The North Carolina House Oversight and Reform Select Committee has called NCInnovation (NCI) CEO Bennet Waters to testify before the committee next week. The hearing — chaired by Reps. Jake Johnson, R-Polk, and Harry Warren, R-Rowan — marks the first real public examination of the private non-profit since the appropriation of $500 million in state taxpayer funds, as lawmakers seek answers about NCI’s legislative reporting, use of state funds, and more.

The hearing is scheduled for Tuesday, July 9, at 9:00am in the Legislative Building’s Blue Ridge Auditorium.

NCI was created by some of the state’s business leaders in 2018. The aim of the nonprofit is to further applied research projects at select UNC-system universities toward commercialization by funding select projects with taxpayer dollars. The leaders behind the effort were originally requesting over $1.4 billion in taxpayer funds to finance their personal vision for an improved research-to-retail ecosystem, and were ultimately appropriated $500 million (in two $250 million installments).

“The General Assembly made a big bet on NCInnovation. If it succeeds in bringing university research to market, the state will reap significant returns,” said committee co-chair Warren in a press release announcing the hearing. “NCI leadership has not publicly addressed its funding assumptions or its operations. This hearing can be a step to increase our comfort with putting so much faith in one organization’s ability to pick winning technologies.”

Committee staff confirmed to Carolina Journal that members are interested in hearing from NCI executives about:

  • the status of private fundraising, as required by state law;
  • progress in identifying research projects already “in the pipeline” at public universities;
  • the search for an investment manager for NCI’s anticipated $500 million pool endowment using state funds;
  • the first pilot round of $5.2 million in grants and selection criteria for those grants; and,
  • compliance with statutory provisions to receive each round of state funds.

In February of this year, NCI board member Art Pope formally requested the Office of State Auditor to investigate the non-profit for compliance with mandated accounting practices following concerns regarding the treatment of privately pledged donations and other stipulations required by law.

Pope is the owner and chairman of Variety Wholesalers Inc., which owns and operates a chain of discount retail stores spanning 17 states. He’s also a founding board member of the John Locke Foundation and chairman of the John William Pope Foundation, a family grant-making organization he has led since its creation in 1986. He was also a member of the North Carolina General Assembly and served as the state budget director from 2013-14.

Through public information requests, Carolina Journal learned board members appointed by the General Assembly were uncomfortable with how the entity was reporting private donations, notably if financial statements were embellishing private funds raised to satisfy statutory requirements.

Critics have blasted the use taxpayer money to pick winners and losers in the research and development space, noting that NCI should have been piloted itself before awarding the group such a large sum of taxpayer funds. While oversight hearings are certainly welcome, they think the attention should have been there from the beginning.

Senior vice president for research at the John Locke Foundation, Brian Balfour, is thankful for the oversight.

“The House Oversight Committee is right to question the leader of NCInnovation, an unproven organization that is set to receive a second round of $250 million in taxpayer dollars. Similar organizations in other states – organizations that NCInnovation themselves propped up as inspiration – have been plagued with corruption and extremely poor track records,” said Balfour. “Short of eliminating NCInnovation’s funding, the best thing for taxpayers is a high level of transparency to clearly convey how this new organization is spending their money.”

After a lobbying blitz during the height of budget negotiations two years ago, lawmakers gave the green light for $500 million in taxpayer funds, despite caution from critics, in two tranches. NCI is eligible to request the second $250 million tranche this month; the first $250 million in taxpayer funds was distributed earlier this year.

Now, House Oversight Committee members have questions about NCI’s use of those state funds, reporting compliance, and maybe even political favoritism.

Co-chair Rep. Jake Johnson, R-Polk, noted, “NCInnovation intentionally chose two projects from each region, which does raise concerns of how much it is making decisions on merit and how much on political considerations.”

Meeting details can be accessed on the House Oversight and Reform Committee webpage.