After $1.8B accounting error, Senate report likely to suggest SC Treasurer Loftis removal
South Carolina Senate Finance Committee members investigating a $1.8 billion accounting error on the state’s books will likely recommended Treasurer Curtis Loftis be removed from office for willful neglect of duty.
It is a recommendation that was absent from an interim report last year, at the request of the governor. But now that an outside forensic audit has found most of the $1.8 billion never existed and placed shared responsibility for the error on the comptroller general, treasurer and state auditor offices, the Senate panel likely will now suggest Loftis be gone.
The panel’s leader, state Sen. Larry Grooms, R-Berkeley, has been vocal about his belief that Loftis should leave and told The State the report will likely include the removal recommendation, pending no objections from the subcommittee members before the report is issued.
Grooms is scheduled to present the report to the full Finance Committee on Tuesday and then to the full Senate on Wednesday.
Anticipating the release of the report, Loftis, who said last year he believed the $1.8 existed, has gone on the offensive circulating an op-ed to media organizations defending himself and his office, and sending a letter to Finance Committee Chairman Harvey Peeler and Senate President Thomas Alexander questioning the validity of the investigation.
“South Carolinians deserve leadership, not theatrics. Our financial stability, reputation and future are too important to be sacrificed for political games,” Loftis said in the op-ed. “It’s time for the Senate to drop this sideshow and focus on the real work of governing.”
This is the latest in the ongoing saga of investigations since 2023 into the state’s accounting errors that took place when the state converted accounting systems in 2017.
Former Comptroller General Richard Eckstrom resigned in 2023 after he disclosed his office had inflated the state’s cash balances by $3.5 billion over the course of 10 years.
State Auditor George Kennedy resigned earlier this year after outside forensic auditors AlixPartners determined most of the $1.8 billion didn’t exist, and said the comptroller general, auditor and treasurer’s office were aware of the accounting issue for years but didn’t take any action to correct it or notify the General Assembly.
The state’s finances are under investigation by the Securities and Exchange Commission because of the accounting issues.
Loftis, who has often been defiant during hearings, has refused to step down before the end of his term which ends in January 2027. Loftis has said he would not run for reelection in 2026.
“I want to be clear that I take full responsibility for the actions of the State Treasurer’s Office,” Loftis said in a March 10 letter to Grooms. “What I am unwilling to do is accept responsibility for the statutory duties of the Comptroller General — namely overseeing SCEIS and the SCEIS conversion (including directing STO to make certain entries which ultimately proved incorrect, as demonstrated in the report), and preparation of the ACFR.”
All three offices were aware of the flow through account created in 2017 when the state switched accounting systems.
AlixPartners said the transferring of entries into the flow through fund was done by two treasurer’s office employees and one accounting system employee assigned to the treasurer’s office. The comptroller general office was aware of the entries.
The likely removal recommendation comes after AlixPartners rebutted Loftis’ interpretation of the forensic audit. Loftis presented his own 56-page report to the Senate Finance panel saying comments made by others about the accounting error have been inaccurate.
The treasurer’s office has said all of the money was always properly managed and accounted for, a position AlixPartners objected to.
“I don’t think we would be here if everything was properly accounted for,” AlixPartners Director of Investigations Dave Bligh told Senate Finance Committee members on March 11.
AlixPartner’s Managing Director Susan Markel also said if the treasurer’s office had taken the step to reconcile by funds, and not just bank accounts, the $1.8 balance would have been apparent.
“So by not doing it by fund, that was a missed opportunity to find this,” Markel said.
The decision of what to do with Loftis after the Senate Finance report will be in the hands of the two chambers.
Lawmakers could vote to remove Loftis for willful neglect of duty or other reasonable cause, which requires a two-thirds vote of each chamber and is used for offenses that don’t meet the grounds for impeachment.
Lawmakers also could consider censure, or impeachment for serious crimes and misconduct, which would be a higher standard to meet.
Other efforts to reduce Loftis’ salary to $1 this year and last year have been unsuccessful.
Last year, the measure failed in the House 85-20 during the 2024 budget debate. A vote didn’t happen in the House during this year’s budget debate when state Rep. Heather Bauer, D-Richland, proposed the pay reduction again. State Rep. Chris Murphy, R-Dorchester, who has been critical of Loftis, said the move would be unconstitutional. The House voted down the measure in a voice vote with no totals taken, offering no indication of how many members supported Loftis.
At least one person is against removing Loftis.
While speaking to reporters Tuesday, Gov. Henry McMaster said the general assembly should focus on implementing recommendations made by AlixPartners.
“I don’t see any benefit in removing the treasurer,” McMaster said. “I don’t think (it’d) do any good at this point.”
As Grooms prepares to release his report, two top staffers in the treasurer’s office have announced their planned departures. General Counsel Shelly Kelly and Chief of Staff Clarissa Adams announced their retirements this summer during a staff meeting Wednesday.
Treasurer’s spokeswoman Karen Ingram said Adams has worked for the state for 41 years and Kelly for 35 years. The office also has been preparing for their eventual departures for years with succession plans.
Adams herself testified in Loftis’ place in front of the Senate panel where she defended the hiring of outside consultants to help the treasurer’s office navigate the issues surrounding the accounting errors.
As part of Loftis’ offensive, he pushed back against the Senate Finance investigation in his letter to Peeler and Alexander.
Loftis questioned the validity of the investigation itself and questioned whether the panel exceeded its legal authority saying “Senate subcommittees are not inherently empowered to conduct unscheduled investigations.”
Loftis said the subcommittee never articulated the scope of the investigation to his office, did not give notice of subject matters, and that the panel aggressively questioned him. Loftis even accused the panel of making harmful and false accusations.
“The subcommittee’s conduct is troubling and appears unlikely to produce a trustworthy or meaningful outcome. Moreover, these meetings may prove detrimental to the State’s financial reputation and credit rating,” Loftis wrote. “The subcommittee’s ever-changing accusations and allegations have been extraordinarily taxing, both personally and professionally, for my staff and myself. It is my sincere hope that the Senate recognizes the harm that this investigation has caused and will take care to prevent it from happening in the future.”
Peeler and Alexander on Wednesday sent a letter to Grooms, complimenting the work of his panel. In the letter, a copy of which was sent to Loftis, Peeler and Alexander said the oversight of the state’s central financial systems are areas under the scope of the subcommittee and well within their charge and latitude given by the Finance committee chairman, Senate rules, statutory authority and the constitutional checks and balances.
“Any assertion to the contrary would be outside the realm of reasonable thought,” Peeler and Alexander wrote.
