N.C. Audit Outlines Spending In Grants Flap

RALEIGH, N.C. -- An audit released Thursday outlined the use of $14 million in "discretionary funds" handed out by three legislative leaders to nonprofit groups, allocations that raised political hackles over whether the three exceeded their authority in controlling the money.

The report by State Auditor Les Merritt reached no conclusions about whether House Speaker Jim Black, former co-Speaker Richard Morgan and Senate leader Marc Basnight acted improperly when they handed out money that was set aside in this year's budget.

Merritt forwarded the report to State Attorney General Roy Cooper to "consider and render legal opinion as deemed appropriate." But it suggested that Cooper consider, based on the data collected:

_ how state law applies to the reserve funds and their "origination, allocation, control and disbursement and other surrounding circumstances."

_ what constitutional issues and/or separation of powers issues are raised in relation to the funds and their use.

_ any relevance of the situation to personnel issues _ a point related to the use of some funds that ultimately led a political ally of Black's to land a state job.

A call placed after business hours to a spokeswoman for Cooper was not immediately returned.

In responses attached to the report, Black and Basnight defended the disbursements as being made "to a number of worthy programs in communities across our state," in Black's words.

The three leaders signed off on grants that funded such items as historic buildings, health-care centers and arts projects in districts of political allies. Some money was spent to hire former Rep. Michael Decker, a Black ally, as a community development specialist in the Department of Cultural Resources.

Though the money in the fund was distributed by state agencies, legislative leaders essentially decided which projects would be among the dozens of winners.

Several lawmakers urged Merritt's office in March to investigate, saying the leaders lacked the authority to control the money.

At the time, Black, D-Mecklenburg, defended the method for disbursing the grants, saying it ensures legislators can bring something home to their districts if the final budget leaves them out. Such reserve funds have been common practice in state government for years, he said.

"While it is clear that the budget process did not work the way it should have, I continue to believe that every project the Senate recommended for funding last year was truly deserving," Basnight, D-Dare, wrote in a letter dated June 23 and included with the report.

Black's response, dated Wednesday, said he suggested Decker for a state job after his staff and officials at Cultural Resources discussed "the need to promote historical sites and tourist areas in the smaller communities of our state."

"When Mr. Decker asked me to assist him in find a job in state government, I thought Mr. Decker's background _ a history teacher who has an interest in state historical sites and experience in public service _ fit with the identified needs in Cultural Resources," he said.

In 2003, Decker switched from the Republican Party to the Democrats to force a 60-60 partisan tie that led to the election of Black and Morgan as co-speakers of the House. Decker later returned to the GOP and was defeated last year.

A one-sentence letter from Morgan, R-Moore, dated June 24 simply thanked Merritt for the opportunity to review the report.

Spending outlined in the audit was no surprise, as state agencies and the legislative leaders released records on the handouts last spring at reporters' requests.

The audit found that more than $1.23 million remained unspent as of June 1.