RNC Holds Unreported Debt

The RNC is expected to file a series of amended reports with the FEC this month after an internal review by the treasurer found a number of debts that had not been previously reported.

Sources with knowledge of the RNC's financial situation said the debts will likely amount to hundreds of thousands of dollars. The debts, owed to several vendors, have not been reported yet because top RNC officials have not acknowledged their existence.

"Over the past 3 or 4 months, maybe longer, the staff has been directed to hold off on reporting some debts, to roll them over to the next month, so the month that they're in will look better on the FEC report," said one source involved in the budget process. "It eventually catches up with you."

The roll-overs have concerned RNC Treasurer Randy Pullen, who will head to DC next week for further review of the party's recent filings. Though he doesn't handle day-to-day financial operations for the RNC, Pullen's name is on FEC reports, which means he is liable for any mistakes or omissions.

Pullen discovered the missing debts, which must be reported on documents filed with the FEC, over the last month. RNC chief of staff Mike Leavitt, who had knowledge of the debts, argued that debts didn't exist for FEC purposes until he had acknowledged them. Pullen disagreed, and refused to sign last month's FEC reports until debts were accurately reported, leading to the first RNC debt on an FEC report since Jan. '07.

Pullen declined to comment for this article.

The financial impact won't be large. The RNC had $12.58M in the bank as of May 31, according to the party's most recent filings. The committee also carried debts of $760K, which RNC communications director Doug Heye said had been paid off last month.

The amendments aren't likely to show a dramatic drop in the RNC's cash position, but they will come at a time when the committee's cash flow is slowing. Early analysis of the RNC's June fundraising numbers show small-dollar donations were down dramatically, while one source described the RNC's major donors program as a "disaster."

Filing amendments to previous reports is not terribly unusual for any political committee. Some expenses are miscategorized and checks are mistakenly issued or returned. But sources who described the upcoming amendments said the RNC's unreported debts are unusual because top committee staffers were aware of the off-the-books debt.

Pullen's review of recent FEC filings is the third such examination taking place at the RNC. At chairman Michael Steele's request, an ethics panel headed by IL GOP chair Pat Brady is looking into financial processes that allowed an outside contractor to be reimbursed for a $2K expense at a risque L.A. nightclub.

Also at Steele's request, an outside counsel is looking into the committee's financial processes. That outside counsel, ex-RNC council Tom Josefiak, is well-respected by both Steele's team and long-time RNC members who have clashed with Steele over the budgeting process.

"With a new Chief of Staff and a new Finance Director on board, the Chairman felt that the time was right for an internal procedures review. That review is now being conducted by an outside company recommended by the Ethics Committee of the RNC," said Heye, the RNC's communications director. "We will continue to work very closely with our Legal Counsel and our Treasurer to ensure that the RNC meets all FEC reporting requirements."

As a result of both reviews, contracts and expense reimbursements go through a variety of approval phases. Depending on the type and amount of the check being cut, it is reviewed by Leavitt, finance director Boyd Rutherford and the RNC legal department.

Pullen's review, and the resulting debt, spotlights a serious problem with which GOPers are growing more concerned: The RNC has traditionally been the biggest breadwinner among GOP party committees. This year, though, it is the poorest committee; the NRSC, NRCC and RGA all have more cash in the bank than the RNC does.

RNC chair Michael Steele has come under fire for a series of gaffes, but while those misstatements play a role in generating Beltway buzz, they have less impact on the party's ability to win elections. Instead, Steele's fundraising abilities are what truly worry GOP strategists. Amid the best political environment GOPers have seen since '94, some party strategists worry the lack of money could mean the GOP misses out on opportunities they might otherwise seize.

The RNC has already cut its proposed budget for so-called Victory Programs, money sent to states to help with turnout and voter registration operations. The Washington Times first reported the budget cuts early this week. Those budget cuts have state party leaders nervous that they won't have the money necessary to get voters to the polls.

Elected officials have commented on the RNC's lack of money as well. House Min. Leader John Boehner has said he worries about the RNC's fundraising ability. MS Gov. Haley Barbour, chairman of the RGA, told donors at a briefing last week he had increased his committee's fundraising goals by $10M because of the RNC's lackluster fundraising.