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Rural Center falls under fire

Published 8:55am Tuesday, July 23, 2013

RALEIGH – An entity that has poured millions of taxpayer dollars into projects in rural areas of North Carolina is under intense scrutiny after an audit questioned its oversight of state money and how it pays its long-time president Billy Ray Hall.

One day after the release of the July 17 audit, Hall abruptly resigned. He had led the Rural Center since its founding in 1987.

“I have devoted my entire career to improving the quality of life for all the people of North Carolina,” Hall said in a press 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.”

Valeria Lee, president of the RuralCenter’s board of directors, said she accepted Hall’s decision with a heavy heart.

“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,” she said. “He did this from one end of the state to another while cultivating friendships with thousands of people in every walk of life, each of whom knows him simply as ‘Billy Ray’.”

Lee appointed Elaine Matthews, the center’s senior vice president, to oversee the RuralCenter’s daily operations during this period of transition.

However, those “daily operations” have fallen under fire from state leaders, now more than ever since the release of last week’s audit.

Governor Pat McCrory has requested the Office of State Budget and Management immediately suspend dispersement of state grant money to the Rural Center. He also directed Rural Center officials to stop spending public funds until it provides corrective action in light of the recent audit.

Additionally, the new state budget, which is expected to be formally adopted this week by the General Assembly, may cut state funds to the Rural Center. In its place, the budget calls for the creation of a new Rural Economic Development Division within the state Department of Commerce. Its objective is to improve rural services and address rural needs. The new budget also invests in a new Rural Infrastructure Authority, a program where rural communities can get the support and resources they need without regard to political connections.

How this new entity will impact rural northeastern North Carolina is unknown, especially on the heels of the Rural Center’s continued investment into the local area. RuralCenter grants have helped pave the way to the opening of new businesses and investments in all four counties of the Roanoke-Chowan area.

But for all the positive steps taken by the Rural Center, the recent audit showed that approximately $20 million in interest earnings from undisbursed state funds is not available to the state; job creation or other performance measures were not verified for at least five grants; and grant reporting requirements were not diligently enforced.

Additionally, the audit questioned the $221,000 annual salary paid to Hall, saying it was out of line when compared to the salaries of similar positions.

The audit comes as the General Assembly debates the budget, to include how to go forward with funding the Rural Center. Last week, Senate President Pro Tempore Phil Berger said he wants to cut off the money.

“This audit reinforces my belief that the Rural Center should receive no taxpayer funds in the state budget. Funding the Rural Center would send the wrong message to voters who elected Republicans to provide accountability in state government,” Berger said.

Berger also issued a statement regarding the resignation of Hall.

“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. 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,” Berger stated.

In a response to the audit made prior to his resignation, Hall said the center has maintained the highest degree of ethical and fiscal integrity over its 26-year history. He said the Center has followed all accepted accounting procedures and reinvested interest earnings. Hall added that the Rural Center was in the process of refining their written policies and procedures to improve the way they manage and monitor grants.

As far as his annual salary was concerned, Hall said executive salaries are regularly evaluated and compared with similar nonprofit organizations around the country.

In her suggestions to the Rural Center, State Auditor Beth Wood said the organization should request clarification from the General Assembly about the intended use of interest earnings from state funds. The Rural Center should independently verify all grantee provided information for accuracy and reliability. The Rural Center should notify grantees when they become noncompliant with grant contract terms, including reporting and performance requirements. The Rural Center should compensate its employees at a rate that is comparable to executives in similar positions at rural economic development agencies.

Due to Rural Center oversights, Wood said there is an increased risk that more than $58.8 million in grant funds spent in fiscal year 2012 were not used for their intended purpose.

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