South Carolina comptroller faces ouster call after accounting blunder
4 min read
South Carolina lawmakers are moving to remove the state’s elected comptroller from office after a $3.5 billion accounting blunder went unnoticed by his office for a decade.
Comptroller General Richard Eckstrom is facing removal by a legislative vote this month for “willfully neglecting his duties” aftera state investigation into his office concluded he was responsible for misreporting cash balances in year-end financial reports since 2011.
Eckstrom, a Republican who has held the elected position for 20 years and was unopposed for reelection in 2018 and 2022 , surprised lawmakers at a routine budget request hearing in February with an announcement that his office found it misreported funds sent to state universities to the tune of $3.5 billion since a systems programming switch in 2011.
The multi-billion mistake meant that South Carolina’s general fund balance had been overstated annually since, leading to a wholesale investigation of the comptroller’s office led by Sen. Larry Grooms, a Republican who chairs the Senate Finance Committee’s Constitutional Budget Subcommittee.
Grooms said lawmakers found that a relatively minor inputting error of $12 million made in 2007 had carried over during the system switch and compounded into the billions as the state pumped larger annual sums towards its education systems over the following years.
Investigators laid blame for the blunder squarely at Eckstrom’s feet, citing lax internal controls and weak oversight mechanisms in his office.
Eckstrom, drilled several times by lawmakers throughout the investigation, claimed he was “surprised to know” issues in his internal operations were discovered and pointed a finger instead at the state treasurer’s office and problems there with procedures for reconciling funds and sharing that information at the end of the fiscal year.
Grooms disagreed.
“State law clearly puts the responsibility on the comptroller general; he has control over accounts that nobody else does and can do things no one else can,” the senator said in an interview. “We have auditing reports going back 10 years where he was flagged for internal controls that could lead to a misstatement.”
During the legislative investigation, State Auditor George Kennedy testified that, despite flagging annual financial reports from the comptroller’s office for “reporting deficiencies” nine out of the last ten years, changes were never made.
The accounting misstep is unlikely to impact the state’s bond rating, said Eric Kim, senior director and head of U.S. state ratings at Fitch Ratings.
Fitch rates South Carolina AAA, with a stable outlook.
“From a policy perspective, what’s right in terms of management or how the state should oversee is up to the state to address,” he said. “From a ratings perspective, this doesn’t have clear implications for us.”
Grooms said investigators also identified staff shortages at the comptroller’s office as a contributing factor to the error.
The shortage was not a matter of necessity, Grooms added, but Eckstrom’s design as he took on the role of a “self-proclaimed watchdog” and trimmed staff from 70 employees to 20 in an effort to cut costs.
“Every year he was asked about the staffing because there was some concern about the workload,” Grooms said. “He believed he could do more with less and, well actually, he was doing a lot less with less.”
Following the investigation, Groom led a bipartisan group of lawmakers in submitting a joint resolution to have Eckstrom removed and replaced with an interim chief selected by the legislature.
If Eckstrom is successfully deposed, Grooms said he intends to introduce additional legislation that would seek to dissolve the comptroller’s office entirely through a public referendum.
The office’s responsibilities would then be divvied up, Grooms said, with payroll handled by the Department of Administration, oversight and auditing by lawmakers and the attorney general’s office, and financial record keeping and reporting by the state treasurer.
As Kim describes it, money was miscounted but not lost in a mistake more akin to a programming error than an accounting blunder.
Though the general fund was debited for annual allocations that never arrived, Kim said, the money was eventually tracked down into component accounts where it still exists safely today.
While a sizeable error, South Carolina’s more favorable cash position today means it won’t affect budgets or the state’s AAA rating or stable outlook, Kim said.
“They were fortunate the discovery of this error coincided with one of their best operating performance years,” Kim said. “Fiscal ’22’s operating surplus wiped out the accounting error and left the general fund balance exactly where it was at the end of fiscal ’21 and as a result, it didn’t budge the general fund balance or affect the rainy day fund at all.”
Moody’s Investors Service rates South Carolina Aaa and S&P Global Ratings rates the state AA-plus.
The joint resolution would remove Eckstrom from office under Article XV, Section 3 of the state constitution, which calls for the governor to remove an official from office for “willful neglect of duty, or other reasonable cause” upon two-thirds votes of each house.
The resolution was introduced last week and referred to the Senate finance committee.
The process is distinct from impeachment “in cases of serious crimes or serious misconduct,” which requires a two-thirds House vote to impeach and set up a trial in the state Senate.
Gov. Henry McMaster, has resisted calls forimpeachment, contending voters should be the ones to hold Eckstrom accountable.
Sentiment in the statehouse may be running against Eckstrom. On March 14, lawmakers voted 104-7 for an amendment that reduced the comptroller’s salary to $1 from $150,000.
