No NRCC Audits in Five Years

Posted February 22, 2008 at 6:35pm

The National Republican Congressional Committee apparently stopped conducting independent audits of its finances five years ago, according to Republican sources and Federal Election Commission records.

The NRCC will not confirm its audit history, citing an ongoing investigation into financial irregularities apparently centering on former Treasurer Christopher Ward. But the indication is that the committee did not conduct an independent audit at all during the 2003-2006 tenure of former Chairman Tom Reynolds (N.Y.) and his audit committee chairman, Rep. Greg Walden (Ore.).

NRCC Chairman Tom Cole (Okla.) announced Feb. 1 that the committee had contacted the FBI after discovering “irregularities in our financial audit process.” Cole said the committee had “terminated our relationship with a former employee who was engaged as an outside vendor.” Cole has never publicly named the vendor, but other sources have identified him as Ward, who served as the NRCC treasurer from 2003 until last summer and as a comptroller for seven years prior to taking that post.

Ward also has maintained a private consulting business since 2001, serving as treasurer and campaign financial compliance adviser to dozens of Republican candidates and political committees. Since Cole’s announcement, Ward has left the firm, Political Compliance Services, and his clients have severed ties with him.

The NRCC will not comment on what irregularities it found in Ward’s bookkeeping, or whether there is any evidence of campaign money disappearing. Ward has not returned phone calls and e-mails requesting comment.

Reynolds wrote in a statement e-mailed to Roll Call, “It was my understanding that throughout my tenure as NRCC Chairman audits were performed on a regular basis. At no point in time were any red flags raised about those audits. It now appears over an extended period of time a long-serving, professional staff member may have put together an elaborate scheme resulting in financial irregularities that are currently under review. I fully support this investigation in an attempt to uncover the truth.”

It now appears that the NRCC has not conducted an independent audit of its books since the 2002 election cycle.

According to Republican sources, the NRCC routinely conducted audits prior to Reynolds taking the helm. A Republican source said that Rep. Tom Davis (Va.), who chaired the committee for the 2000 and 2002 election cycles, had independent audits conducted each year.

FEC records show that the NRCC paid $24,000 to Deloitte & Touche in 2001 and 2002 for “audit and tax preparation.” In the first half of 2003, the committee paid the firm $45,450, including a single payment in June for $42,000, which sources say was payment for the audit requested by Davis for the 2002 cycle.

The committee’s FEC records show one payment to Deloitte & Touche in 2004, for $2,000, and no payments to the firm after that, and no payments logged as audit expenses. Republican sources say they believe the committee has not had an audit since 2003.

Upon taking over from Davis in 2003, Reynolds announced an overhaul in the NRCC management structure in the wake of new campaign finance rules that outlawed the use of soft money. Part of this restructuring included the creation of an audit committee with Walden as the chairman. Reynolds reappointed Walden to this post in 2005.

Asked why it appears the NRCC did not conduct an audit during his tenure, Walden, through his campaign, issued the following statement: “I fully support Chairman Tom Cole and his team in their efforts to identify how far back these problems may go and to make sure that new, more effective safeguards are put in place for the future.”

When Roll Call pointed out that the statement didn’t address the question, campaign manager Brian Hard replied, “The statement that we have is what we are putting out. We can’t go beyond that statement at this time.”

NRCC spokeswoman Julie Shutley said she could not discuss the committee’s audit history because “we have an ongoing review by outside vendors and won’t have any comment on their findings while their work is under way.”

Campaign finance experts said the FEC does not require committees to conduct audits, but many do so regularly, particularly in response to requests from their lenders for a review of the books.

The National Republican Senatorial Committee has an independent review of its books every year, a spokeswoman said, and also did a more in-depth audit in 2006, which will be repeated this year.

The Republican National Committee reported $6,700 in “audit costs” in 2004 and $2,500 in 2003, plus two payments to Ernst & Young in 2005 totaling $60,000, one for “audit cost” and the other for “audit services.”

A source at the Democratic Congressional Campaign Committee said, “DCCC conducts a thorough and comprehensive review of the committee’s financial records on an annual basis.” Sources say the DCCC has an independent firm review the books every year, and also occasionally has conducted a larger audit at the request of lenders.

The same is true of the Democratic Senatorial Campaign Committee. “The DSCC has an independent financial review conducted by an outside firm every year, and has since 1985,” said spokesman Matthew Miller. Both Democratic committees have hired the accounting firm Gilbert & Wolfand for many years, though the payments are not expressly listed as “audit” expenses on the FEC filings.

While there is no FEC requirement for committees to audit their books, “Conducting thorough audits on a regular basis makes total sense, particularly with the FEC’s stepped-up scrutiny over the last several years of the accuracy of their books,” former FEC Chairman Michael Toner said.