News: CJ Exclusives

Bill Didn’t End Debate on Nonprofits

A new law was supposed to strengthen rules on state-funded nonprofits, but it may have done the reverse

Gov. Mike Easley on Tuesday signed into law a bill that, according to his press release, will “clarify and strengthen the reporting requirements for non-state entities receiving state funds.”

But State Sen. Hamilton Horton, a Forsyth County Republican, said that in some ways the new law weakens accountability for state-funded nonprofit organizations.

“It doesn’t require a cutoff of funds, as in the previous law,” Horton said. “They leave it to the executive.”

That would be the state’s budget administrator, Easley, and his budget director, David McCoy. The new law also makes McCoy responsible for setting the rules for nonprofit reporting to the state budget office on how they spent the state’s money.

“This bill gives the state more ability to supervise the use of our state dollars,” Easley said. “This is an important step in our efforts to continue to increase accountability for taxpayer dollars and to ensure that all state funds are being used appropriately.”

But in reality the accountability isn’t increased, but moved from state agencies to the budget director, whose previous role was advisory. Language in the old law, now repealed, said, “a state agency shall not disburse funds…to any grantee that has not complied” with reporting requirements. Horton said the problem before was that while the law provided for agencies to stop disbursements, automatically, they often failed to review reports from nonprofits or verify that they were filed.

“The difference now is that if you don’t file reports, the new law says [accountability] is at the discretion of the [State Budget Office],” Horton said. “It’s not an automatic cutoff any more.”

The new law says, “The Office of State Budget and Management shall adopt rules to ensure the uniform administration of state grants….” The termination of funding is not automatic, in legal terms, but the budget director “shall have the power to suspend disbursement of state grant funds….”

The General Assembly short session, which ended last month, centralized accountability for some significant state functions under Easley’s leadership. Besides the new nonprofit reporting responsibilities, oversight for all state technology purchases was removed from the Information Resource Management Commission and given to the state’s chief information officer, George Bakolia, who reports directly to the governor.

Horton noted also that Easley’s budget adjustment recommendations removed four staff positions from the Office of the State Auditor, Ralph Campbell. In recent months Campbell released reports critical of the management of Easley’s Department of Health and Human Services and his More at Four program. Campbell requested funding for four new positions; the final budget left the auditor’s office with no net change in employees.

Dennis Patterson, spokesman for Campbell, said the office’s responsibilities remained largely unchanged by the new nonprofit accountability law. He said the auditor was responsible for collecting reports, evaluating data, and advising, but not enforcement.

Despite the staffing stagnation, Patterson said the auditor was shifting personnel to increase scrutiny of nonprofits. Campbell said earlier this year that he was adding a specialist because of increased interest in that area.

“We’re trying to do some shuffling to get the positions aimed at the nonprofit sector,” he said. “We’re probably going to add an investigative person also.”

Still, Horton was skeptical of the new law.

“You’ve got a situation where there’s enough law to hold the loopholes together, all the wording of a genuine statute,” he said. “But everywhere you turn it permits people to fudge, and get their funds without complying with the law.”

But the bill passed both chambers of the legislature unanimously, albeit early in the morning in the waning days of the state Senate session. Horton couldn’t remember if he voted for the legislation or abstained.

The bill’s sponsor, of course, believed accountability was strengthened.

“The use of our taxpayers dollars should be carefully guarded,” said Sen. John Kerr, D-Wayne. “I am pleased to see that we will now have safeguards in place to make sure that those receiving state funding are not using them improperly or for personal gain.”

Paul Chesser is associate editor of Carolina Journal. Contact him at [email protected]