Monday, March 24, 2008

"Blowing Lid Off" NRCC Embezzlement

The Dallas Morning News went light on Republican Representative Mike Conaway of West Texas. Heck, it even made him a hero for finally exercising basic nonprofit governance oversight of the National Congressional fundraising arm of the Republican Party. Apparently newspaper reporters don't serve on many nonprofit community boards.

The NRCC's Treasurer, Christopher J. Ward fabricated audited financial reports for fiscal years 2002-2006. Recall Enron and WorldCom? That caused these same Congressional leaders in 2002 to vote for Sarbanes-Oxley, intended to prevent financial fraud from happening so easily. Audit firms changed their practices for all organizations, not just publicly traded firms. Any nonprofit board member could expect to be interviewed by a member of the audit team, but certainly the Board President and Treasurer would have face to face time with an auditor.

Then there's the five year period where Chris handed the NRCC Executive Committee the "audited" statements. This is another red flag. A partner from the accounting firm would personally present the audit results and review the management letter with the board. Reporter Todd Gillman either is unaware of this practice, or thought it not important enough to include in his piece. However, what he wrote makes no sense. Consider:

Lawyers are a dime a dozen in the halls of Congress. But a good CPA? Only four, including Midland's Mike Conaway. That eye for ledgers and balance sheets came in handy when Mr. Conaway – who used to keep the books for President Bush's oil business ­unraveled an accounting scandal that has cost House Republicans nearly $1 million.

It wasn't the financial statements or fuzzy looking numbers that tipped Mike off. It was the absence of professional auditors, as in outside reviewers with financial expertise. The Congressman had this to say of the scheme, "but this is as sophisticated as anything I've dealt with." As to the forged statements he said, "They looked very good," he said. "A typical user would not see anything that just jumped out and said there was something wrong." The Dallas Morning News piece stated:

"Had I not caught it, it would have been staggeringly embarrassing to me professionally," Mr. Conaway said the other day. It's a humble stance, considering that the alleged fraud and misappropriation at the National Republican Congressional Committee went undetected for five years, until Mr. Conaway took over the audit committee.

Sorry Todd, wrong again. The West Texas Representative was appointed in January 2007 as head of the audit committee. He found the ruse in January 2008, a full year later. Audit cycles have much activity, not just at year end and especially if the organization changed auditors on a frequent basis (another red flag). Mike likely should have caught the scheme earlier, but his peers who served on the Executive Committee over the five year milking need to hang their head in shame, especially the President and Treasurer.

These truly are audacious schemes. On the fraud Mr. Conaway said. "This guy was covering his tracks." Funny, it seems members of the NRCC Executive Committee do likewise in every news article on the major pilfering. The five year scheme is clearly the result of poor governance, inadequate oversight that doesn't meet the standards of a local nonprofit organization.

And these people are "running the country"? How can they vote for greater fiscal oversight after Enron, and then loosen the reins inside their money changing operation? Houston, we have a problem, attention must be diverted elsewhere. How many whores could Eliot Spitzer have bought with nearly $1 million?