A major credit-rating agency has given the National Rifle Association its lowest possible ranking after studying the gun lobby’s financial records.
Dun & Bradstreet, which evaluates the financial strength and credit-worthiness of corporations, businesses and municipalities, gave the NRA a rating of nine on its scale of credit risk.
Such a rating generally is reserved for companies with extreme financial difficulties and could make it harder for the NRA to do business with banks and contractors. In contrast, a rating of one would be assigned to the most financially sound entities.
The Dun & Bradstreet report, prepared June 30 for an individual involved in the NRA’s operations, was obtained by The Associated Press.
An NRA spokesman, Bill Powers, declined comment. But the gun lobby has said that it is operating in the black this year.
Dun & Bradstreet spokesman Joe Eckert said the firm has a general policy of not commenting on any report it prepares.
Banks, insurance companies and vendors typically can pay Dun & Bradstreet to do such analyses to determine whether they should do business with a company or group and, if so, on what terms.
The Dun & Bradstreet evaluation comes on the heels of an AP report that showed the NRA has depleted its cash and investments by more than half since 1991 and has been running in the red for the last four years with a cumulative deficit of at least $60 million.
Dun & Bradstreet based its assessment on 1993 financial summaries provided by the NRA. Such rankings can change dramatically if the rating agency obtains more detailed information or if the organization’s financial situation changes.
In the four-page report, Dun & Bradstreet cited several reasons for its poor credit assessment of the NRA. They include reported losses and payments made an average of 15 days late, compared with an average of six days late by other non-profit groups that Dun & Bradstreet studies.
The document, which said that the NRA has just $49.4 million in cash and investments, concluded, “This business has a deficit tangible net worth.”
“What that means,” said James Nesbitt, an accountant with BDO Seidman who specializes in auditing non-profit groups like the NRA, “is that Dun & Bradstreet sees an organization that has dug itself a deep hole due to the fact that its liabilities exceed its assets by so much.”
Nesbitt, who reviewed the Dun & Bradstreet report at AP’s request, said he was not surprised by the rating agency’s conclusions.
“A general rule of thumb used by many accountants is that debt should not exceed an organization’s equity,” Nesbitt said. “Here, the equation is so lopsided that it’s further evidence of the deterioration of their financial picture.”
Nesbitt said the analysis could make banks and contractors reluctant to do business with the NRA. An individual close to the NRA said at least one of the group’s contractors recently requested and received the Dun & Bradstreet analysis.
The Dun & Bradstreet study also found that the NRA currently has several agreements with vendors that tie up much of its remaining cash.
Chief among them is an agreement with First Union bank in which $39 million is pledged as collateral for the NRA’s new headquarters in Fairfax, Va., a suburb of Washington.
Dun & Bradstreet’s negative assessment comes as the NRA has been the focus of a political firestorm due to its recent fund-raising letter referring to federal agents as “jackbooted government thugs.” The NRA eventually apologized for the language, but not before former President George Bush resigned his NRA membership.
The NRA has said the letter raised more than $1 million, but declined to provide specific figures, and it later sent out two mailings warning of program cutbacks unless more cash were received immediately.