NC Capitol

NC Capitol

McCrory halts Rural Center spending after critical audit

Posted July 18, 2013 11:30 a.m. EDT
Updated July 18, 2013 6:45 p.m. EDT

— Gov. Pat McCrory ordered Thursday that the flow of state money to and spent by the North Carolina Rural Economic Development Center stop immediately.

The move comes one day after a state audit criticized the nonprofit for a lack of oversight and exorbitant salaries and hours after longtime Rural Center President Billy Ray Hall resigned.

"It is the right decision for the organization and the rural communities we serve," Hall wrote in a memo to the Rural Center's board of directors.

In a hand-delivered letter, McCrory budget director Art Pope told Rural Center officials not to pay any state funds in compensation to any employees.

The center's board set up a severance account for Hall a decade ago, and it now has nearly $242,000. Chairwoman Valeria Lee said she believes he should receive the money.

"There is no question it was warranted," Lee said. "Hall had grown the organization so substantially. He brought it to become the significant player that it is in rural economic development.”

Board member Bob Luddy threatened to challenge any severance payment in state court.

Senate President Pro Tem Phil Berger said he also believes Hall doesn't deserve any payments beyond his state retirement.

“While Mr. Hall’s resignation is a good first step in cleaning up the blatant abuse of taxpayer money by the Rural Center, it is wrong for him to take a ‘golden parachute’ severance package under these circumstances," Berger, R-Rockingham, said in statement. "Bringing about fundamental reform requires more than just a change at the top. We must make sure tax dollars go directly to our rural communities instead of the pockets of unaccountable bureaucrats.”

The center uses state and federal money to support business and infrastructure development in 85 North Carolina counties, but state auditors said the center doesn't verify that grant recipients are using their money for the intended purpose.

Auditors also noted that Hall's salary of more than $220,000 was 77 percent higher than the secretary of the state Department of Commerce last year and that his salary and those of center vice presidents also were at least 20 percent more than those of other rural development centers nationwide.

The audit prompted McCrory to call for new leadership at the Rural Center, and Berger said state funding to the center should be eliminated. House and Senate negotiators are hammering out details of a state budget for the next two years.

Pope also informed center officials that the state might try to recoup state funding to the center. State grants and appropriations to the center since 2005 total $363.7 million, and nearly $113 million hasn't been doled out, according to his letter.

The Rural Center also came under fire recently over possible political connections to some grants that 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.

"By moving up my retirement by a few weeks, I hope to clear the way for the General Assembly to make the right decisions about funding for the Rural Center and its work on behalf of rural communities," Hall wrote in his memo. "From Ahoskie to Bakersville, from Alexander County to Duplin County, it is important that this work continues, and that can best be accomplished under new leadership."

Lee, the chairwoman of the Rural Center's board, praised Hall for his 26 years of service to the nonprofit.

"Rural North Carolina has been blessed by his leadership, which has brought to rural communities clean water, jobs, business opportunities and the practical knowledge and skills for leading change in a rapidly evolving economic environment," Lee said in a statement. "He did this from one end of the state to another while cultivating friendships with thousands of people in every walk of life."