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Loophole Locks Lawmakers Out Of Pot Of Money

5:22 PM, Jul 26, 2013   |    comments
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Greensboro, NC -- - School bus repairs, drug treatment programs, work training for the recently divorced or widowed - each is a program lawmakers reduced in the budget that was passed this week. What if 2 Wants To Know told you there's already a pot of money out there which could have helped pay for these recent budget cuts? We found a legal loophole is keeping it out of lawmakers' hands.

Under the current state law, non-profits that get state grants are not required to give over interest money generated from those grants. The way the law is written, your elected officials can't keep an eye on it.

State Auditor Beth Woods says a prime example is the North Carolina Rural Economic Development Center. Woods just audited that group and found during the past five years, the state gave the Rural Center about $145 million in grants.  Those grants accrued $20 million dollars in interest. So the Rural Center could spend it anywhere it wants - including out of state.

"That's another $20 million that could be designated to go into economic development for the state of North Carolina, but the state government has lost the power to have any say so in that interest earned and what to do with it," Woods said.

This legal loophole only applies to non-profits that get state grants. If a city like Greensboro, or the county or the school earned money off a state grant, they'd have to reinvest 100 percent of that interest in the original project or give it over to the state.

"If we're going to treat state dollars going to cities, counties and school boards one way, why treat it any different for the not-for-profits?" Woods said.

This loophole only exists at the state level. The feds require both non-profits and local governments receiving grants to hand over interest earned.

The Rural Center would not comment when asked about the accrued interest. Instead it writes it plans to use the audit to "strengthen our organization." The Rural Center also told the auditor it has earmarked half of the interest - about $10 million - for economic programs similar to a recent company expansion in Randolph County where 25 additional people now have jobs - including Eddie Davis.

"Very glad because jobs are difficult to come by. Especially a decent job that pays a decent wage," Davis said.

No matter how the money is used- good or bad - right now, lawmakers and taxpayers are shut out of the decision process. On top of all that we don't know how big this pot is because no one tracks the interest from these state grants given to charities. But we're going to try to figure it out. 2 Wants To Know will let you know what we find out.

WFMY News 2

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