Hurricane Matthew North Carolina (copy) (copy)

Floodwaters from Hurricane Matthew cover parts of Interstate 95, homes and businesses in Lumberton in 2016. Researchers say the flooding from Hurricane Matthew was a primary factor in massive fish kills months later.

RALEIGH — The North Carolina Department of Public Safety broke the law and didn't follow legislative directives when distributing $9 million of state money after Hurricane Matthew hit in 2016, according to a report Monday from the General Assembly's government watchdog agency.

The report — the second in three weeks by the Program Evaluation Division questioning how Matthew recovery funds have been handled — determined a lump-sum, upfront $5.35 million payment to one grant recipient violated state law, which says funds must be distributed in smaller incremental payments.

The grant recipient in question, the nonprofit North Carolina Community Development Initiative, then used money intended for emergency shelter and short-term housing to fund new construction projects, buy land for future development and fund mixed-use development, the report says.

Instead of going directly to help hurricane survivors, the report says, some state money allocated by the nonprofit benefited private developers and landlords.

North Carolina Emergency Management Director Michael Sprayberry told legislators the violation was inadvertent due to ignorance about the law, and that the questioned spending still was designated for affordable housing projects in hurricane-ravaged areas.

"They needed a housing solution. Honestly I felt like the General Assembly would've wanted me to use the funding in this manner," Sprayberry told lawmakers reviewing the report. He said the money helped "hundreds of people get into a housing solution where they've got no place else to go."

Rather than allocating money for emergency shelter, Sprayberry said the Department of Public Safety's Division of Emergency Management needed more funds for reconstruction and new construction of affordable housing.

Some legislators on the Program Evaluation Oversight Committee, such as Democratic Rep. Becky Carney of Mecklenburg County, acknowledged emergency management's efforts to be transparent and help as many people as possible following what was then unprecedented flooding.

"They were doing the best they could. Can they do better? They're acknowledging that," Carney said. "I for one think they've done an incredible job."

Still, the committee voted to send the report to other oversight committees and the state attorney general for further review. Committee co-chairman Rep. Craig Horn, a Republican from Union County, called the report "provocative" and "damning," and said emergency management officials should be held accountable for their actions.

"Because the Department of Public Safety admitted to breaking the law, it needs to go to the attorney general, and they may decide it was just a mistake, and that's fine," Horn said in a phone interview after the meeting. "But if they don't know about it, they can't do anything about it."

Last month, a separate report from the Program Evaluation Division found that administrative mistakes and a lack of expertise caused severe delays in the state's spending of federal funds for Hurricane Matthew recovery.

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