The National Rifle Association spent growing sums on overhead in 2018 even as it cut money for such core activities as gun training and political efforts, ending the year deeper in debt, new financial documents show.
The gun rights group’s 2018 financial report, which was obtained by the Washington Post, portrays the longtime political powerhouse as spending faster than its revenue rose.
The records show that the NRA froze its pension plan for employees at the end of last year, a move that saved it close to $13 million, and obtained a $28 million line of credit by borrowing against its Virginia headquarters.
Despite that, the nonprofit, four affiliated charities and its political committee together ended the year $10.8 million in the red. In 2017, the six groups ended the year with a $1.1 million shortfall.
Brian Mittendorf, an Ohio State University accounting professor who has studied nonprofits, including the NRA, and examined the 2018 report for the Post, said it depicted “a bad year for them financially.” He compared the NRA to a person living paycheck to paycheck, leaning on credit cards with very little cushion.
“They’ve never exhibited extreme financial conservatism,” Mittendorf said. “They’ve largely spent what they could.”
NRA spokesman Andrew Arulanandam declined to address the group’s financial trends but said the annual report shows the organization making “financial and administrative decisions that work in the best interests of its members.”
“In the last three years, the NRA has raised more than a billion dollars, played an important role in getting President Trump elected and continued to successfully defend the freedoms of gun owners everywhere,” he said. “That is the true measure of the organization.”
In a letter in May to NRA members, a group of board members and past presidents said the organization is on budget for 2019. “Our financial house is in order,” they wrote.
The new details about the NRA’s finances come as the 2020 White House race gets underway; the organization is expected to be a key ally once again for Trump. But the group is also facing pressure on multiple fronts.
The New York attorney general is investigating the NRA’s tax-exempt status amid recent revelations of lavish spending by chief executive Wayne LaPierre and top vendors. Among the expenditures were nearly $275,000 in personal charges at a Beverly Hills men’s store and more than $253,000 in luxury travel to locations such as Italy, Budapest and the Bahamas.
NRA officials have said the expenses were made over a long period of time and were necessary for LaPierre’s fundraising and public appearances.
The Post reported this past week that money also flowed to 18 members of the group’s 76-member board of directors, which is tasked with overseeing the NRA’s finances. The allegations have infuriated many longtime NRA members, who are demanding transparency about how their dues are spent.
Amid last year’s financial crunch, the organization cut funds for gun training, a key purpose spelled out in the NRA charter. 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 midterms, down from $27 million in the 2014 midterms, according to campaign finance filings compiled by the nonpartisan Center for Responsive Politics.
At the same time, the NRA’s spending last year on legal fees, travel, entertainment and office supplies rose — making up about 12% of the budget.
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.
Harvard Law Prof. Howard Abrams, a tax expert, said the NRA’s spending on overhead was “extraordinarily high.”
“It is surprising that an organization as well-known as the NRA would have to spend that much on administrative and fundraising costs,” he said. “That is money that isn’t going to legislative programs, safety and training programs, and other core activities. It is sort of a cost of running the business. But it is a big cost.”
Steve Hoback, an NRA life member who used to work in safety and training at the organization’s Virginia headquarters, said he’s angry that the group cut back on what is supposed to be its central service to members: gun safety and training.
“For administrative costs to go up at the same time that one of the core missions of the NRA is going down, that has me incensed,” he said. “I’m livid at that.”
In 2018, the organization benefited from an increase in money from its members. The NRA recorded $170 million in dues last year, up from $128 million the prior year, according to the 2018 annual report, which was prepared by the NRA’s outside auditors. The report noted that the NRA recorded as revenue some memberships before they were collected.
Overall, the spending of the NRA and its associated groups outpaced revenue. 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 annual report, together with state filings, shows that the NRA has run a deficit for the past three years.
Despite spending more than it took in, Abrams and other tax law experts noted, the NRA has reserves: It reported nearly $145 million in total net assets.
Legal fees up
From 2017 to 2018, legal and audit spending jumped from $12.9 million to $33.5 million. Legal expenses for administrative purposes rose nearly 400%, accounting for the largest increase, from $4.6 million to $21.9 million, records show.
The rise in legal fees came as the NRA was contending with congressional inquiries into its ties with Russia, as well as various state investigations.
The NRA’s spending on legal fees has been questioned by board member Oliver North, who detailed his concerns in a memo this spring in which he said “extraordinary” legal expenses paid to the group’s outside lawyers, the Brewer law firm, were “draining NRA cash at mind-boggling speed.”
North was ousted from his post as president of the board in April after LaPierre accused him of attempting to extort him and the organization. His attorneys have declined to comment.
Arulanandam said the NRA’s legal expenses have increased “as the NRA defends the interests of its members against attacks like those orchestrated by New York Governor Andrew Cuomo and Michael Bloomberg,” a major backer of gun-control efforts.
“Our members expect the NRA to stand and fight when it comes to advocating for their constitutional rights,” he added. “They certainly don’t expect us to back down and bank their membership dues.”
A spokesman for the Brewer law firm declined to comment.
The annual report was made available to board members at the NRA’s annual convention in the final week of April, according to people familiar with its distribution.
The report was prepared by the NRA’s longtime independent auditor, RSM, which submitted a letter to the board describing the financial statement on March 13. The detailed financial statement combines the yearly expenses and revenue of the NRA, which is set up as a nonprofit social welfare organization; its PAC, the NRA Political Victory Fund; and four affiliated charitable groups: the Special Contribution Fund, the Civil Rights Defense Fund, the NRA Foundation and the NRA Freedom Action Foundation.
The consolidated statements in the 2018 annual report mask some of the challenges facing the main group, Mittendorf said. For example, in 2017, 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, according to the annual report and tax filings.
The NRA has borrowed against its Fairfax headquarters, which has an assessed value of $40.4 million, the report and public filings show.
As of December, the NRA owed $25.4 million on the line of credit it negotiated in September and is paying interest of 3%, according to the annual report. That debt must be repaid in 2021. The NRA also owes $17 million on a 2017 credit agreement that comes due in October of this year.
Tax experts said nonprofits’ revenue often fluctuates year to year, particularly if they are affected by the election cycle. But most organizations that have high volatility in their revenue have cover for the off-years, Mittendorf said.
“The NRA doesn’t have that cushion, and we’re seeing the consequences,” he said.