The audit, released Wednesday, also found that the partnership's former president, Rick Watson, had a conflict of interest by seeking to work for a private project to develop an entertainment complex near Roanoke Rapids while continuing to lead the partnership. Watson resigned from the partnership last month.

North Carolina's Northeast Partnership is the marketing arm of the Northeastern North Carolina Regional Economic Development Commission, which serves a 16-county region that stretches from the Outer Banks to Halifax County. It has received more than $4 million in state money over the past three years.

The audit said the boards that oversee the partnership had provided almost no oversight of the money entrusted to it by the public.

A spokesman for State Auditor Les Merritt said the findings are triggering audits of six other regional partnerships. The audit also could push lawmakers to cut funding or step up oversight.

State Sen. David Weinstein, a Lumberton Democrat, who is the chief budget writer for the committee that oversees partnership funding, said he was "flabbergasted" at the lack of accountability.

"We need to get these spoiled little apples out of the barrel," Weinstein said.

The partnership's interim head, Vann Rogerson, did not dispute the audit's findings. He said both boards are now moving to provide the needed oversight, but he declined to discuss many audit findings in detail.

"My charge is to go forward," said Rogerson, who has been with the partnership for about nine years.

The partnership also has been pulled into a federal investigation into the work of lobbyist Meredith Norris, who had a public relations contract with the partnership. Rogerson, reading a statement from the board's chairman, said Norris had received $24,000, but the partnership had no documentation to show what she did for the money.

Norris was House Speaker Jim Black's unpaid political director until last fall. Correspondence from Black's office showed that he helped secure $500,000 for the entertainment project in the state budget.

The audit found that $572,000 in bonuses had been paid to partnership employees, state Commerce Department employees and consultants over the past three years with no written justification. The bonuses account for 14 percent of the $4.1 million the partnership received from the state during that period.

Watson received $240,000 in bonuses, including nearly $100,000 last year. Rogerson received nearly $102,000 in bonuses over the three years. A former employee received a $3,000 bonus despite working less than one month of the yearlong period in which the payments were based.

Three Commerce Department employees who work with the partnership received $66,000 in bonuses, despite not being supervised by the partnership. Donald Hobart, a Commerce spokesman, said the department is looking into the bonuses.

"Without documentation of the criteria for bonuses, the state has no way of knowing if the bonuses were deserved, reasonable, the most effective use of state resources, or whether they enhanced economic development," the audit said.

The audit found that the partnership's federal tax returns underreported Watson's and Rogerson's compensation by tens of thousands of dollars over a three-year period. For the 2003-04 fiscal year, the tax return should have reported that Watson received $256,039 in compensation. But it listed less than half that amount -- $123,878. The partnership said in its response that an accountant made a mistake on the tax returns.

The audit questioned nearly $890,000 in contracts with consultants, finding partnership officials did little to make sure the money would be well-spent.

Contracts often favored consultants with terms such as expensive buyout clauses. The audit found no documentation to justify paying more than $50,000 to two consultants. The partnership later obtained documentation from one contractor, but has yet to receive it from the other. Rogerson declined to say whether the other contractor was Norris.

Senate leader Marc Basnight said the audit reflected a "terrible abuse of authority." But he said he still favors distinct regional economic development groups funded by the state.

"We'll fix it," said Basnight, a Manteo Democrat.