GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 192

Short Title:  GPAC/Nonprofits Performance Contracts.	(Public)
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Sponsors: Senators Perdue; and Martin of Guilford.
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Referred to:  Government Performance Audit.
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February 17, 1993

A BILL TO BE ENTITLED
AN ACT TO IMPLEMENT A RECOMMENDATION OF THE GOVERNMENT PERFORMANCE AUDIT COMMITTEE TO DIRECT THE DEPARTMENT OF COMMERCE TO ESTABLISH PERFORMANCE-BASED INDICATORS AND CONTRACTS FOR NONPROFITS THAT CONDUCT STATE-FUNDED ECONOMIC DEVELOPMENT ACTIVITIES.
The General Assembly of North Carolina enacts:
Section 1.  The General Assembly finds that:
(1)	The General Assembly has established, directly or indirectly, the following four special purpose nonprofit agencies to conduct economic development activities:
a.	The North Carolina Biotechnology Center.
b.	The MCNC (Microelectronics Center of North Carolina).
c.	The Rural Economic Development Center, Inc.
d.	The Technological Development Authority, Inc.
(2)	The mission of each of these nonprofits is as follows:
a.	The mission of the Biotechnology Center is to provide long-term economic benefit to North Carolina through support of biotechnology research, development, and commercialization statewide.
b.	The mission of the MCNC is to accelerate the use of emerging electronics technologies through innovation and market-driven applications that improve quality of life.
c.	The mission of the Rural Economic Development Center is to develop and advocate innovative strategies to help stimulate economic growth and job creation throughout the State's rural areas.
d.	The mission of the Technological Development Authority is to increase the rate at which new jobs are created in all regions of the State, by stimulating the development of existing and new small businesses.
(3)	In the 1991-92 fiscal year, these four nonprofits expended almost thirty million dollars ($30,000,000) in General Fund revenues justified in the budget process as economic development although, beginning in the 1993-94 fiscal year, the Technological Development Authority will no longer receive State funding.
(4)	Each of these special purpose nonprofits has demonstrated success in its respective area of focus and, as a group, they have contributed significantly to North Carolina's reputation as a State committed to innovative, technology-based research and development.
(5)	However, few mechanisms currently exist to ensure the accountability of these special purpose nonprofits to the State.
(6)	The current accountability mechanisms are:
a.	Annual and special published reports.
b.	Quarterly reporting to the Joint Legislative Commission on Governmental Operations regarding the use of their funds.
c.	Annual government financial audits.
(7)	These conventional accountability measures focus on inputs, or programs and budget levels, rather than outcomes–the results of the nonprofits' efforts.
(8)	Without outcome-based accountability measures, the extent to which the nonprofits are fulfilling their intended purposes cannot be fully assessed.
(9)	The lack of meaningful measures to evaluate and report the nonprofits' performance leaves the General Assembly with only a limited ability to evaluate the outcome of its significant investments in economic development activities of nonprofits.
(10)	Performance-based contracts would provide an effective and appropriate accountability mechanism to assess the performance of the nonprofits on a regular basis.
(11)	Examples of performance-based indicators by which nonprofits' effectiveness could be measured include:
a.	Achievement of an adequate ratio of private funding to State funding.
b.	Long-term financial viability, measured in quantitative terms, of those start-up businesses which the nonprofits finance.
c.	Number of patents received by applied researchers supported by the nonprofits.
d.	Number of jobs created in businesses that the nonprofits finance.
(12)	The General Assembly's economic development budget allocations to nonprofits should be based on outcomes, as measured by performance indicators designed by the nonprofits in conjunction with the Department of Commerce and the Economic Development Council.
Sec. 2.  The Department of Commerce, in conjunction with the Office of State Budget and Management and each nonprofit agency involved in State-funded economic development activities, shall recommend for each nonprofit agency performance indicators that are appropriate and measurable criteria, including criteria that each agency can influence and criteria based on baseline data and reasonable recommendations.  The performance indicators should articulate specific, measurable results for each agency and should be comprehensive, so that the General Assembly may base each agency's continued economic development appropriation on its effectiveness as measured by the performance indicators.
Sec. 3.  The Department of Commerce and the Office of State Budget and Management, as appropriate, shall, when allocating economic development appropriations to nonprofit agencies, execute a contract incorporating the performance indicators and any conditions upon which the appropriation was based.
Sec. 4.  This act is effective upon ratification.