As the National Republican Congressional Committee last week released the first details of the accounting scandal involving former Treasurer Christopher Ward, the committee’s top official also asserted for the first time that the debt left over from the 2006 elections was actually in the range of $19 million.
NRCC Chairman Tom Cole (Okla.) had previously said that the committee’s debt from last cycle was about $16 million, even though the highest amount reported to the Federal Election Commission was $14.5 million.
But on Friday, Cole told Roll Call that the debt was somewhere between $18 million and $19 million, an increase mostly due to vendor bills for services rendered during the 2006 cycle that trickled in over the first few months of 2007. In some instances, there were discrepancies between what the NRCC thought it owed vendors and the actual bills. Cole said those differences were generally not major but are being looked at as part of the NRCC’s internal investigation surrounding Ward.
The increased debt is not directly tied to Ward’s alleged actions — which included submitting faked committee audits over a five-year period and funnelling hundreds of thousands of dollars out of the NRCC coffers to his personal and business bank accounts. The FBI is investigating those allegations.
But the higher debt figure does reveal how money was leaving the committee late in the 2006 election cycle — as Republicans were attempting to save seats and hold onto their House majority — at such a rapid pace it was hard to know the extent of how much was being spent and where it was going.
“We slipped into a deeper hole than we understood at the time,” Cole said in an interview.
Cole has repeatedly cautioned that had the money not been spent by his predecessor, Rep. Tom Reynolds (N.Y.), Republican losses would have been much greater than the 30 seats that put them in the minority for the first time in a dozen years.
But at the same time, publicly releasing the $19 million figure demonstrates Cole’s frustration with what he perceives as a lack of understanding of the NRCC’s financial footing at the beginning of the cycle.
“I never am critical on that score,” Cole said of spending the money. “I just want to have people understand where we started. … All I want to do is have the record clear this is where we began.”
Reynolds loyalists have privately asserted that the debt they incurred last cycle is nowhere near the amounts Cole has claimed, but they have declined to talk about the issue publicly.
Even before the accounting scandal involving Ward came to light, the NRCC has struggled to raise money this cycle, in part because of a poor fundraising environment for the GOP. The committee’s cash-on-hand figure has been further hindered by Cole’s efforts to pay off the large debt.
“When we go into debt this far and we lose the majority simultaneously, we really put ourselves in a deep hole,” Cole argued.
He added: “I don’t ever remember any committee carrying this much debt.”
According to Cole, forms filed with the FEC never revealed the actual level of debt because “debts and obligations” as defined by the commission is any bill that is more than 30 days past due. Bills that are received and are less than 30 days old are considered “financial obligations.”
For example, the committee reported $6.38 million in vendor debt as of Dec. 31, 2006, on its year-end fundraising report. In actuality, according to Cole, when he arrived at the committee in January 2007, there was an additional $2 million in vendor bills that were under 30 days and therefore not reported as debt to the FEC. Another $500,000 was 30 days past due in January but paid off by the time the committee filed its next FEC report and therefore never reported as debt.
The close to $9 million in vendor debt Cole said he found at the committee when he arrived is in addition to an $8 million bank loan the committee secured in the run-up to the November 2006 elections. In addition, Cole said vendor bills for services rendered in the 2006 cycle continued to come in between January and May 2007 and those totaled another $1 million to $2 million, putting the overall debt figure in the range of $18 million to $19 million.
Cole, a Republican consultant and one-time executive director of the NRCC, said it is common for vendors to send their bills to the committee weeks or even months into the new year after the November elections.
Even as new bills kept coming in, Cole explained that the committee began aggressively paying down the vendor debt — and he instituted a policy that no bill would be allowed to go unpaid past 30 days — which is why the actual debt figure was never reflected in the committee’s FEC filings.
The initial 2006 year-end report filed with the FEC showed the NRCC with $14.38 million in total debt, reflecting the $8 million bank loan and more than $6.38 million in vendor debt.
At the end of 2006, the committee reported $1.4 million in cash on hand. However, the committee revealed last week they now know that the cash figure was actually $410,000 because the internal investigation surrounding Ward’s alleged fraud activity has revealed the cash on hand reported was actually $990,000 more than what the committee had in the bank.
Cole briefed members of the NRCC’s executive committee on the $19 million debt figure during a meeting Thursday. Adding to some of the confusion about the NRCC’s financial standing at the start of the cycle, Cole said, is the fact that the executive committee only signed off on taking out the $8 million line of credit before the 2006 elections.
“I think most people thought we were $8 million in debt,” Cole said.
He also offered to show proof of the bills received in 2007 for services done in 2006.
“We’re happy to show people all the bills that are under 30 days,” he said.
In some instances, Cole said, the NRCC wasn’t aware of the total they owed to certain vendors. Those discrepancies are being investigated as part of the internal investigation the NRCC launched into Ward’s alleged actions.
“We found out in a couple of cases we owed them more than we thought,” he said. “It wasn’t dramatic. But it does raise questions, and that’s being looked at now in another context.”
In the wake of the accounting scandal involving Ward, Cole has instituted reforms in management and transparency at the committee. He said he feels confident that he will have more control over what money is being spent in the runup to the November elections.
For instance, Cole has developed departmental budgets within the committee and required that the committee’s executive director sign off on all checks.
“When I got here we didn’t even produce a sheet that told us how much money came in that day,” Cole said.
Last week, the NRCC detailed what they know at this point about Ward’s alleged embezzlement. They revealed that the committee has $740,000 less in cash on hand than the amount reported to the FEC as of Jan. 31. Also, the amount outstanding on the NRCC’s line of credit is $200,000 less than the actual amount owed. As of last week, Cole said the committee had $1.675 million in remaining debt, all of which is owed to a bank.
A forensic audit of the committee’s books is being conducted by PricewaterhouseCoopers.
Ward, who served as treasurer from 2003 to 2007, was one of the only holdovers from the previous NRCC administration when Cole arrived at the committee in January 2007.
After being pushed and pushed by committee officials for a meeting with the firm that had conducted the NRCC’s 2006 audit, it came to light in late January that Ward had submitted bogus audits and that the last real audit conducted for the committee was for calendar year 2001.
“I doubt there will [ever] be anybody here who doesn’t meet with the outside auditor again,” Cole said.