SC’s chief accountant had $3.5B mishap. Now he faces lawmakers’ grilling
South Carolina’s chief financial watchdog is under pressure after a years-long bookkeeping error resulted in a multi-billion dollar statewide accounting discrepancy that lawmakers discovered last week.
Comptroller General Richard Eckstrom testified Thursday before a Senate panel, scrambling to explain why his office overstated the state’s cash balances by $3.5 billion, a figure that began accumulating in 2011.
Now, lawmakers are looking to pinpoint exactly when Eckstrom identified the problem and who he notified in response.
“You’re the state’s chief officer when it comes to accuracy,” said state Sen. Larry Grooms, R-Berkeley, chairman of the Senate Finance constitutional subcommittee. “I’m hearing that what actually occurred (accounting-wise) is correct but what was reported is not. I’ve got problems with that, and I think others do, too.”
Eckstrom, 74, seemed unprepared and fuzzy on the timeline leading up to the multi-billion dollar mistake, leaving some members on Thursday’s panel puzzled.
“If I’m an accountant and I realize there’s a $3.5 billion anomaly, that’s something I’m going to remember, probably like the birth of my first child,” said state Sen. Thomas McElveen, D-Sumter.
Last week, Eckstrom told lawmakers that he had notified the governor’s office and legislative leaders of the error in October. But on Thursday, Eckstrom said he had misspoken, and that it wasn’t until early December that he told anyone about the mistake.
Eckstrom was unable to specifically identify anyone in the State House he had communicated the accounting error to, prompting Grooms to say, “I find it hard to believe you let others know about this.”
What caused the $3.5B error?
Eckstrom said the bookkeeping mistake was caused by a discrepancy between two accounting systems, as billions of dollars in state appropriations were transferred to colleges and universities but were not reflected in the state’s annual financial reports, thus inflating the general fund balances.
But the revenue received by colleges and universities was correctly accounted for, Eckstrom maintains.
The root of the problem, however, dates back to 2007, when Eckstrom said a coding flaw in the state’s old accounting system occurred but didn’t manifest until 2017, when Eckstrom’s office first discovered a $1.3 billion overstatement.
That amount, Eckstrom says, was accumulated from 2011-2017, with another $2.2 billion from 2017-2022, totaling the $3.5 billion mishap.
Grooms said that he wanted to get to the bottom of why problems in Eckstrom’s office continued for as long as they did.
“Here’s the point I think you need to understand: A lot of people rely on that information,” Grooms said, referring to state annual financial reports created by Eckstrom’s office. “And when the General Assembly was discussing what to do with annual appropriations for the needs of our state, we passed legislation to return $1 billion of our reserves believing we had $10.5 billion when in fact it was only $7 billion.”
A new set of eyes discovers error
Lawmakers learned Thursday that the blunder was first discovered in September by Catherine Kipp, who moved over from the treasurer’s office to the comptroller in 2020.
Kipp, an accountant in Eckstrom’s office, said that upon stumbling across the misstatement, she was shocked and hesitated to notify Eckstrom.
“I couldn’t believe the numbers I was looking at,” Kipp said. “When I went to Mr. Eckstrom (with the problem), I was very nervous because I did not know how this would cast on an elected official, but he was very open to getting to the bottom of this.”
Eckstrom also attributed the problem to translation issues between his office and the state treasurer’s office, where Kipp had previously worked — affording her a skill set that was in demand at the comptroller general’s office, according to Eckstrom.
In fact, Eckstrom admitted that had he not hired Kipp, the massive accounting error would’ve likely never been discovered.
Eckstrom said his office has taken several measures to ensure that accounting mistakes like the one at hand will not occur again.
But members of the General Assembly are now questioning Eckstrom’s ability to accurately keep track of the state’s money moving forward.
“The committee will continue our fact-finding mission,” Grooms told a reporter after the hearing. “However, I will say that my confidence in the comptroller was greatly diminished by today’s testimony.”
Other policymakers say they’re concerned about how the error will affect how credit ratings agencies view the state.
“Will it affect our rating? I don’t think so, but I’m certainly in no position to make that call,” Eckstrom said.
As comptroller general, Eckstrom is responsible for maintaining the state’s books while supervising statewide spending.
“This (error) had absolutely no impact on your cash, and that’s the point I want to make,” Eckstrom said, explaining that the mistake was limited to an overstatement, not a misplacement, of money.
Eckstrom, who was elected for another four-year term in November, has served as South Carolina’s comptroller general since 2003.
In speaking with The State newspaper following Thursday’s hearing, he said he has no plans of stepping down from his post.
This story was originally published February 17, 2023 at 11:09 AM.
