RALEIGH — NCInnovation board member Art Pope has no comment on whether or not his audit complaint about the organization’s financials is now a closed matter.
“Not commenting on it,” Pope told North State Journal.
“I mean, I have to say I’m not commenting on that,” Pope said when asked if the audit issue was resolved. “There are open matters that are being addressed within the organization by the board, and the letter speaks for itself with the state auditor.”
Pope would not say if he had further audit complaints planned.
“Would not even begin to comment on that,” said Pope. “I mean, I’m right now working with … we have a board meeting coming up. I’m looking forward to a good board meeting. A productive board meeting.”
Established in 2020, the purpose of NCInnovation (NCI) is “accelerating commercialized innovation from North Carolina’s universities.” On May 16, NCI announced $5.2 million in funding for eight research projects at seven North Carolina public universities.
The audit controversy stems from NCI receiving $500 million in nonrecurring funding over two years as part of the 2022-23 budget. NCI may use $50 million of the “NCInnovation Reserve Fund” endowment as investment income in the 2023-24 fiscal year and $90 million in the 2024-2025 fiscal year.
On Oct. 23, 2023, Pope was appointed to the NCI board by House Speaker Tim Moore (R-Kings Mountain). Three weeks before his appointment, Pope and four other business leaders signed a letter to Republicans in the House aimed at killing NCI’s appropriations. The letter, published by Business NC on Sept. 19, 2023, also denounced Medicaid expansion and casinos.
In addition to serving on NCI’s board, Pope is the chairman of the John William Pope Foundation. In 1990, he launched the John Locke Foundation, a conservative think-tank that operates the news site Carolina Journal.
On Feb. 14, Pope emailed a complaint to the North Carolina state auditor about NCI’s financials.
The letter requested an independent audit and examination by the state auditor to determine if NCInnovation has adhered to statutory requirements, maintained adequate accounting practices and provided accurate financial reports.
NCI had submitted a “Compliance Certificate” dated Dec. 7, 2023, certifying that it maintained records and accounts in accordance with Generally Accepted Accounting Principles (GAAP), which was a condition precedent for receiving a $250 million state appropriation transfer.
NCI hired the accounting firm, Thomas, Judy & Tucker, P.A. (TJT) for the review, which indicated adjustments to the financial statements in accordance with GAAP, but Pope said these adjustments were made after the Dec. 7, 2023, Compliance Certificate was submitted.
However, Pope believes that as of Dec. 7, 2023, NCInnovation was not maintaining its records, accounts and financial reporting in compliance with GAAP, particularly regarding the recording of multiyear charitable pledges as revenue and assets. Pope claimed NCI improperly recorded future pledges as current revenue and questioned whether GAAP was being employed.
In 2023, prior to receiving its endowment from the legislature, NCI had begun switching from cash-based accounting to accrual accounting and some corrections were made to its financials as a result. Public records showed that months before Pope sent his complaint, both the North Carolina Department of Commerce and the private accounting firm that reviewed the financials found no wrongdoing and that NCI was GAAP compliant.
Previously unreported is that Pope sent his complaint to the auditor while sitting in an NCI board meeting presentation that was explaining the financial corrections and NCI’s compliance with GAAP.
When asked why he sent the audit complaint during the board meeting presentation where his questions were being answered, Pope responded, “It was an open meeting … public records, so whatever you observed or heard.” He also maintained he “was not getting the information I was requesting.”
North State Journal asked about NCI board presentation materials that counter his objections to the state auditor, and Pope responded, “That’s your understanding, but my letter speaks for itself and I’m not commenting on it further.”
The Department of Commerce (DOC) was set to cut the appropriations check to NCI on Dec. 18, and one of the requirements was that NCI financials followed GAAP.
The same day the check was supposed to be released, Pope raised questions about NCI’s records being kept in accordance with GAAP.
Additionally, not long after Pope raised his questions with the DOC, Joe Coletti, director of oversight staff for the North Carolina House Majority, called the department with the same questions about GAAP compliance and statutory interpretation. Coletti is a former John Locke Foundation employee.
When asked, Coletti told North State Journal he spoke to the House speaker’s office but at first said he wasn’t sure if he had spoken with Pope about it. Later, Coletti said, “I’m sure I talked with (Pope).” He also said he spoke with Bennett Waters, president and CEO of NCI, about what the organization had sent to the Department of Commerce.
North State Journal asked if Pope had communicated with Coletti during the December exchanges with the DOC.
“I had no communications (with him) nor with the Department of Commerce,” Pope said. “I talked to many people about many things.”
The inquiries from Pope and Coletti and subsequent back and forth between NCI and the DOC resulted in a five-week delay of the check being cut to NCI. The impact of the delay, as noted in NCI’s board documents, was the loss of approximately $1.33 million in interest that NCI could have accrued on the funds.
North State Journal asked Pope if he had considered the impact on the interest accrual due to his questions to the Department of Commerce.
“That’s a very vague question,” Pope replied. “I wouldn’t even know how I began to answer, and I already said I’m not commenting on my audit request. That audit letter speaks for itself.”
Pope responded with “of course” when asked if he planned to remain on the NCI board.
