Rural Center: president resigns, governor suspends taxpayer funds

Jul. 18, 2013 @ 08:50 PM

RALEIGH — The longtime president of the embattled North Carolina Rural Economic Development Center announced Thursday his immediate retirement a day after a stinging state audit. Gov. Pat McCrory's administration said later it was suspending funding of the center and suggested seizing state money held by the organization.

The audit released Wednesday said the taxpayer-funded nonprofit agency led by Billy Ray Hall failed to provide proper oversight of millions in grants while paying Hall too much money. McCrory called for the replacement of Hall and Valeria Lee, who chairs the center's board.

The center's statement issued Thursday announcing Hall's retirement made no mention of the scrutiny now facing the center he has led for 26 years.

"I have devoted my entire career to improving the quality of life for all the people of North Carolina," Hall said, according to the release. "It has been humbling to see the tremendous impact that the N.C. Rural Center has had in communities across the state. But our work is not finished. From Ahoskie to Bakersville, from Alexander County to Duplin County, it is important that this work continue, and that best can be accomplished under new leadership."

State Auditor Beth Wood's report said oversight requirements on millions in grants issued by the center were not diligently enforced and that job creation claims could not be verified. The audit also questioned Hall's $221,000 annual salary and another $241,000 in a special account to be paid to him as a cash severance if he leaves, in addition to generous retirement benefits. Hall's retirement statement made no mention of whether chairwoman Lee will resign or whether Hall will still collect the severance cash criticized in the audit.

While McCrory's office called Hall's departure "a positive step," it suggested the center's board review the audit and the center's response. The state audit said the Rural Center's response "misleads the reader."

State Budget Director Art Pope wrote to center executive Elaine Matthews telling her the state budget office was suspending disbursement of public funds to the group and told the center to stop giving state money to its grant recipients. The center also should stop using state funds to pay employees or for other expenses, Pope wrote.

The state budget office also is considering the further step of recovering state funds held by the center, Pope wrote, with a decision based in part on "a detailed and truthful response" to the audit and other "corrective actions" the center can perform immediately. The amount of funds recovered may be more than $100 million, Pope said.

The recovery would "ensure the funds are used for the original purpose of serving rural North Carolina," McCrory's office said.

Center officials were evaluating Pope's letter Thursday evening and "will attempt to resolve this matter quickly and satisfactorily," spokeswoman Garnet Bass said by email.

A state budget proposed by the state Senate would completely eliminate state funding for the center, while a proposal in the House would provide more than $36 million over the next two fiscal years. Lawmakers are currently meeting to sort out the differences between their budget proposals. In a separate letter to lawmakers negotiating the budget, Pope suggested the center may have tried to conceal the audit until after the final budget was completed. Bass said later "the center made no attempt to conceal the audit."

Established in 1987 following a legislative study, the Rural Center is supposed to spur economic development in 85 North Carolina counties, with a special focus on helping individuals with low to moderate incomes in non-urban areas. The center received about $17 million in state funds over the last fiscal year. The center has received $363 million in state funds and grants since July 2005, the budget office said.

Senate leader Phil Berger on Wednesday renewed his call for taxpayer money to be cut off. Following Hall's resignation, he pushed for the big severance payment to be withheld.

"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 said Thursday.

The Rural Center has been under fire following stories published by The News & Observer of Raleigh last month that detailed several cases where grants resulted in no new jobs or far fewer than the center reported back to legislators. The Rural Center has nearly $70 million that has gone unspent because of delayed projects or busted deals, according to the newspaper's review of public records.

The newspaper reported that the center used millions in taxpayer money to help build fast-food restaurants, golf resorts and big-box retailers including Wal-Mart. While Hall claimed the center used state money to create nearly 20,000 jobs in the past five years, the newspaper found more than 950 jobs in the count from projects that haven't yet begun.