June 14, 2019; Washington Post
More concerning news about the National Rifle Association (NRA) emerged last week. This time, it has to do with a $10.8 million deficit during a year that saw both a rise in revenues and cutbacks on mission-related services.
Based on a leaked copy of the organization’s 2018 financial statement, the Washington Post reported that the politically powerful organization is spending significantly more than it is raising, having run deficits for the past three years. To fill the budget gap, the organization has cut mission-related expenses, frozen its pension plan, and drawn down on lines of credit. Still, it ended last year with nearly an $11 million deficit.
But as recently as last month, a group of board members and past presidents wrote an open letter to the membership declaring that the NRA’s financial house was in order and that the cascade of reports about the organization’s spending habits are merely an attempt to besmirch CEO and Executive Vice President Wayne LaPierre.
Professor Brian Mittendorf of Ohio State University, a reputable source on the nonprofit field, compared the NRA to “a person living paycheck to paycheck, leaning on credit cards with very little cushion.” Well, and it has also taken out a mortgage to pay for controllable current expenses, and that is never good news.
The organization’s budget problems come from overspending. Taking just two categories, the Post notes some major increases: “The group and its associated entities reported spending roughly $8.7 million in 2017 and $10.1 million in 2018 on travel and entertainment. They spent nearly $69 million on fundraising, up from $55 million in 2017.”
Professor Howard E. Abrams, a tax expert at Harvard Law School, highlighted the unusual nature of this financial picture for a large and longstanding organization like the NRA. “It is surprising that an organization as well-known as the NRA would have to spend that much on administrative and fundraising costs.”
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At the same time, spending on core services to its members and on the organization’s political agenda declined. According to the Post:
Spending for educating gun owners about safety and marksmanship dropped by nearly a quarter from 2017 to 2018, from $42.6 million to $32.7 million. The group also pulled back from politics, spending just $9.4 million during the 2018 midterm elections, down from $27 million in the 2014 midterms, according to campaign finance filings compiled by the nonpartisan Center for Responsive Politics.
The results are deficits that overshadow what would, in different times, be good financial news. From 2017 to 2018, total revenue grew significantly, from $378 to $412 million. As a membership organization, it is very good news that most of the growth came from increased membership revenue. But when you place the spending in the context of the revenue, it becomes almost bizarre: “In 2018, the NRA and its affiliates brought in $412 million and spent $423 million. In 2017, they had revenue of $378 million and spent $379 million.”
The financial statement reviewed by the Post consolidates the operations of the 501c3 NRA with its PAC, its Political Victory Fund, and four affiliated charitable funds and foundations. Splitting out the operations of the NRA itself shows an even more troubled picture. While the organization’s overall net assets appear large at more than $145 million, unrestricted assets available to help cushion their operating budget are much smaller. “The six groups together had $6.5 million in unrestricted net assets to use as they chose—while the NRA alone had a $31.8 million deficit in that category” as a result of mortgaging its headquarters and drawing down more than $42 million from two lines of credit. As Mittendorf told the Post, “The NRA doesn’t have that cushion, and we’re seeing the consequences.”
An unbalanced budget is just one more challenge before the NRA’s board and staff leadership. Over the past several months, NPQ has been following the growing signs of an organization in trouble. Its annual convention featured a public and divisive leadership struggle. It continues to fight a heated and expensive legal battle with the PR firm that has guided its rise to prominence. Its longtime leader has been accused of using organizational funds for personal benefit. Its practice of contracting for the services of many of its board members has been challenged. Its nonprofit status is under investigation in by New York’s attorney general.
Still, the NRA persists in recasting these issues as part of their ongoing battle with gun control advocates. A spokesman for the NRA, Andrew Arulanandam, said the organization makes “financial and administrative decisions that work in the best interests of its members.”
That’s their story and they’re sticking to it.—Martin Levine