McCrory administration freezes Rural Center funds

acurliss@newsobserver.comJuly 18, 2013 

  • Keeping its investment gains

    The Rural Center has been getting money from lawmakers before it was needed for projects on the ground, allowing the agency to earn and keep $20 million in investment income in five years, a state audit says.

    Taxpayer money has been given to the Rural Center “long before those funds were needed to fund Rural Center grants,” the audit says. “These early disbursements allowed the Rural Center to accumulate significant interest income while waiting for projects to be completed.”

    One example is a Clean Water Partners program run by the Rural Center that received $145.5 million in state funds in fiscal years 2008 and 2009. By June 2012, the audit says, approximately $55.9 million still had not been spent.

    The center received $145.3 million in infrastructure grant funds from 2005 through mid-2012 but had distributed only $86.9 million of it, the audit says.

    The audit says state law does not require that the Rural Center share the investment earnings with the state, but said the state should consider a different approach and the General Assembly should clarify its intentions.

    -- J. Andrew Curliss

The administration of Gov. Pat McCrory has frozen state funds to the troubled, taxpayer-funded N.C. Rural Economic Development Center and ordered the nonprofit not to spend any more state money.

In an order hand-delivered to the center on Thursday, state budget director Art Pope wrote that the administration is considering “the further step” of seeking recovery of all state funds now held by the center, an amount that may top $100 million.

The order directs the center to cease making any further grants with state money and halt any other expenditures with state funds, including compensation to employees or third parties or any other administrative or operational expenses. State law gives the budget director that authority.

Pope asked the Rural Center to provide financial statements and other information to his office by Friday.

Attempts to reach Rural Center officials were unsuccessful. President Billy Ray Hall resigned earlier Thursday, and senior vice president Elaine Matthews is now in charge.

The Rural Center may have money to operate for the short term. It says it receives federal money, private donations and has accumulated earnings on unspent money that it could continue to spend.

In a memo to lawmakers explaining the decision, Pope cited a critical state audit of the Rural Center released on Wednesday – and the center’s response to it – in invoking authority for the freeze. Pope wrote that the decision was made with approval of the state Department of Commerce, which is required by law.

The audit from the office of State Auditor Beth Wood, a Democrat, found a lack of proper grant monitoring at the center. Wood’s office took the unusual step of responding to the Rural Center’s formal response to the audit. Auditors said the Rural Center had not provided accurate information.

“Governor McCrory is not only concerned with the findings of the (audit), but the Rural Center response, which the State Auditor stated was ‘not true’ and misleading,” Pope wrote to lawmakers.

He wrote that the audit has apparently been underway for months, with a draft submitted to the Rural Center weeks ago.

Pope wrote that it “appears that (the) Rural Center may have been actively concealing the existence of the audit and delaying the delivery of the audit, in hopes that the final state budget, including increased funding for the Rural Economic Development Center, would be enacted before the release of the audit.”

Pope wrote to lawmakers that the state would aim to oversee the money in a “common goal that these funds be used to meet the needs of rural North Carolina, in compliance with the legislative intent and express legal requirements.”

Pope’s company, Variety Wholesalers Inc., was the beneficiary of a $200,000 Rural Center grant award in October 2012. The grant allowed the company’s landlord to renovate a building in Rocky Mount so that Variety could open a Roses discount store and grocery.

Curliss: 919-829-4840

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service