Tensions were high over SC’s mystery $1.8B. How a task force worked through simmering issues

A group tasked with looking to existence of $1.8 billion of state money with no assigned owners has set up the state for its upcoming forensic audit.

But when the group formed in April, it started amid tension between the offices as the center of the existence of the money and the tension at least appeared to carry into the early work of the governor’s task force.

Gov. Henry McMaster created the task force to “determine the existence, purpose and intended destination” of the $1.8 billion sitting in a flow-through fund created when the state changed accounting systems.

The group charged with trying to figure out the origins of the money included staff from the treasurer’s office, comptroller general’s office and the state auditor’s office. The governor’s office and the attorney general’s office also had staff members at each meeting. The efforts were then coordinated by the Department of Administration.

Before the creation of the task force, as public discussion took place earlier in the spring over the existence of the account, the treasurer’s office and comptroller general’s office appeared to be pointing fingers at one another .

At the first meeting members established guidelines to use during the process seemingly acknowledging the previous tension between the treasurer and comptroller’s offices.

“The members agree to respect offices’ requests to not copy or publish the documents but instead have them available during meeting times,” the April 16 meeting minutes read. “The members resolved to work through the problems in an effort to reach the needed solution. The goal of the group is not to assign blame.”

They initially looked at working as three teams, one looking at appropriations, one looking at cash reconciliation, and one looking at the conversion from an old accounting system to the state’s current accounting system. At least one staffer from the treasurer office’s, comptroller general’s office and state auditor would work on each team.

A day later, those meetings were postponed while a legal issue could be clarified. Six days later, task force members adjusted how they would work.

“Going forward, each agency will work individually. Work should include efforts to determine the cash entries that were made regarding the $1.8B, how the conversion took place, and why the conversion was done in the way it was. Admin stands ready to assist where needed,” the meeting minutes read.

Other agencies referred questions from The State to the attorney general’s office, which declined comment, including on why outside counsel was brought in during the meetings in June. Those lawyers were from King & Spalding, a law firm with 24 offices around the world. The firm had four lawyers, who specialize among other things securities related investigations, participate in meetings, mostly remotely.

McMaster, who had two staff members including a deputy chief of staff in the meetings, acknowledged to reporters tension within the group took some time to die down.

“When you have an important job to do and you realize it must be done and you have all the people right there ready and willing that can do it, and get them together, they will do the work. That’s what they did,” McMaster said.

Those inside the task force meetings characterized them as productive.

For two straight weeks in May, the phrase “Marcia (Adams) shared with the group the goals for next week for each office/agency” and she reiterated that staffers overseeing the state’s accounting system are available for each agency.

Two weeks into the process, the Department of Administration had individual meetings with the comptroller general’s office and treasurer’s office. The substance of those meeting were not disclosed in working group meeting notes.

At two of those meetings Adams reiterated what research each office and agency was responsible for.

At the weekly meetings, each agency provided status updates or presentations about how the state created accounting reports. They even discussed the flow through account.

They had discussions on the state’s annual comprehensive financial report, how the treasure’s office manages cash and investments, money in the state’s general fund, and the state’s accounting system.

It wasn’t until mid-May when agencies had to assign staffers to work with the Department of Administration’s chief technology officer on accessing needed data in the state’s accounting system on the bank reconciliation effort.

“Marcia Adams is a miracle worker,” McMaster said. “She did a great job. So did all of those folks, and there were some tensions at the beginning, as we all know that we decreed that should go away in a hurry and went away.”

During the working group process, the agency staffers created a centralized location for bank and investment statement, cash reconciliations and cash comparisons. They created a platform to access thousands of entries from when the state changed accounting systems.

“These individuals and agencies have been committed to working together to determine the existence, purpose and intended destination of the $1.8 billion in question, to find ways to improve collaboration among the agencies involved in state accounting and treasury processes and to build a foundation for a formal review by an outside accounting firm,” Adams said in a statement.

The work produced by the group, which intends to continue meeting, will be used as the state hires an outside firm to conduct a forensic audit to determine which agencies the money belongs. Lawmakers budget $3 million for the outside firm and an additional $1.2 million for the treasurer’s office to comply with the audit.

With the forensic audit on the horizon, any potential changes to the treasurer and comptroller general’s offices will depend on what the audit finds, McMaster said.

“It’s not a good thing to have a discrepancy like that particularly if there is extra money that is the we don’t know where it’s supposed to be. But I think we need to reserve judgment, not making a decision until we get all the facts and get those answers,” McMaster said.