Rural Center Board Member Calls For Comprehensive Audit

Civitas Board Chairman Bob Luddy is also on the board of the Rural Economic Development Center (REDC).  The Raleigh News & Observer and Charlotte Observer recently ran stories highlighting questionable practices by the  center, and the N&O followed up with an editorial that concludes “the center has become less about sustaining rural communities and more about sustaining itself by pleasing lawmakers and others who are politically connected.”

In the wake of such publicity, Mr. Luddy sent the following letter to his fellow REDC board members:

Members of the REDC Board:

The News & Observer and Charlotte Observer articles of Saturday and today have shown serious implications in the management and operations of the REDC. These are issues that must be addressed by the entire board to fulfill our fiduciary and legal duties to every taxpayer in our state. The board should immediately hire an independent forensic auditor to begin a review process.

In one case, a grant from the REDC to the Randy Parton Theater caused severe long-term economic harm to the City of Roanoke Rapids, while in other cases the REDC takes job credits for dubious grants laced with political influence. These practices must be terminated immediately by the REDC Board.

Key issues are:

1. Most of the funds held by the REDC rightly belong to the State of North Carolina.  Many grants listed on the  REDC statement on June 30, 2012 are now de-obligated as far back as 2002. This means the Balance Sheet does not accurately reflect the true position at that date.  I have already put the former auditors on notice about their statements, based on information provided by the center. Note spread sheet attached.
2. The relationships among developers, local politicians, bankers, legislators and the Rural Center do not appear to be at arm’s length. The practice of maintaining dossiers on elected officials must be banned summarily.
3. Job creation claims are very deceptive and misleading. Job claims are made concurrent with grants and as you know many times these jobs are not created and or sustained. Grants from the REDC to a project do not mean the center created these jobs, it simply means it provided a grant.
4. Every grant must be voted on individually by the board. This has not been done. Policies of the REDC have not always been followed based on documents recovered and sometimes arbitrarily violated.

Due to the extremely serious implications of potential inappropriate activity and board oversight, the following are my recommendations to the board:

1. The board should hire an independent forensic auditor and attorney to review all transactions of the last five years and all outstanding grants.  Included in this audit will be compliance with all laws, REDC policies and legal board approval. Review balance sheet dated June 30, 2012 based on my memo to McGladrey and all information provided by management and the audit committee.
2. The June 30, 2012 audited statement should be reviewed based on current management information and restated and explained to the board.
3. Funds granted by the state to the REDC should be returned to the NC State Treasury until such time as they are required to meet legal obligations, which are approved by the Board. Request the Governor and General Assembly to withdraw any new funding until completion of both audits and review by the board.
4. Bill Ray Hall should be put on a 90-day non-paid leave of absence during this REDC review process to insure a fair and unbiased outcome. He must be available to answer questions from the auditor and reviewers.
5. Request the NC State Auditor to conduct a complete audit and compliance with state laws.
6. Request the Attorney General to review all transactions for legal compliance especially any allocations of pay-to-play.
7. Every future grant must be reviewed one at a time by the full board and should be subject to challenge by any board member. Full disclosure of every person involved in each grant must be made to the board. This includes beneficiaries, elected officials, developers, bankers, consultants or any related parties.  Every single document must be available for inspection of board members. Discontinue the grant process, effective immediately and indefinitely until all grants are reviewed and verified by the board.
8. The policies related to claiming job creation must be reviewed by the board and the new policy must accurately reflect the truth.

NC Rural counties will achieve a renaissance in economic development, job creation and prosperity based on the following ideas.

• K-12 Education requires dramatic improvement. Many rural students lack educational opportunities and alternative choices, which is imperative for job creation.
• Vocational education must begin in high school to develop a workforce ready for modern technology.
• Rural counties must be open to new charter schools and private schools to meet the needs of all students.
• Science and Math must be stressed since we live in a technological world.
• Entrepreneurs must be encouraged and supported by each community and state. Taxation and regulatory policies must be small business friendly.
• Private investment in manufacturing and technologies is critical to job creation and sustained economic growth.

Student apprenticeships may reflect education’s future 

Every dollar the REDC spends is taken from taxpayers and small business operators (the real job creators).  Apprenticeship programs are one of our greatest needs.  

Bob Luddy
Board Member
Rural Economic Development Center