Raleigh, N.C. — The North Carolina Rural Economic Development Center isn't keeping track of grants it awards, is improperly keeping interest on grant funds and is overpaying its top managers, according to an audit released Wednesday.
The audit prompted Gov. Pat McCrory to call for new leadership at the Rural Center, which uses state and federal money to support business and infrastructure development in 85 North Carolina counties.
"At a time when rural areas of our state are suffering the most, we must ensure that we are using our limited funds by the most effective, efficient and transparent means," McCrory said in a statement. "I believe that new leadership will begin to address and fix the serious issues identified by the state audit."
Senate President Pro Tem Phil Berger said state funding to the center should be eliminated.
"This audit reinforces my belief that the Rural Center should receive no taxpayer funds in the state budget," Berger, R-Rockingham, said in a statement. "Funding the Rural Center would send the wrong message to voters who elected Republicans to provide accountability in state government.”
The Senate's budget proposal completely cuts funding to the Rural Center, while the House's plan gives the center more than $36 million over the next two years. Lawmakers are working on a compromise budget.
State auditors said the center doesn't verify that grant recipients are using their money for the intended purpose, noting that the center had no idea how many jobs were created by a $1 million grant in Harnett County and an $814,000 grant in Halifax County. Grant recipients also weren't punished for not providing progress reports on their projects, according to the audit.
"For all practical purposes, there is no oversight. There is no monitoring of what's going on with all these monies," State Auditor Beth Wood said. "If they are not monitoring what's being done with the money they pass out, none of us can be assured that taxpayer dollars are accomplishing what they intended to do."
Rural Center officials told auditors that the organization lacks the resources to monitor grant progress and noted that they try to work in cooperation with recipients and don't want to be seen as an enforcer.
According to the audit, center President Billy Ray Hall was paid more than $220,000 last year, or 77 percent more than then-state Commerce Secretary Keith Crisco. His salary and those of center vice presidents also were at least 20 percent more than those of other rural development centers nationwide.
Hall said in a response to the audit that salaries are approved annually and are based on a national compensation report, but auditors said the report includes nonprofits that do different types of work, some of which operate overseas.
"The Rural Center is committed to being a good steward of state funds," Hall said in a statement. "We have a long history of serving the people of rural North Carolina and welcome the opportunity to improve our operations."
The center has come under fire recently over political connections to some grants that sometimes didn't meet the organization's guidelines. An independent committee is now reviewing all grants made in the last five years to determine if they followed Rural Center policies.
"I think it's time for Billy Ray Hall to resign," said Bob Luddy, a Raleigh businessman and Rural Center board member. "This is very poor bookkeeping, and I don't think our board of directors remotely understands what's going on. They only understand what Billy Ray Hall tells them."
Luddy said the center has $60 million in the bank – state money that sits there earning interest, and part of that interest is paying for Hall's salary.
The audit also criticized the center for now turning over the interest to the state General Fund and called on lawmakers to clarify policies for the way the center handles its money.