SC agency: a retirement was key in $28M deficit

COLUMBIA, SC (AP) - South Carolina's welfare agency said Wednesday taxpayers nearly footed $28 million bill for a deficit caused in part because of a retirement in its financial shop.

That news that the agency's financial guru's departure left the agency unable to grasp financial problems alarmed state senators investigating deficits at the Department of Social Services and the Department of Health and Humans Services.

"I think we were very close to having $28 million transferred over that we didn't need," said Sen. Shane Massey, an Edgefield Republican leading the panel investigating the agency's shortfall. "A lot of it was just poor communication and just not understanding all the financial stuff."

Last fall, DSS reported it needed a $28 million state bailout to cover a deficit threatening its foster care and welfare programs. Last month, the agency said it had erased the deficit by recalculating spending, trimming program changes and managing benefits better. Meanwhile, the Medicaid agency has a $225 million deficit and has received a $100 million bailout to keep payments flowing to doctors, hospitals and other care providers through April.

Gov. Nikki Haley appointed a new DSS director in January. Director Lillian Koller told Massey's committee that agency's financial executive retired and the agency didn't have replacements who knew how to do his job, including estimating how much cash was needed. Koller says the official also was responsible for seeking federal matching cash for programs.

About $17 million of the agency's deficit disappeared when it changed how it calculated the amount of money it needed to cover programs and froze hiring. The agency had struggled for months to calculate the amount needed for programs after the departure.

Koller said having "one person with exclusive knowledge of what is so critical for the agency and for the Legislature and the governor is not acceptable. One person was apparently the single knowledge of how to do everything fiscal in our agency. That's got to stop."

The man has been rehired and is now training others to do his job, Koller said.

And the agency is pursuing federal match cash that the state may have been eligible for, but did not seek, since 2007. Koller said. That's expected to generate at least $4.5 million.

Koller also said she has called in unpaid consultants who had worked with her in Hawaii to get a grasp on the agency's problems.

Koller's testimony worried Massey, who said about $22.5 million of the agency's now erased deficit "was based on poor communication and bad information within the department."

Massey said the episode feeds the impression of incompetence in government and wasted money. Now he's worried other agencies are reporting unreliable financial information.

"You'd like to think that's not happening, but to a large degree, it is happening," Massey said.

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