Uncertain future for NCInnovation as CEO to exit and legislators renew scrutiny

As North Carolina’s budget stalemate drags on, the board of directors for NCInnovation met this week to confront the organization’s uncertain future and the growing threat of losing state support.

This comes as NCInnovation’s CEO Bennet Waters announced that he is building out succession for his leadership tenure, with plans to step down within the next six months.

The nonprofit he leads is now at the center of a political debate over transparency, governance, and whether taxpayer dollars should continue funding its mission.

In a candid interview with CJ on Thursday, Rep. Harry Warren, R-Rowan, chair of the North Carolina House Oversight and Reform Committee, expressed serious reservations about continued state funding for NCInnovation, the nonprofit investment fund created to boost university research commercialization in the state.

“My issue isn’t whether or not they’re performing admirably or ethically or legally… My issue is the fact that they shouldn’t be funded with public taxpayer dollars,” Warren stated.

He argued that North Carolina has too many other budget priorities, including infrastructure and emergency response.

“Bridges need to be built; roads need widening; ports need work… To tie up $500 million with a group of guys that aren’t elected and apparently aren’t very adept at what they’re saying they’re going to do is, to me, unconscionable,” said Warren.

legislators look to clawback

NCInnovation has faced mounting scrutiny since receiving a $500 million endowment from the legislature in 2023. The House version of the 2025 state budget proposes pulling that funding entirely, while the Senate has offered a scaled-down alternative: replacing the endowment with four years of $25 million appropriations and reallocating remaining funds to a new children’s hospital.

With no budget deal in sight, board members are now weighing whether the nonprofit can — or should — shift toward a self-sustaining, privately backed model. Earlier this year, Warren and Oversight co-chair Rep. Jake Johnson, R-Henderson, also filed HB 154 to return the NCI endowment to the state’s general fund.

In the executive branch, a performance audit from the State Auditor’s Office confirmed that NCInnovation complied with core legal obligations but flagged several areas for improvement, including documentation of funding decisions, conflict-of-interest monitoring, and consistency in public disclosures.

In giving NCInnovation a half-a-billion-dollar endowment, lawmakers also gave themselves appointment power to the group’s board as a watchdog for public money. Among their appointees: Art Pope, co-founder of the John Locke Foundation. Much of the scrutiny came after Pope raised concerns about the group’s tax filings, lack of compliance with General Accounting Practices, and underreported spending on lobbying the state legislature.

Pope said that his questions have led to him being shut out of key information loops and that NCI leadership violated his rights as a whistleblower, attempting to intimidate him with threats of litigation. NCI formed a Special Litigation Committee earlier this year to weigh Pope’s concerns and whether his questioning and calls for more documentation constituted an unreasonable burden to the organization.

On Wednesday, the chair of the Litigation Committee presented a final report to the full board, saying that over the last eight months, the committee had met for over 17 hours across 15 meetings reviewing Pope’s allegations, as well as claims from NCI staff that Pope’s watchdog actions cost the organization time, money, and public image.

“The [SLC] litigation committee found sixteen of those [Pope’s] allegations to be totally unsubstantiated, and we found one allegation, while substantiated, was properly resolved,” the chair reported.

no lawsuit, but a “code of conduct”

Ultimately, the committee said they do not recommend pursuing litigation, without explicitly naming Pope as the potential target. Instead, the SLC recommended, among other points, that all members of the board of directors abide by a new “Code of Conduct” that would “reiterate Directors’ obligations under their duties of care and loyalty to support NCI’s mission, which advances the State’s interests.”

In comments to Carolina Journal, Johnson said that the legislative appointees are on the NCInnovation board to look out for the taxpayer’s interests, not just those of the organization.

“That was the whole string that was tied to it,” Johnson explained, referring to the legislature’s decision to fund NCInnovation with conditions. “We will give this money, but we get to put people there to look out and make sure it’s being spent the right way — not to benefit NCInnovation, but to make sure it’s a return on our investment.”

He added: “If there’s not that return on the investment — regardless of what that does for NCInnovation — we reserve the right to say yes or no.”

During the time he was given to address the accusations against him, Pope pointed to his fiduciary duty to North Carolina taxpayers.

“I did not make accusations. I raised concerns — what a board member is supposed to do,” he said.

NCI leaders originally asked state lawmakers for $2.5 billion for the project, ultimately receiving two installments of $250 million each. However, it was written into the budget, rather than introduced as a separate bill that went through the committee process. On Wednesday, Pope objected to the hundreds of thousands of dollars that NCI spent on lobbyists, lawyers, and public relations during that 2023 budget process.

“You’re talking about a legal dispute. I’m talking about a duty. I’m trying to make NCInnovation better by making sure we comply with the law,” he added.

A narrow runway

As the meeting moved to other business, the issue of the state budget and continued funding for NCI loomed large over the discussion. Despite apparent agreement between the chambers on clawing back NCInnovation’s funding for other budget priorities, the legislature has yet to finalize a budget agreement. If lawmakers fail to pass a full budget or address the issue in a minibudget during upcoming sessions, NCInnovation could retain millions in state funds — at least for now.

The lawmakers’ message has been clear: recent efforts to pull state funding are rooted in transparency concerns and insufficient communication with General Assembly-appointed board members.

“That’s the reason we have these bills to retract the money,” said Johnson. “We feel like the board members we put on there are not getting the information they need to make the best decisions.”

NCInnovation Board of Directors Chairman Kelly King offered a sobering assessment during their latest meeting, which is open to the public:

“If the legislature chooses to shut us down, they can come back into session and do that. If you’ve got the Senate version, and we have four years of assured funding, that gives us a runway long enough. I believe we could develop alternative sources of funding.”

King, the retired CEO of Truist Financial bank, also said that as a “substantial personal taxpayer” he liked seeing the people’s money going toward NCI.

“I personally think it’s wise on the part of the state to invest public money in this. And I say that as a substantial personal taxpayer — I’m happy to see my taxes go to this investment for my kids and my grandkids. To be honest, it’s good for me personally, because if we grow the economy, we grow revenue, and my personal taxes — they’re going down.”

Pope offered a more cautious view, pressing the board to prepare for long-term independence:

“For reasons having nothing to do with NCInnovation, there is a current deadlock on the state budget,” he advised fellow board members. “It is possible, like in 2023, the ice will melt and there will be a budget in September or October… Even if the Senate budget were to reappropriate $25 million for four years, that’s not assurance. Because each General Assembly’s budget could change. That’s better than nothing, but it’s not an assurance. Better to have a contingency to be self-supporting — administratively, at least.”

King agreed with the urgency.

“You’re right — this is a call to action,” he said. “We haven’t been asleep on this. We’ve been talking about it. But I wanted a quiet moment with the board to focus on strategy. Now that the question’s been raised, I’m glad to answer it.”

Still, he stood firm in support of public investment:

“I’m not yet ready to give up on public funding. It would be very unwise. And for those who want to debate whether public money should be used for this — that’s hogwash. We already put billions into one of the most advanced university systems in the world, and now you say we can’t put a dollar into leveraging that? That’s just silly.”

King also referenced recent criticism from the John Locke Foundation, publishing organization of the Carolina Journal:

“As of yesterday, or the day before, the John Locke Foundation was still submitting arguments against us to members of the General Assembly, with strong recommendations that the House version be approved. I think that’s very unwise — and frankly unfair.”

Earlier this month, Locke’s CEO, Donald Bryson, circulated a memo to lawmakers arguing that the $500 million endowment is equivalent to 7,000 times the median household income in North Carolina and lacks measurable outcomes. Citing tax penalties and transparency concerns, Bryson called on lawmakers to reappropriate the funds.

“NCI exceeded IRS limits on lobbying in FY 2023, likely triggering an excise tax penalty,” Bryson wrote. “NCI’s noncompliance with 501(c)(3) lobbying limits is supported by its own tax documents. While the IRS may allow NCI to retain its nonprofit status after paying the fine, the General Assembly is under no such obligation. The organization violated the very condition that justified receiving and retaining $500 million in taxpayer funds. The clawback provision exists for exactly this scenario.”

In the meeting Wednesday, King acknowledged the challenges but asked for more time:

“We’ve already approved 25 grants,” he said. “Sure, some are small — but they caught my attention. And if supporters of this effort just give us a fair chance, this will work.”

He also acknowledged that future funding hinges on results.

“We’d have to launch a significant private fundraising effort,” he said. “But then I worry — if I walk into a big bank and ask for money, they’re going to say, ‘What have you done with the money we gave you before?’ And then I’d be concerned about all the headlines, all the hard questions.”

Tensions flare in audit committee

This week’s meeting followed a contentious one of the NCInnovation Audit Committee, which saw a heated exchange between Pope and NCInnovation’s legal counsel, Josh Howard.

In the audit committee meeting, Pope raised concerns about compliance with IRS regulations, particularly regarding lobbying expenses reported on the 2023 Form 990. He noted the return reported $267,184 in lobbying expenses, exceeding the allowable limit by $9,516, triggering a $2,379 excise tax. He also cited lack of timesheets, absence of overhead allocations, and failure to report costs related to NCInnovation’s “pitch book” and other materials distributed to lawmakers.

Pope was the lone dissenting vote against the approval of the 2023 and 2024 tax forms, arguing that underreporting and insufficient descriptions of lobbying activities may put the nonprofit at further IRS risk.

During discussion of the 2024 Form 990, Pope challenged its reference to the state audit having “validated” grantmaking, arguing it mischaracterized the findings. He criticized the board for not inviting the auditor’s office to discuss the report publicly.

The exchange grew tense.

Howard asked Pope whether he had any interaction with the state auditor, raising his voice. “We’re all aware that you requested the state auditor’s action on this. Did you have any other interaction with the state auditor about the state audit?”

“Of course not, and I don’t see why that’s relevant,” Pope responded.

Audit Chair Cantey Alexander joined in: “How many times, Art? Probably 30?”

“Maybe two or three. Not 50, not 30,” Pope said. “How many times did you communicate with them, Cantey?”

“Zero,” Alexander replied.

What’s next?

While Pope has been the most vocal critic, other board members and lawmakers have echoed concerns about NCI’s compliance and transparency. In April, the board voted to freeze NCI’s funds pending legislative action.

NCInnovation’s future now hinges on budget negotiations between the House and Senate. Changes could come in a mini-budget or even a technical correction this fall. Meanwhile, NCI’s leadership must balance governance reforms, fundraising efforts, and public trust in the months ahead.

Warren left little doubt about where he stands: “As long as they’ve got taxpayer money — whether it’s a dollar or half a billion dollars — I think that warrants oversight by the General Assembly.”

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