Eckstrom's $3.5 billion accounting gaffe to lead to reckoning

A $3.5 billion accounting mistake over 10 years by state Comptroller General Richard Eckstrom may lead to a legislative reckoning as calls for his resignation mount. His office is in charge of authorizing state expenditures.

Eckstrom admitted this week that the state overstated its cash balances by $3.5 billion over the last 10 years because of double-reporting of some of its spending.

“As more information is brought to light, I suspect that there will be a call for all sorts of things,” state Sen. Larry Grooms, R-Berkeley, told the City Paper this morning. “This may prove to be the largest accounting error in the history of accounting errors.”

State budget experts emphasize the error isn’t a shortfall — that the state didn’t lose $3.5 billion of tax dollars — but that the Comptroller General’s office essentially twice counted money transferred to the state’s colleges and universities as a new computer system was installed. When it wasn’t caught initially, it kept making the same wrong assumption, year after year. Essentially, it kept revenue on its reports after it had already been transferred, making it appear in post-budget spending analysis reports that the state had more of a surplus than what was accurate.

“Nobody lost one dollar,” one insider said. “Nobody embezzled one dollar. It’s simply a reporting error.”

In fact, state budget writers use projections from a different office to make budgeting decisions and don’t rely on Eckstrom’s reports of what happened to spending after money has been spent.

Eckstrom, a former state treasurer elected comptroller general in 2002, acknowledged the error in a briefing document to state senators: “It had no impact on the state’s actual cash or on the state’s annual appropriation and budgeting process. Furthermore, the general ledger was correct throughout,” Eckstrom wrote, according to The State newspaper.

Calls for resignation begin

The error likely will lead to a day of legislative reckoning.

“The comptroller general will have a platform to explain the situation to the subcommittee of the Senate Finance Committee,” Finance Chair Harvey Peeler, R-Cherokee, said today. “I want to withhold any kind of pre-judgment until then.”

But he added it didn’t look good: “If you place an issue like this on a plate before you, all five senses will be bad as far as what I can see.”

Trav Robertson, a one-time deputy state treasurer who currently chairs the South Carolina Democratic Party, called for Eckstrom’s resignation.

“For all his serious faults, Richard Eckstrom is not a stupid man,” Robertson told the City Paper. “So the question becomes was this part of his scheme to cook the books to make the South Carolina economy look stronger than it actually is? Is this a scheme to pull the wool over the eyes of the credit rating agencies, the legislature or the SC Board of Economic Advisors?”

He said Eckstrom should resign immediately: “Richard Eckstrom, for 20 years, has crowed about how he is a great CPA. Either he withheld this information for personal or political reasons, or he’s lost his grip on doing his job. I’m not sure which is worse for S.C. taxpayers. He had one job and failed. This could cost taxpayers billions of dollars.”

When asked to explain, Robertson said credit rating agencies, which set bond ratings that impacts how much it costs for the state to borrow money, could lower South Carolina’s rating, which would make borrowing cost more in the future.

“It could potentially cost the taxpayers billions if the credit rating agencies feel misled and downgrade our credit rating. It could cost us if the feds decide to fine the state for the egregious error — this essentially amounts to lying about the financial stability of our state’s finances.”

According to the Comptroller General’s website, the office was created in 1890 to administer the spending of state funds, which was part of a system of checks and balances.

“All payrolls for state employees, vouchers for bills owed by the state and interdepartmental payments between state agencies are submitted to the Comptroller for processing,” the site said. “His office examines all payments to ensure they are properly authorized by agency officials, that funds are available to cover them, and that they are properly classified in the state’s accounting system. Upon approval, the Comptroller issues a warrant for each payment to authorize the State Treasurer to release the funds.”