COLUMBIA, S.C. — It turns out that $1.8 billion in South Carolina state funds weren’t just sitting in a bank account waiting to be spent. Instead, it was an accounting error compounded over years instead of being reconciled, an independent forensic audit determined.

The announcement Wednesday dashed ideas like returning the money to taxpayers or using the windfall on roads. But it also led to more questions: why wasn’t the error reported when it was first discovered back around 2018, and should the elected state treasurer, Curtis Loftis, step down or be impeached.

“In the private sector, if anybody had made a blunder of $1.8 billion — whether it was an error, negligence, misfeasance, malfeasance, fraud or a cover-up, they would lose their job,” said Republican state Sen. Larry Grooms, who leads a committee investigating the accounting problems.

The private audit, which cost millions of dollars, is the most comprehensive look so far into the South Carolina Treasurer and Comptroller General’s Office. Those agencies are typically led by elected officials and are in charge of making sure that government accounts stay balanced.

The audit isn’t the final word on the matter. Investigators, including the Securities and Exchange Commission, are trying to determine if it was just a series of mistakes or whether state employees figured out what was going on and tried to cover it up, Grooms said.

Depending on how serious the allegations are, the state could see its rates to borrow money rise, pay fines or face other punishment.

In a separate case, the elected Republican comptroller general — the state’s top accountant — resigned in 2023 after his agency started double-posting the amount the state had sent to colleges and universities for a decade, leading to a different $3.5 billion error that also was all on paper.

While Richard Eckstrom stepped aside in that case, Loftis has defended himself and his office.

The problems with the $1.8 billion error started as the state changed computer systems in the 2010s. Grooms said the initial mistake happened when Loftis, whose job is to write checks for the state, shifted accounts from the old system to the new one.

Loftis testified under oath before senators last year that he invested the money in the mystery $1.8 billion account and made nearly $200 million in interest for the state, which Grooms said seems impossible since there was no money there. The senator said Loftis also appears to have lied under oath when he said their was no federal investigation into his office.

Loftis issued a statement Wednesday thanking the audit firm Alix Partners for its work. He did not address the statements from Grooms.

“The citizens of South Carolina can be confident that their money is safe,” Loftis said. “We, along with our state partners, look forward to reviewing the report in its entirety.”

Gov. Henry McMaster said he has confidence in everyone going forward to handle the state’s accounts and doesn’t think there was any intention to deceive anyone.

“It was an accounting error with no criminal conduct, no wrongful intent, no intent to make the error — errors sometimes happen and unfortunately, that was a big one,” McMaster told reporters.

Among other recommendations, the audit said South Carolina should hire a third-party auditor to look over the shoulders of the Treasurer and Comptroller General offices to make sure the state’s accounting books are properly kept.

The state has its own auditor, but that person is hired by a five-person board that includes both the treasurer and comptroller general. Lawmakers are likely to look into why that person didn’t raise the alarm about the accounting problems sooner, Grooms said.

Meetings have already been scheduled with a House subcommittee, and the Senate Finance Committee will likely call Loftis to testify by the end of the month, Grooms said.

South Carolina has had a long history of accounting issues.

The Treasurer’s Office was created when the state’s first constitution was written in 1776. Back then, the General Assembly selected the treasurer. But by the early 1800s, the state’s finances were in “a state of bewildering confusion” and no one could “tell the amounts of debts or of the credit of the State,” according to History of South Carolina, a book edited in 1920 by Yates Snowden and Howard Cutler.

The first comptroller general determined the state was owed about $750,000 in debts, which would be worth about $20 million today.