State Auditor Les Merritt - North Carolina

The state auditor says he will look into how legislative leaders handed out the money

RALEIGH - A little more than $1 million remains of $10 million in "reserve funds" controlled by House Speaker Jim Black, but he has not decided what to do with the money.

"We may hold that to plug the holes we need to plug," Black said Monday night. But the Mecklenburg County Democrat also said he would have to consult with former House Republican Speaker Richard Morgan about how to handle the remaining money.

A spokeswoman for Black said Monday that pending requests from legislators could take up nearly all of the remaining money.

The reserve funds that were tucked in three state agencies -- but controlled by legislative leaders -- have drawn criticism from government watchdog groups and several lawmakers. Some are putting pressure on State Auditor Les Merritt to conduct an audit.

Merritt said Monday that he will look at how legislative leaders steered the money into dozens of nonprofits and government projects over the past several months with no public oversight.

Merritt did not call his fact-finding mission an audit. But he said he will launch one if the findings point toward misspent money or a violation of spending procedures.

"I can't really tell you at the end of the day, after we round up all of that information, that we actually end up with an audit," Merritt said. "It's just a little premature at this point. But certainly with all that's come out, we've got to look at it."

Black and Morgan had control of $10 million in reserve funds placed within three state departments: Cultural Resources, Health and Human Services, and State Budget and Management.

The two leaders spent hundreds of thousands on projects that benefited their districts and gave money to favored lawmakers to spend on groups in their districts. The only requirements were that the money go to nonprofits or governmental agencies that had policies to protect against conflicts of interest.

A News & Observer review of some of the projects found that the nonprofits or government agencies had not expressed a need for the money. In other cases, money went to programs in which lawmakers served on the boards of directors.

Black and Morgan stand behind the spending, saying it went toward worthy projects.

Black also spent $45,000 to help the man who kept him in power the past two years -- former Rep. Michael Decker of Forsyth County -- win a state job. Black said Decker was qualified for the job and deserved help for his role in forming the Black and Morgan coalition that ran the chamber.

Senate leader Marc Basnight had control of $6.5 million in the reserve accounts. He had publicly identified roughly $6 million in spending in Senate budget documents, but an additional $580,000 went toward projects that were not disclosed. Basnight said he was not aware of the undisclosed spending.

Basnight had $2,500 left in the reserve funds. He said he wouldn't touch it.

A taxpayer watchdog group, Americans for Prosperity of North Carolina, and state Rep. John Rhodes, a Mecklenburg County Republican, are holding a news conference today to call for an audit, a suspension of further reserve fund spending and for state Attorney General Roy Cooper to determine whether the spending was allowed under the state constitution.

"I look at state government as a corporation and you and I and other taxpayers as investors," said the watchdog group's state director, Chris Neeley, a former manager of Republican Richard Vinroot's gubernatorial campaigns. "And when they do things with our money, we have a right to call the question."

Merritt said several other lawmakers had contacted him about the spending.