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Debate forms around Rural Center’s oversight, future

By J. Andrew Curliss
acurliss@newsobserver.com

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 (Raleigh) News & Observer series and welcome additional oversight.

Rural Center leaders, however, said the newspaper reports do not properly reflect the organization’s 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. 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 center’s grants.

Call to suspend official

Without examining other files and projects, it is unclear whether there would be additional questions about the center’s 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 center’s grant-making decisions. As it is now, a subset of the nonprofit agency’s 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 Center’s 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 center’s 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 center’s board approves a plan of work each year; the center provides an annual report to the General Assembly’s Fiscal Research Division; and Hall himself is evaluated by the center’s 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.

Curliss: 919-829-4840
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