STUMP » Articles » Podcast: Financial Reporting v. Budgeting: SC Comptroller Resigns Over $3.5 Billion Error » 13 April 2023, 05:41

The long-time comptroller general of South Carolina was recently forced to resign due to a $3.5 billion cash balance error that accrued over a decade in accounting. How did this happen, and why didn’t this affect state budgets? What is the difference between budgets and financial reports?

Episode Links

Associated Press, March 23, 2023: South Carolina’s top accountant to resign after $3.5B error

COLUMBIA, S.C. (AP) — South Carolina’s embattled top accountant will step down next month after a $3.5 billion error in the year-end financial report he oversaw, according to a resignation letter written Thursday that was obtained by The Associated Press.

Republican Comptroller General Richard Eckstrom’s decision to leave the post he has held for 20 years came after intense scrutiny of his performance following the blunder and amid rising calls for him to either quit or be removed.

The Senate panel investigating the financial misstatement issued a damning report last week accusing Eckstrom of “willful neglect of duty.” As recently as last week, however, Eckstrom had said he would not resign.

….

Eckstrom has said the Annual Comprehensive Financial Report exaggerated the state’s cash balances for a decade by double counting the money sent to colleges and universities. The mistake went unsolved until a junior staffer fixed the error this fall.

….

The next comptroller general may also lead a much weaker office. The investigating panel suggested its responsibilities be transferred to one or more agencies. State Treasurer Curtis Loftis, an elected Republican, has testified that his office could absorb the main tasks.

….

A certified public accountant, Eckstrom, 74, spent four years as state treasurer before assuming his current office. He has run unopposed in the past two elections and last faced a Republican primary challenger in 2010.

Hey, maybe this will be handy!

AP, March 16: Bid opens to fire SC comptroller for $3.5B accounting error

COLUMBIA, S.C. (AP) — South Carolina lawmakers angry over a $3.5 billion accounting blunder by the state’s comptroller general began efforts Thursday to sack the official, a day after demanding he quit or be fired.

Comptroller General Richard Eckstrom told senators last month he had unintentionally exaggerated the state’s cash position by $3.5 billion by overstating the amount the state had sent to colleges and universities for a decade. He has signaled he won’t resign.

The error wasn’t in actual cash, but in the way the state reports its balance sheets. It could affect South Carolina’s credit rating and has eroded confidence that a large number of lawmakers in the Republican-dominated state had in Eckstrom.

AP, March 15: SC lawmakers want to fire comptroller for $3.5B error

A $12 million coding error in 2007 got compounded by a shift beginning in 2011 from one accounting system to another, Eckstrom has said. The reporting confusion then led to a double counting of state cash transferred to colleges and universities. By 2017, the sum of overstated funds had grown to $1.3 billion. That number has nearly tripled in the following years as South Carolina sent more and more money to higher education.

In its Wednesday report, the Senate Finance Constitutional Subcommittee concluded Eckstrom failed to do his job properly and should be removed from office. In South Carolina the comptroller — the state’s chief accountant — is elected.

….

For 10 years, Eckstrom did not respond to warnings that a “material weakness” existed in the comptroller general’s office, according to state Auditor George Kennedy. He said the internal controls over the annual report’s preparation were insufficient to detect and correct errors in a timely manner. Around 2017, Kennedy said his office told Eckstrom’s team that a full reconciliation would help. That did not happen until last spring.

South Carolina Office of the Treasurer: Annual State Debt Report FY2022

Statement of Revenues

Enjoy!