Rural Center plan would halt grant-making, diminish agency

by Andrew Curliss, News and Observer, August 29, 2013.

Leaders of the N.C. Rural Economic Development Center outlined plans Wednesday for a diminished future for the nonprofit agency, saying the loss of millions in state money will lead it to a focus on growing small businesses and helping develop leaders in rural areas.

But the Rural Center would no longer make grants under the plan that was discussed by the full center board, ending a decade of efforts to use state money in poorer areas for job creation and other infrastructure work. The center had long been a voice for rural North Carolina within state government, using hundreds of millions in state funds to make grants.

Officials stressed Wednesday that the center’s best efforts and long-standing work to assist rural areas will continue in some form but will be handled by the state Department of Commerce with different oversight and accountability. About 15 current employees of the center are expected to shift to the commerce department to continue overseeing the center’s grant programs.

The Rural Center’s future has been in doubt after its accounts were frozen following a critical state audit and lawmakers cut off new funding. Leaders of the center said previously they would have to at least consider dissolving the center, which is housed in an office complex in Southeast Raleigh.

Commerce Secretary Sharon Decker met with Rural Center leaders and expressed optimism about continued help for local communities across the state, including one that provides grants to rehab vacant buildings for business owners.

Layoffs begin

The board did not take action on the downsizing plan, but many board members expressed support. The plan would shift the center’s main focus to overseeing several smaller loan programs focusing on small businesses. The center would survive on about $1.6 million a year in various streams of funding, officials say.

The refocused center would employ about 12 to 15 people, down from 47.

An estimated 15 employees received layoff notices and will leave the center this week. Among those leaving will be the current acting president, Elaine Matthews. Patrick Woodie, a vice president, was put in charge Wednesday.

Bill Gibson, the acting chairman of the center’s board, said Wednesday there are “promising potentials ahead” for the downsized center and a possible partnership with the state Commerce Department that would include having the state employees move into its offices.

The administration of Gov. Pat McCrory says it is continuing to honor grants awarded by the center, releasing about $3 million in recent weeks. McCrory has said new grants for rural areas will be made after October.

A question of severance

The board also heard an update from its lawyer about $241,000 in a special severance account built up over the past decade for the center’s longtime president, Billy Ray Hall. The lawyer told board members that he could not recommend making any severance payment to Hall now because his review shows that the full board had not approved spending the money.

The lawyer, Bob Saunders of the Brooks Pierce law firm, said that more information needs to be gathered about whether the payment would be acceptable for a tax-exempt agency to make. He said making the payment could lead to an IRS audit.

He said that not making the payment could spur a legal battle with Hall who, through a lawyer, has inquired about receiving the money.

The board will ultimately vote on whether to make the severance payment, Saunders said. It is not clear when.

Hall resigned last month, and the Rural Center lost state funding in fallout after a News & Observer series and a critical state audit, both questioning how well the center was overseeing millions in state money intended to help poor, rural areas.

The severance account was first disclosed in a footnote of the state audit, but it had been set up by a subset of the full Rural Center board known as the executive committee. Some Rural Center board members expressed surprise about the account. Others have defended it as a deferred compensation plan to reward Hall.

The severance account is separate from and in addition to retirement contributions and salary for Hall, which topped $221,000 and had drawn criticism from state auditors as being unreasonable for the type of private nonprofit agency he was running.

Rural Center board members had already voted to hold off on releasing the funds amid concernabout the account.

Hall had led the Rural Center since its formation in 1987. The severance account was added to his compensation package in 2003, officials have said. Longtime board chairwoman Valeria Lee had expressed support for the severance account last month, but then resigned her unpaid post days later.