Several board members of the taxpayer-funded N.C. Rural Economic Development Center said this week they are concerned about practices brought to light in a recent News & Observer series and welcome additional oversight.
Rural Center leaders, however, said the newspaper reports do not properly reflect the organizations work.
Gov. Pat McCrory said the reporting shows why he wants a new approach on economic development and taxpayer aid for job creation across the state. The governor stepped up lobbying on legislation that would revamp how the administration spends money recruiting jobs, including with grant funding like that now handled by the Rural Center, in advance of a House hearing Wednesday.
These revelations continue to confirm what our administration has learned during just the first five months in office: The statewide economic development system is broken, McCrory said in a statement.
Rural Center officials are urging caution as lawmakers debate its budget for the coming year. They say the public and lawmakers should not draw broad conclusions from reporting about a portion of its overall work. In the series, the newspaper explained that it focused on a sample of Rural Center job-generating projects.
The newspaper reports documented instances in which the center claimed it created jobs but none existed, broke its rules to award money and made grants without establishing whether the recipients needed it. The reports also detailed political influence surrounding the centers grants.
Without examining other files and projects, it is unclear whether there would be additional questions about the centers work, said one board member, Bob Luddy, who is advocating for more oversight of the center and preventing more taxpayer money from going to it.
Luddy, appointed by Senate leader Phil Berger, said the findings in the newspaper series raise enough questions that it should prompt immediate reviews. In a letter to fellow board members, Luddy said the board should place center president Billy Ray Hall on a 90-day unpaid leave of absence while auditors review policies and procedures.
He is pushing for more active involvement by board members in the centers grant-making decisions. As it is now, a subset of the nonprofit agencys board, about 12 people, handle much of that work. The full 50-member board approves grants in rapid fashion later, several board members say.
Luddy wrote that he wants to discontinue the grant process, effective immediately and indefinitely, until all grants are reviewed and verified by the board.
He does not likely have wide backing for that; several key board members have voiced support for continued funding for the center, including in a letter published in The N&O on Tuesday that called the newspaper series inaccurate and incomplete.
We have the utmost confidence in the integrity of the Rural Centers economic development initiatives, said the letter, signed by Hall and two board members, Brian Crutchfield of Boone and Bill Gibson of Sylva. They said they also welcome questions about the centers efforts.
Questions of oversight
At a legislative committee meeting in February, one lawmaker asked Hall about oversight of the center. Hall said there are six ways that happens: He makes reports as needed to the legislative committee; he meets with lawmakers individually in their offices; the state auditor performs an audit every year; the centers board approves a plan of work each year; the center provides an annual report to the General Assemblys Fiscal Research Division; and Hall himself is evaluated by the centers board.
According to a spokesman for the state auditor, there have not been state audits of the Rural Center.
They receive their financial statement audits from private CPAs, said Bill Holmes, a spokesman for State Auditor Beth Wood.
Hall misspoke to the lawmakers on that point while trying to convey information quickly, said Garnet Bass, a spokeswoman for the Rural Center.
She said that the center also sends an annual report to the legislature and quarterly reports to the state Department of Commerce.
The Commerce Department has not been properly tracking money that goes to the Rural Center and other similar nonprofits, according to a state audit released in November. The audit was not a performance or investigative review, but focused on financial compliance.
The auditors office looked at about $80 million in grant funds that passed from the legislature to the state Commerce Department and then out to various agencies in the 2010-11 fiscal year. Documents from the auditors office show the largest recipient of those funds, at about $27 million, was the Rural Center.
The audit found that the Commerce Department did not adequately apply grant-monitoring procedures to ensure that grantees were meeting grant objectives and that grant expenditures were reasonable, including a failure to conduct site visits. The department since has started on-site reviews of recipients, but it could not immediately say Tuesday whether any of them included the Rural Center.
To preserve rural help
Leslie Boney, a Rural Center board member and a vice president of the UNC system, said he is certain that board members will be asking more questions. He wrote in an email message that he was concerned about what seems from your report to be unusual amounts of political involvement on some grants that deviates from what is a well-designed set of policies and procedures.
I think the Center should take a hard look at these cases, then find ways to beat as much of that out of the system as it can, Boney wrote. I will advocate for that.
But he said he is worried that the reports in the newspaper did not represent the entire center fairly and that the reporting will be used to justify shifting money away from it.
Chris Parrish, a board member who was appointed last year by House Speaker Thom Tillis, said he doesnt want to throw out the baby with the bath water but is also concerned about some of the grants.
He said he wants counties in rural North Carolina to always have an advocate which he said the Rural Center does well and that he isnt certain there is a better way.