Hoplin II - Follow the $$$

This is my last post on Eric Hoplin. The election for MN GOP chair/vice-chair is this weekend. If he wins, I will shut up until the moment I can say, 'see, I told you so'. Hopefully the delegates will do the right thing. Hopefully this post helps.

After my post yesterday, I received all sorts of helpful emails and phone calls and most specifically this link addressing how the CRNC spent its money in the two years Hoplin was Chairman.

I feel particularly well qualified to put on the green eyeshade. I have an MBA from Notre Dame. An MBA is nothing short of a poo detector that can ferret out corruption, anomalies, and other potentially grievous errors in this age of Sarbannes-Oxley. I also happen to run a non-profit focused on the spread of ideas and not dissimilar in structure to the CR's - just significantly smaller.

I found three areas of concern:

FIRST AND FOREMOST! The CRNC raised $17.2M. Of that, $14.2M was spent on fundraising and only $2.5M was spent on the CR's. So the CRNC only got to spend 15 cents for every dollar they raised. This is bass-ackward. Look at the RNC last quarter - Raised $30M, spent $8M doing it ~ 25%. Johan Santana signed a 4 year, $40M deal ~ Agent got 15%. Even if you look at the break down of RDI for CRNC, $13M raised, $5M in expenses ~ 38%. Yeah that last number is a bit high, but I'm willing to write that off due to small donations vs. the larger ones the RNC gets. The main point, a 15% return on your fundraising is AWFUL. It should never happen. Why it was allowed to happen needs to be seriously looked at because it smacks of fraud, kick backs, or laundering. The bull-poo radar is off the charts with that number.

Second cause for concern - CRNC lists just under $174,000 in payroll taxes - or 34% of all money spent on payroll ~ $515,000. Uhhhh... payroll taxes are not 34%, not even in DC. Payroll taxes (FICA = social security+medicaid/medicare) are at roughly 14% and are split between the employee and the employer. So the employee pays 7% plus their regular federal and state income tax rates. These numbers, which might very well add up to 34%, would NOT be recorded by the employer. The employer would only record the 7% share of FICA.

So what the hell?!? Either the numbers are just WRONG and thus the CRNC gave the IRS bad info (rut-roh) or the number is right and... and what? Assuming the whole number of $174k is correct for the payroll tax line item, that would suggest a payroll number of $2,146,000 - not $515,000. Is the CRNC hiding over $1.5 MILLION in payroll?!? If so, who is getting it? The guy who controls the checkbook would be a good place to start looking...

And it makes sense. If you are going to bilk your organization out of money via large checks through payroll, you avoid getting busted on taxes a la Capone if the FICA is paid - all the sweeter if you get the organization you're bilking to pay the FICA! So if this is true, the embezzler would have no problems with an audit from the IRS - just fraud charges against the CRNC - how white collar.

And if there's not any fraud involved, why the HELL did the CRNC pay $135k more in payroll taxes than they had to? Even liberals don't do that!

Third Problem - Bad Management

Groups like CFACT and the CR's are similar in the sense that each has a mission and a message, and the most important part of a budget is those line items that promote the mission and message - namely employees and and message dollars (events, media, programs, campaigns, etc.) The rest is overhead (phone bill, office space, insurance, travel, computers, pencils, notebooks, accounting, legal fees, etc). The overhead is necessary, but is not indicative of how effective a group is. Most groups will try to maximize their people and mission dollars and minimize their overhead in order to focus more resources on mission and people.

For instance, in the coming year, CFACT will an overhead number at roughly 14%. Usually as an organization gets bigger, the overhead percentage will decrease. For instance, if you magically doubled CFACT's budget next year, I could drop my overhead number to 10%.

The CRNC operating budget is SIX times larger than CFACT's. And their mission/overhead split? 48% Mission - 52% Overhead. How bad are those numbers? Think of a bloated cow with lactose intolerance.

The best thing I can say about Hoplin - his inability to manage led to a financial disaster. The worst thing? Remember that bloated lactose cow? Just wait till it farts... everything stinks.

~Fin