Carolina Journal News Reports
RALEIGH — Missing from the state auditor’s report on the John A. Hyman Foundation last week was $140,000 the nonprofit organization received from the N.C. Department of Health and Human Services.
State Auditor Ralph Campbell’s critical report on the Warrenton-based foundation listed a total of $2,115,000 in state funds the organization had been allocated since 1994. All of the money came through the N.C. Department of Correction.
But the tally of state funds listed in the report was incomplete. Carolina Journal uncovered and previously reported that in 1997 the foundation, chaired by 1st District Rep. Frank Ballance, also received funds from DHHS.
The money was part of a $2 million discretionary fund the General Assembly had allocated to DHHS. There were no specific guidelines on how the money could be spent, but records obtained by CJ showed that Senate leader Marc Basnight and then-House Speaker Harold Brubaker each controlled half the money. The Hyman Foundation grant came from Basnight’s share. There was no application process for the funds and no specific reporting requirements attached to receiving the money.
But before receiving payment, the foundation had to submit information to the agency’s chief budget officer. As chairman, Ballance signed a January 1997 transmittal letter accompanying the information.
At the request of CJ, a Basnight spokeswoman issued a comment on the Hyman audit. “State funds should not be used for purposes other than which those funds were allocated, and oversight of nonprofits is needed to make sure they are delivering the important services that many North Carolinians rely on.”
For his last six years in the state Senate, Ballance served as the deputy president pro tem under Basnight.
Much of the foundation’s money, however, never found its way to the intended purpose, the audit said. As chairman of the foundation, Ballance, instead, wrote checks to relatives and people who contributed to his political campaign.
“This program is riddled with conflicts of interest in providing contracts and services,” Campbell said at a press conference to announce the audit’s findings Oct. 22. Because of time constraints and shoddy record-keeping by foundation officials, Campbell’s investigative team limited its examination of the nonprofit’s records from July 1, 2000 through April 30, 2003. The audit called for the foundation to immediately return to the state $239,000 in unspent funds it has in three bank accounts.
The day after the audit was released, N.C. Attorney General Roy Cooper’s office sent a letter to foundation officials demanding that they put the $239,000 into an escrow account until the State Bureau of Investigation examines allegations of mismanagement, conflicts of interest, and misuse of funds. Cooper also said his staff had been investigating the foundation before the audit was completed.
The FBI also is investigating whether Ballance and other foundation officials were involved in any criminal wrongdoing. The day the audit was released, Ballance told the Rocky Mount Telegram that he had not been contacted directly by the FBI. But, he said, “I am aware they are moving around.”
On Wednesday, the News & Observer of Raleigh reported that a federal grand jury is scheduled to hear evidence next week in what appears to be a federal criminal investigation of Ballance and the Hyman Foundation.
In response to Campbell's audit, the foundation blamed its mistakes on overworking of its staff and “regulatory interpretation.”
“In conclusion, the JAHF is proud of its charter and the work it has done. Having read the report, however, it is chagrined at its administrative shortcomings and what, at times, can only be characterized as shortsightedness. It will work hard to learn from its mistakes and will take corrective action. It appreciates the opportunity to address the issues raised by the special review and looks forward to continuing in its efforts to serve the public at large.”
Carrington is associate publisher of Carolina Journal.