In a recent development, South Carolina's legislative body is considering allocating over a million dollars to engage an independent financial consultant. This decision follows the revelation of a significant accounting error uncovered in a recent audit. The mistake, involving nearly $2 billion mistakenly listed as unclaimed funds, has prompted lawmakers to take immediate action. The audit report by DC-based consultants AlixPartners highlighted numerous recommendations, with the foremost being the appointment of a third-party consultant to ensure proper oversight and compliance.

The audit also revealed that state financial offices were aware of this discrepancy for years before it came to light in late 2022. Lawmakers have been investigating these irregularities since 2021, starting with a $3.5 billion error due to double-counted college funds. This led to the resignation of the Comptroller General under pressure. The Senate Finance subcommittee has advanced a resolution to allocate $1.2 million for the consultant, emphasizing the urgency of implementing reforms due to a federal investigation.

Addressing Financial Oversight Gaps

South Carolina's lawmakers are responding to the need for improved financial oversight by proposing the engagement of an external consultant. This move comes after an extensive audit exposed a decade-old accounting error that went unnoticed until recently. The proposed consultant would play a crucial role in ensuring adherence to best practices and preventing future discrepancies. The state’s treasurer, comptroller general, and auditor had been aware of the issue for years but failed to address it adequately.

The audit conducted by AlixPartners uncovered not only the $2 billion error but also several other issues within the state’s financial system. The recommendation to hire a consultant aims to provide an independent perspective on the state’s finances. Senator Larry Grooms emphasized the importance of this step, likening it to hiring a "babysitter" to oversee critical financial operations. The consultant will be tasked with reviewing existing processes, identifying weaknesses, and recommending improvements. This initiative is part of a broader effort to restore public trust in the state’s financial management and ensure transparency.

Urgency and Federal Scrutiny

The urgency of addressing these financial irregularities has been heightened by the ongoing federal investigation into the state’s financial practices. The U.S. Securities and Exchange Commission (SEC) has launched an inquiry into the discrepancies, adding pressure on lawmakers to act swiftly. The potential consequences of this investigation include financial penalties and a downgrade of South Carolina’s AAA credit rating. Senator Grooms acknowledged the seriousness of the situation, stating that the duration and outcome of the investigation remain uncertain.

To mitigate these risks, the Senate Finance subcommittee has advanced a resolution to allocate $1.2 million for the consultant. Initially allocated to the state treasurer for compliance purposes, this funding was never utilized, prompting its redirection. The full Senate and House of Representatives must approve the resolution for it to take effect. Both chambers have expressed a commitment to implementing the audit’s recommendations as quickly as possible. Lawmakers recognize the importance of swift action to correct past mistakes and prevent similar issues from arising in the future, ensuring the state’s financial integrity and maintaining public confidence.