NCInnovation audit committee flags errors, delays final approval of IRS filing

The audit committee for NCInnovation, the state-funded nonprofit at the center of recent legislative and financial scrutiny, has delayed approval of its latest IRS Form 990 following a detailed review revealing compliance issues, disclosure gaps, and unresolved questions about past filings.

The decision came during a lengthy audit committee meeting this week, where external auditors from BDO and staff walked members through the draft of NCInnovation’s FY2023 IRS tax return. While the organization reported a dramatic increase in revenue—from $10 million to $259 million—driven by state appropriations and endowment funds, committee members raised concerns about how those funds were documented and disclosed.

Disclosure Omissions and Governance Gaps

Among the most significant revelations was the failure to update key governance disclosures in the tax filing. The draft Form 990 incorrectly stated that no changes had been made to the organization’s governing documents. However, board members pointed out that substantial amendments had been made to NCInnovation’s bylaws and articles of incorporation in late 2023.

“I think that needs to be checked ‘yes,’ and then we need to include a Schedule O disclosure that we amended our bylaws and articles of incorporation,” said NCI board of directors member Art Pope during the meeting, referencing a governance question on the draft Form 990. “Those amendments were made within the reporting period, and failing to disclose them would be inaccurate.”

Pope also highlighted problems with how actions taken by the executive committee—particularly a bonus awarded to CEO Bennett Waters—were documented. He pointed out that the decision was not immediately reported to the full board, a lapse that Pope is concerned could violate internal governance policies and IRS expectations for transparency.

Lobbying Records and H-Election Compliance

The committee also scrutinized NCInnovation’s reported lobbying expenditures—totaling over $460,000, with nearly $21,000 attributed to staff time. Under its 501(h) election, NCInnovation is required to maintain contemporaneous records to document lobbying activity. Members questioned whether those standards had been met.

“We discussed this last year and emphasized the importance of contemporaneous recordkeeping,” Pope noted, probing whether staff estimates had been reconstructed after the fact rather than tracked in real-time.

Staff responded that the allocations were based on calendars and meeting logs, using the same methodology as in previous years, but acknowledged that some records had been reconstructed.

“We went back and we brought all of those dates and and the time and then allocated essentially the same way we did for fiscal year 23,” said NCI CFO Linda Hall. “We referred back to those again in determining the allocations.”

Tensions Over Past Filings and Transparency

Members expressed frustration over how previous returns had been handled, particularly the amended Form 990 for the fiscal year ending June 2023. That amended form, filed in April 2025, was submitted without review by the audit committee despite including a statement that it had been.

“It said it had been reviewed,” said Pope. “It had not. That’s a material misstatement.” The board agreed to revisit the FY2023 return and work with an independent firm to conduct a full analysis and recommend any necessary amendments.

The meeting also underscored ongoing tensions between Pope and the organization’s auditors. Pope reiterated a standing request for a private meeting with BDO to raise unresolved questions from the last audit cycle—a request that, according to him, had not been granted.

Next Steps

The committee will reconvene once the FY2024 Form 990 is updated to include corrections related to board governance changes, executive committee activity, and improved narrative descriptions of the organization’s grantmaking—particularly its $13 million in pilot grants, which had not been adequately reflected in the draft.

The delay in approval marks another challenge for NCInnovation, which earlier this year saw lawmakers file legislation to claw back $500 million in taxpayer funding amid mounting questions about oversight and fiscal transparency. The organization, created to support commercializing university-affiliated innovation through grants and partnerships, has faced growing skepticism from some in the General Assembly.

With a September 15 deadline to file the final Form 990, the clock is ticking—and with legislative attention still fixed on the group’s stewardship of public dollars, the stakes remain high.

The post NCInnovation audit committee flags errors, delays final approval of IRS filing first appeared on Carolina Journal.

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