Oversight needed for state grants, report says

November 17, 2009

A watchdog agency says the state needs to provide more oversight for the hundreds of millions in grants it awards to North Carolina nonprofits each year, The Associated Press reported Nov. 9.

State agencies distributed a total of $694 million in grants in fiscal 2008, but few processes are in place to ensure the funds are used appropriately, says the report from the General Assembly's Program Evaluation Division.

Only six percent of the 2,758 nonprofits that received state funds last year are large enough that they are required to be audited; the remainder file annual reports that include line-item expenditures, but no documentation is required for expenses.

Almost 80 percent of state grant funds went to about seven percent of nonprofit recipients, with the North Carolina Rural Economic Development Center receiving $145 million, more than any other grantee.

To ensure better oversight of state grant funds, the report recommends:

* Lawmakers should require nonprofits to provide information about the number of people served and services delivered.

* Nonprofits should be required to file financial reports within 90 days of the end of the state's fiscal year.

* Lawmakers should move toward a competitive grants process and away from identifying specific grant recipients in legislation.

* The General Assembly should retain two percent of state grant dollars to fund oversight.

* Lawmakers should ask the State Controller's Office to block payment of grants to nonprofits that do not comply with reporting requirements.

State Sen. Martin Nesbitt of Buncombe County urged caution in implementing the recommendations, noting that increased paperwork could be a burden to smaller nonprofits.

"I don't want to create any more of a convoluted system," he says in a statement.

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