Read the RNC's internal finance review
Updated 2:49 p.m.
An investigation by Republican National Committee Treasurer Randy Pullen into some minor, but embarrassing, financial scandals has resulted in a "procedures and policy report" that went out Wednesday to the entire committee.
Highlights from the document, which you can read in full after the jump:
- "No material weaknesses in accounting controls" but several "significant deficiencies" were discovered.
- The infamous $2,000 bill for a party at the Voyeur West Hollywood night club was reimbursed with a forged signature, the report stated; it is "questionable whether or not Rob Bickhart, Finance Director, had in fact reviewed and initialed the Request."
- Bickhart's company eCapitol Direct has stood to make more than a quarter of a million dollars in work for the RNC. "This contract should be cancelled," recommends Pullen.
- As of April 12, only Pullen and RNC Chairman Michael Steele are allowed to use the committee's American Express cards.
I got the full report via RNC communications director Doug Heye, who also challenges an element of Ralph Hallow's report Thursday in the Washington Times. Heye tells me that Hallow's claim that the RNC is spending $1.09 for every dollar raised is not true, and that the committee's "burn rate" is actually around 70 percent, or $0.70 for every dollar raised. Indeed, there's nothing in this document that suggests that.
To: Executive Committee
From: Randy Pullen, Treasurer
Re: LIMITED REVIEW AND ANALYSIS OF POLICIES AND PROCEDURES
As part of the ongoing effort to improve the accuracy and completeness of the RNC’s accounting system and FEC reporting, I conducted a limited review of certain policies and procedures, as well as certain transactions to determine if the procedures were adequate and effective to assure proper recording of revenues and expenditures of the RNC. The areas and transactions that were reviewed are presented below:
1. Review written policies and procedures regarding signoffs on expenses and check requests.
2. Finance Division
-review Request for Purchase Order form and supporting documents, examples of other reports with signatures by same individual(s).
-Consider if other divisions should be reviewed.
3. Review American Express Credit Card policy.
4. Review Finance Division reports.
5. Michigan Donors’ Contributions to RNC.
Written Policies and Procedures
I previously had reviewed the internal accounting controls of the RNC in February and March of 2009. At that time, I found the procedures to be adequate to assure there were no material weaknesses in accounting controls. The work performed at the time included reviewing the written policies and procedures as well as limited subjective testing by selecting and reviewing transactions for proper documentation and signatures. A written report was forwarded to the Chairman’s office.
Subsequent to my work, the auditors for the RNC, McGladrey & Pullen (no relation) completed their audit for 2009 and presented their report dated March 19, 2010. They noted no material weaknesses in accounting controls. They did note several significant deficiencies in accounting controls, which were duly noted in responses by management to the auditors. Additional procedures have been implemented to alleviate the deficiencies. None of the deficiencies noted by the auditors dealt with the issues under review in this memo with the exception of the American Express Credit Cards. This concern is addressed later in this memo.
My current review of written policies and procedures found that the same policies and procedures were in effect. In order to determine the conditions that allowed for the reimbursement to Erik Brown, a third party, of a payment for $1946.25 to Voyeur West Hollywood, I conducted interviews with Mike Leavitt, Boyd Rutherford, John Phillippi, Rob Bickhart and Tom Josefiak. I also inspected the Request for Purchase Order and support documents.
My conclusion is that the questioned Request for Purchase Order (“Request”), support documents and supervisor acknowledgement were adequate to allow for payment. Based on information provided by senior management and Tom Josefiak, it is questionable whether or not Rob Bickhart, Finance Director, had in fact reviewed and initialed the Request. On my questioning Mr. Bickhart, he maintained that he did not approve the Request.
On further inspection of previous authorized Request for Purchase Orders, namely American Express invoices, it appeared that the same initials had been used to authorize other payments; calling into question whether these documents had been properly reviewed and authorized. It is my understanding that Mr. Bickhart could not recall if he had authorized and initialed these requests. It was not possible to speak with Allison Meyers as to who had authorized and initialed these requests as she has been terminated.
Senior management and Mr. Josefiak interviewed other division directors regarding their practices for authorizing and signing expenditure requests. Based on their interviews they believed that the policies and procedures for authorizing and approving expenditures were being followed in other divisions and the incident under investigation was limited to Finance.
In order to reinforce written policies and procedures, two memos have been prepared for staff members reiterating their importance and the consequences of violating written policies and procedures. In addition, full signatures will be required on all Request for Purchase Orders.
I believe that the actions taken with regard to notifying all staff as to the importance of following written policies and procedures and of the consequence of not following written polices and procedures are appropriate and sufficient at this time with the exception of Finance.
At this time, it is unclear whether Mr. Bickhart had or had not authorized the expenditure under question as well as other expenditures. Also, Mr. Bickhart appears to be in the RNC offices on average of about three days a week. In order to assure proper authorization of all Request for Purchase Orders, a member of senior staff should review verbally or by email, or in writing with Mr. Bickhart all Request for Purchase Orders and document his responses.
American Express Credit Card Policy
The use of American Express Credit Cards has been under review for several months. Monthly charges exceed $100,000, much of which has been attributed to Finance. Payment was being made before the charges had been reviewed and authorized. The auditors noted this as a significant deficiency in the RNC’s accounting controls. Mr. Rutherford, Director of Administration, with the support of the Treasurer had recommended in December of 2009 that American Express credit cards be limited to himself and the Chairman. This recommendation met with opposition from Finance and was not implemented until the week of April 12, 2010.
Finance Division Reports
The purpose for reviewing Finance Division reports was to determine how fundraising programs were being measured and reported individually and in total. Receipts and expenditures for each direct marketing and Internet fundraising program are budgeted and reported in detail. Receipts and expenditures for each major donor program are budgeted and reported at a summary level. On speaking with Mr. Bickhart about budgeting of each event/program for major donors, he stated that a budget is prepared. Later on speaking with Debbie LeHardy, Director of Major Donor Programs, she stated that they do not do budgets for individual major donor events as it is “too fluid”. I believe budgets could and should be prepared. This is a problem that needs to be addressed by senior management. If each major donor event is not budgeted, tracked and reported, it will continue to be difficult to measure success or failure on a timely basis.
As part of my review, it came to my attention that Mr. Bickhart’s contract calls for his company, eCapitol Direct, LLC, to be compensated (this is in addition to his salary) $22,500 per $9,000,000 raised through direct marketing sources every two months. Based on budgeted direct marketing revenues for 2010, this will result in over $270,000 in additional compensation to Mr. Bickhart. This contract does not take into consideration the cost to generate the revenue; therefore, there is no incentive for costs to be minimized as he receives compensation regardless of the net cash generated. This contract was not reviewed and approved by an officer or the Executive Committee. This contract can be cancelled at any time by written notice to the other party. This contract should be cancelled.
In order to ascertain if there were other contracts in excess of $100,000 that had not been approved by and officer or the Executive Committee, I expanded my review of contracts and noted that the prior contract with eCapitol Direct, LLC that called for $37,500 per $9,000,000 had not been approved. I also discovered a third contract with GKV, LLC that called for a fundraising consulting fee of $10,000 a month for the period September 2009 through November 2010. This contract had not been approved by an officer or the Executive Committee. This brings into question whether or not the Good Governance Resolution is being followed.
Based on my overall review of the Finance Division, I am of the opinion that additional administrative controls need to be put in place to review and authorize expenditures and develop budgetary controls in the major donor programs.
Michigan Donors’ Contributions to RNC
It has been reported in the press that the Michigan Democratic Party has file a complaint against the RNC and Michigan Republican Party with the FEC. At this point, we have not received a copy of the complaint and there is insufficient information as to what is alleged to have happened to determine if their complaint has legal merit. It is likely that the complaint will lack substance and will result in no action by the FEC and is more of a nuisance and distraction. This situation will continue to be monitored.
Chairman & CEO
April 22, 2010; 1:34 PM ET
Categories: RNC | Tags: Congressional Committees, Doug Heye, Economic, Michael Steele, National Budget, RNC, Republican, Republican National Committee
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