NCInnovation Raises Serious Transparency Concerns

North Carolinians deserve better oversight than they’re getting.

Earlier this month, the usually frugal North Carolina Senate surprised pundits by including $1.425 billion for NCInnovation in its budget proposal, considerably more than the $50 million allocated earlier this year by the N.C. House. NCInnovation is a non-profit organization established by N.C. business and education leaders, intended to support the commercialization of university research and development. The Raleigh News & Observer describes the public-private partnership thusly: “NCInnovation aspires to create a massive endowment to help researchers at UNC System schools convert their ideas into revenue-generating businesses.”

The lack of transparency surrounding NCInnovation follows a pattern for public-private partnerships.NCInnovation promises to make North Carolina “THE Innovation State.” It counts accountability among its key values, stating on its website, “We will hold ourselves and our partners accountable for measurable results.”

But there are problems with that promise. NCInnovation lacks some essential oversight mechanisms. Unlike other university units, it does not report to the UNC Board of Governors but to its own board. It is also exempt from North Carolina’s open meetings and public records laws. John Locke Foundation president Donald Bryson pointed out in Carolina Journal why such oversight is essential:

Open meetings and open records laws for organizations receiving funding from state governments are critical in maintaining transparency and accountability. They allow citizens to track the decision-making process of state-funded organizations and hold them accountable for their actions. These laws create transparency and accountability and mitigate the risk of fraud, waste, and abuse. If state lawmakers appoint 62% (eight of 13) of the board of directors, and taxpayers are providing $1.4 billion as an endowment, then citizens deserve to know what is happening with their hard-earned money.

The lack of transparency surrounding NCInnovation follows a pattern for public-private partnerships involving UNC institutions. As the Martin Center has pointed out before, a large portion of university real-estate transactions fall outside traditional board oversight because they are controlled by university foundations instead of the universities themselves. As Shannon Watkins wrote in 2018,

Within the UNC System alone, there are 58 foundations—all of which are, according to UNC-System lawyer Tom Shanahan, “distinct legal entities separate from the university.” As such, university foundations are not only exempt from the Umstead Act, but they are also not subject to public records laws or the governing authority of the Board of Governors.

The Umstead Act is state legislation intended to prevent government entities from competing unfairly with private businesses.

Concerns have also been raised about Project Kitty Hawk, a nonprofit ed-tech startup that will partner with UNC-System universities to serve adult learners. Unlike members of the UNC Board of Governors, Project Kitty Hawk board members are not required to file statements of economic interest. As the Martin Center wrote last year,

Such statements are required by law for all parties who are subject to the State Ethics Act, including legislators and members of the UNC Board of Governors as well as members of various planning organizations and advisory committees. They are not currently required for members of “associated entities,” including Project Kitty Hawk.

As a 501(c)(3) organization, NCInnovation will also be exempt from the State Ethics Act and the Umstead Act, despite the large amount of public funding it will receive. Taxpayers deserve more oversight and better accountability from their public investments.

Jenna A. Robinson is the president of the James G. Martin Center for Academic Renewal.