuesday, the Senate Finance subcommittee advanced a resolution to allocate the $1.2 million for the independent consultant. The full Senate Finance Committee reviewed the resolution but hasn’t yet taken formal action. The resolution must still pass the full Senate and the House of Representatives before it can be implemented.
House leaders have expressed their commitment to enacting the audit’s recommendations quickly. The goal is to restore public trust and ensure that such financial mistakes don’t happen again.
Conclusion
This situation highlights the importance of financial oversight and accountability in state government. By hiring a third-party consultant and implementing the audit’s recommendations, South Carolina hopes to correct its past mistakes and improve its financial management. However, the outcome will depend on how quickly lawmakers act and how the federal investigation unfolds.
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