SC hid unclaimed-property audit fees inside claim payouts

South Carolina's Unclaimed Property Program (UPP) -- the office that holds forgotten bank accounts, uncashed paychecks, and other abandoned money until an owner comes forward -- names the State Treasurer as its legal "administrator" under the state's Uniform Unclaimed Property Act⧉, with authority to audit organizations that fail to surrender property they hold.▸ But a May 2026 investigation by the South Carolina Office of the State Inspector General⧉ found the Treasurer's Office (STO) let its own contracted UPP auditor collect fees in a way investigators say obscured both the program's true cost and the state's own liability to the owners that money belongs to.

SCOIG sampled invoices from Kelmar Associates, one of five firms under a 2021-2026 contract to audit companies for unreported unclaimed property, and found Kelmar worked on a contingency-fee basis -- deducting its audit fee directly from the cash value of property it identified, then remitting only the balance to the state.▸ When identified cash fell short of covering a fee, Kelmar carried the shortfall forward and deducted it from a future audit's proceeds instead; one invoice SCOIG reviewed rolled in deductions from 23 prior audits at once. SCOIG's own assessment of the practice: netting the fees this way "understated the cost of the UPP"⧉ by never recording them as a program expense, and understated the value of property remitted to the state -- for which the state remains liable to owners at full value, fee or no fee.

After January 2024, Kelmar's invoices stopped showing the fee deduction -- the audit contract allowed vendors to instead bill the STO through the state's SCEIS accounting system, the fix SCOIG itself recommends across the board.▸ But SCOIG's review found no payments to Kelmar or the other four contracted firms recorded under their own state vendor numbers at all. The one Kelmar fee payment investigators did trace moved through a different channel, an "Interface Vendor Invoice Process" built for batches of payments arriving from an outside system, and landed in the same general-ledger account as thousands of ordinary payouts to unclaimed-property owners -- netted against incoming property deposits the same way the old contingency fee had been. SCOIG could find that one payment only by searching for its exact dollar amount, buried among 2,327 separate disbursements recorded in August 2025 alone; confirming what it actually was required logging into Kelmar's own separate claims system.

The stakes are the program's own scale.▸ The UPP was the STO's second-costliest Other Funds function in FY2025 at $2.48 million -- not counting the audit fees SCOIG says are obscured entirely -- and carries the largest full-time headcount of any Other Funds function. The fund carrying its transactions, STO Fund 38790000, took in $129.94 million in unclaimed-property deposits in FY2025 and paid out $46.99 million across 36,409 individual claims, an average of 147 a workday, while separately moving $15 million to the state's General Fund and $2.48 million more to offset the program's own recorded cost. SCOIG's recommendation is direct: audit firms should invoice the STO for their fees and get paid through the state's normal accounts-payable process, and the STO's own outside internal-audit contractor should start regularly auditing a program SCOIG itself calls high-risk given its transaction volume. The report -- delivered to the Senate Finance Committee that requested the investigation on May 13, 2026 -- sets no deadline for either change, and, as with the rest of this investigation, records no STO response to these two findings anywhere in its text.