Auditor: Rural Center earned $20 million off state funds

Posted August 19, 2013
Updated August 21, 2013

— While investigating grants and executive pay at the embattled North Carolina Rural Economic Development Center, state leaders discovered a loophole that allowed the nonprofit to earn $20 million in interest on state money. 

While the state can keep track of how nonprofits spend tax dollars, once the money is invested, the state loses that control, Auditor Beth Wood said Monday.

"That is a gaping hole for the state," Wood said.

Now, lawmakers are considering a change to state policy that would retain control over the interest nonprofits earn with state dollars. While the scrutiny is focused on the Rural Center, the move could impact all state-funded entities.

Lawmakers eliminated the Rural Center's state funding last month. Facing criticism for his high salary, longtime President Billy Ray Hall resigned, and board Chairwoman Valeria Lee stepped down under pressure two weeks later. 

North Carolina Rural Economic Development Center Lawmakers want control over earned interest on state funds

Even with all the changes at the organization, it still doesn't appear that the state has any legal right to that $20 million in interest.

"The state was completely short-sighted in the management of the distributing to these agencies. We've done a bad job," said Rep. Marvin Lucas, D-Cumberland. 

Rep. Julia Howard, R-Davie, agreed.

"Those are taxpayers' dollars," she said. "We need to be able to capture those dollars."

Lawmakers said they plan to take up the funding policy change next legislative session. They may pattern it after a federal law that maintains control over interest.

"(The) bottom line is we need to monitor where this money is going and keep control of it," said Sen. Neal Hunt, R-Wake.

In the meantime, the state Department of Commerce is taking over all of the Rural Center’s grants. It will be up the center's board, however, to decide what to do with the remaining earned interest.


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  • wildpig777 Aug 20, 2013

    and why didnt you beth-- bring this to the light of day earlier? whats your lil secret agenda. folks we gotta mess in raleigh -- next election do the right thang and vote --independant.

  • notexactly Aug 20, 2013

    NO NO NO I say give it to the teachers and the schools. That way they can stop saying the gop doesn't care about them. All that money the dems were trying to hide for themselves. Come on libs, defend it. I really do think it should go to the teachers. I am being serious here. That would not be a very big raise, but it would be something

  • wildpig777 Aug 20, 2013

    all this done under easley and perdues adminastrations-- way to go you 2. tell me once what you did for or to the state of nc?

  • dare107 Aug 20, 2013

    "Close it give the $ to teacher pay."

    NOT! Needs to be invested in rural counties not sitting in an interest bearing account waiting for some Fat Cat to come along and steal it!
    Let the teachers prove they deserve an pay raise and work year round and raise the level of graduating seniors, not just pass them along!!

  • Danny22 Aug 20, 2013

    This is an outrage. How can this go on for yrs and nobody catches them.

  • whatelseisnew Aug 20, 2013

    "Give it to the senior citizen who pay taxes to support the schools and dont have children -superman

    Why? Do they not desire a population that is educated too?"

    Yeah a nice sentiment, but unfortunately all that is really happening is the sustaining of a system that is all but completely dysfunctional. No one should be forced at gunpoint to pay for that, regardless of their age.

  • whatelseisnew Aug 20, 2013

    As usual the media gets it wrong. this is NOT the State's money. This is money that was seized from people like me. Now If I had been allowed to keep that money, I could have invested it and made money that I could have used for things like food or clothing and so on. Better that the government once again show how utterly inept it is at handling money it steals from private sector taxpayers.

  • cbuckyoung Aug 20, 2013

    I everyone was screaming about Governor McCrory halting the NC Rural Center while the agency was completely investigated. Now we see why. Another great decision by you Governor McCrory!!!

  • xylem01 Aug 20, 2013

    Give large raises to McCrory's staff!!!

  • Just Once Aug 20, 2013

    If the state doesn't have rights to it who in the world does?? It is a byproduct of a state run agency!