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Wayne LaPierre, the longtime leader of the National Rifle Association, plans to retire by the end of January 2024. In announcing his resignation three days before the organization's civil fraud trial began in Manhattan, he cited “health reasons.”
New York authorities have accused the NRA, Mr. LaPierre and three of his current or former colleagues of squandering millions of dollars the gun group earned from its members.
As a nonprofit accounting scholar who has tracked the NRA's finances for years, I believe the organization is not only at a legal crossroads, but also a financial crossroads.
NRA business model
To understand why the NRA is in such a difficult situation, it helps to first understand how its business model allows for very little margin for error. Despite the nonprofit's long history (founded in his 1871 by a Civil War veteran who fought for the Union Army), the NRA has never amassed enough funds to insulate itself from financial problems. there is no.
Let's consider the NRA situation in terms of the NRA's unrestricted net worth. Net worth reflects the funds available to an organization after taking into account its commitments to donors.
Compare this to the size of your organization's annual budget to get an idea of how much money you have on hand.
In 2015, the NRA's net assets were unrestricted and accounted for just 9% of total expenses. In contrast, in the same year, AARP, another well-established social welfare organization with millions of members, had unrestricted net assets equal to 87% of its expenses.
In other words, the NRA's coffers reflect more in line with the circumstances of an employee living paycheck to paycheck than an heir living in a trust fund. Because of this, the NRA has always relied on members' annual dues to cover its costs and is unable to weather financial storms that can last for years.
The controversy over the NRA's spending and the organization's political entanglements, which has swirled since 2016, constitutes such a mess.
Decline in financial luck
After spending heavily during the 2016 campaign, the NRA found itself with a budget deficit of more than $40 million and a hole to dig.
The next few years saw fluctuations in spending, with the continued challenge of generating enough income to cover spending.
In recent years, organizations' approach to budget shortfalls has been to cut costs, or at least some of them.
Spending on programming fell from about $176 million in 2017 to just $73 million in 2022, the most recent reporting year.
Traditionally core programs were hit the hardest. Spending on education and training decreased from $7.7 million to $3.2 million. Support for law enforcement decreased from $3.8 million to $1.8 million. Recreational shooting decreased from $7.2 million to $5.1 million. Field services decreased from $11.9 million to $1.3 million.
back to deficit
But the NRA hasn't cut all its spending.
Over the same period, the NRA's budget for administrative legal fees has grown from $4 million in 2017 to more than $40 million in each of the past three reporting years, reaching $43.7 million in 2022.
Shrinking the organization's programming budget has eliminated the deficit, at least temporarily.
Thanks to spending cuts, the NRA was able to end both 2020 and 2021 with a surplus. But that surplus, driven by cost-cutting, particularly for core programs for members, proved short-lived.
The organization is also experiencing a decline in its membership. If the number of members decreases, membership fee income will also decrease. Revenue in 2022 was down more than $100 million from 2017 levels, a decline of more than a third.
The decline in revenue meant that despite the budget cuts, the NRA would return to deficit in 2022 and its unrestricted balance of net assets would once again face negative territory.
What's next?
In other words, the NRA is in a financial spiral. The shrinking budget has resulted in a decline in membership, which in turn has resulted in a further shrinking of the budget. It can be difficult to stem.
The organization has drastically reduced the amount it spends on its programs.
There are no easy answers to what organizations can do about financial hardship, but they are not the only pressing issues facing organizations.
How long will the remaining members of the NRA remain loyal to the NRA? When will high legal costs subside enough to ease budget pressure? What will her small NRA mean for its ability to flex its political muscle?
Despite the many challenges, the NRA's impending changing of the guard offers an opportunity to make more fundamental changes in its priorities, spending approach, and marketing to members and donors.
Additionally, large legal budgets are the last remaining area ripe for cost reduction, so perhaps the next generation of NRA leaders will help the organization reduce its excessive legal burden and improve core program It will prepare you to refocus.
What is clear, however, is that the course the new leadership will take will be largely determined by fiscal constraints.
An earlier version of these charts was published in a related article on March 23, 2023.
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