From: Chairman House [mailto:steve@cologop.org] Sent: Tuesday, August 04, 2015 12:13 PM To: Jim Huffman Subject: Re: CRC Q1 and Q1 Financials Jim your questions are valid and we have to go back and redo a bunch of reports back to last November at least to show the debt and unpaid obligations. The true debt is shown as a contribution on the sheets we sent and since we haven't paid any of the loan off yet it hasn't been an expense. Once we get thru the August executive committee meeting you will see a major correction and amendment to this. It's a matter of making sure we have it all and even this past week another bill came in from November 2014 that had never been recorded in Quickbooks and it was $42,000. A big part of the obligation is legal fees but they belong to the IEC so you don't see those either. The monthly expenses on those quarterly reports are very high because we were paying old bills. The legal bills and the loan add up to $188,000. We wanted to give people a sense of running rates and fund raising for now until we get the rest straightened out. I also don't believe dumping it all without a clear understanding of what the bills are for would have been a good idea because it would have looked like I was blaming Ryan and I don't operate that way. This was the first time anyone ever put out a quarterly report before. If you had seen the Q1 report at the very end of Q1 it would have looked like we were in dire financial straits because we were and I really didn't want donors thinking they were only investing in debt especially since the legal bills may not be ours to pay. Please feel free to send any other questions. You will see the corrections before month end . Steve Sent from my iPhone On Aug 4, 2015, at 1:02 PM, Jim Huffman wrote:

Steve,

Thank you for sending these out but I must admit to being somewhat baffled. After hearing about comments concerning your surprise at the $200K debt when you took over in March, and then reading through the long e-mail exchange with Elaine about the $2-300K and where it was accounted for in financial reporting documents, imagine my surprise when I read the two quarterly financial reports you just sent and seeing everything in the black, with no debt shown. I am not a financial guy but I do know how to balance a checkbook and to track income and expenditures of a small business for tax purposes. While that may not apply directly to the business of accounting for political/election commission purposes, when dealing with your immediate constituency (the County Central Committees) we deserve to know exactly what is going on. One of the things I remember from my Legal Ethics classes is a rule that went something like this Not only must a judge avoid impropriety, he must also avoid even the appearance of impropriety. Acknowledging/identifying a deficit of $200K+ when you took over and then sending out quarterly financial reports that make no mention of it, either in the reports or the accompanying e-mail begs the question what is going on? It is this kind of lack of transparency that has caused my CFO and internal Auditor (my Wife) to stop making any donations to either the state or national GOP organizations. Jim Huffman Archuleta County Chair From: Steve House [mailto:steve@cologop.org] Sent: Thursday, July 30, 2015 3:08 PM To: undisclosed-recipients: Subject: CRC Q1 and Q1 Financials State Central Committee, In accordance with our bylaws, I am sending you quarterly financial statements for Q1 and Q2 of this year. Going forward, a quarterly statement will be sent to you 30 days after the completion of a quarter; October 30th, January 30th, April 30th,

and July 30th. These reports are intended to give you an overview of how things are going as well as basic trends in fund raising and expenses. More detailed financial discussions are held every other month in our Executive Committee meetings in which all contributions and expenditures are provided to the EC and questions are answered in any area they have a concern. Starting this month, we will be giving the EC more information on outstanding bills and debt now that we have had time to review and process where we are. Thanks Steve Steve House Chairman Colorado Republican Committee 5950 S. Willow Drive, Suite 210 Greenwood Village, CO 80111 303-758-3333 | Desk steve@cologop.org Email communication B (No response received to date) Sunday, August 2, 2015 at 9:50 PM Subject line: Quarterly financials take 2 Via email to Steve House Dear Chairman House: Thank you for your prompt response to our email requesting quarterly financial statements. We are dismayed by your responses that demonstrate a serious misapprehension of fundamental financial management concepts. While this is not an efficient forum for addressing each misstatement in your email, we urge you to immediately convene a meeting to

include legal counsel, the Audit Committee, the organizations CPAs, the party Treasurer, the Vice-Chairman and Secretary to discuss the serious concerns raised by your recent correspondence. Rather than provide a line by line response to the misstatements and misinformation in your email, we summarize below the major points of disagreement and concern for your immediate consideration. GAAP financial statements Contrary to your understanding, Generally Accepting Accounting Principles must be applied in preparation of the committees financial statements for a number of reasons. For example, the loan covenant with Centennial Bank requires that the books be maintained using GAAP. We have attached a copy of the affirmative loan covenant on page 8 of the attached FEC document, and call your attention to the requirement to use GAAP to maintain compliance with the terms of the loan. We urge you to bring the party into compliance with the loan covenants immediately and to confer with legal counsel and the partys CPA to assist in doing so and properly communicating that intent to the lender. We urge you to confer with the partys CPA immediately to gain an understanding of the necessity of applying GAAP or some other Other Comprehensive Basis of Accounting (OCBOA) in an organization the size of the party. Given the banks requirement to apply GAAP, and the widespread understanding of GAAP financial reporting by most interested parties, there is little reason to consider OCBOA. You will find in your discussions with the professionals that you have a gross misapprehension of meaning and application of GAAP. Such a misapprehension has resulted in woefully inadequate financial record keeping and reporting. Regardless of when such non-compliant practices began, the Chair has the responsibility to ensure that proper financial reporting is routine, and all material prior period errors are corrected in the 1/1/2015 beginning balance sheet. Since March 14, the CRC members have looked to you to have the financial house in order. We are alarmed and disappointed, particularly given your promises of audits and financial transparency. You appear to be asserting that the books (ledgers) are kept on a GAAP basis and converted to some other basis for financial

reporting. This cannot possibly be the case. Audits You have promised that thorough audits would be conducted of current and prior periods. Tyler Hart wrote to Elaine Brofford on July 9 saying "Previous financials are being audited as part of the transition, and Q1 will be released with Q2 together by the end of July. The financial schedules that we received certainly do not appear to have been audited" or they would be complete and prepared on a GAAP basis. Please address whether audits were conducted or are ongoing, and who conducts such audits. The bylaws require an annual audit of the financial statements by an independent CPA. It is our understanding that the Audit Committee did not order the 2014 independent audit as required. We request that the required audit be undertaken immediately, and an auditor's review be conducted of 2015 financial reporting. The 2015 quarterly statements should be prepared using GAAP. Required Financial Statements We urge you to consult with the partys CPAs about your assertions on income statements, balance sheets and cash flow statements. Your comments below reveal a misapprehension of the basics of financial management and reporting. This is not the forum for us to attempt to correct those misconceptions. However, it is important that competent financial management immediately take charge of this area of party operations and oversee the corrections of the books and records and the production of compliant financial statements. We are confident that the CPAs will inform you that a set of three specific financial reports is required to complete financial statements in the commonly understood meaning of that term. As chair, it is your duty to provide those quarterly financial statements to the CRC members. Consistently applied accounting standards for financial statements are necessary for readers to comprehend the financial condition and assess financial activities. Again, we request that you provide a copy of the Q1 and Q2 financial statements properly prepared on an accrual basis in accordance with GAAP.

Please see the attached January 2014 Income statement that was forwarded to us by a member. It notes that accrual based accounting was used, which is what we would expect. If a change has been made to some other comprehensive basis of accounting, that should be well documented and fully discussed with the lender, CPAs and attorneys. Bylaw applicability You suggest contacting Mark Baisley on proposing a change to the bylaws to require GAAP be applied. The current bylaws call for quarterly financial statements (a well understood term) to be provided to the CRC. GAAP (or some OCBOA) is assumed in the preparation of such financial statements. Given that the standard is GAAP and the loan covenants require GAAP, there is seems little reason to consider a OCBOA. The current schedules attached do not conform with either GAAP or any recognized OCBOA. We urge you to confer with legal counsel regarding the clear requirement to prepare financial statements in accordance with GAAP and the Chairs requirement to provide them to the CRC membership. We are not seeking financial management decision making, only financial information. Please promptly inform us of your plan to address our requests. Kim Herzfeldt, Arapahoe County

Elaine Brofford, Denver County

Ken Clark, Denver County

Randy Corporon, Arapahoe County

Mike McAlpine, Boulder County

Email Communication C

From: Steve House [mailto:steve@cologop.org] Sent: Saturday, August 01, 2015 10:26 PM To:Kim Herzfeldt Cc: Ken Clark. E Brofford, Randy Corporon, Mike McAlpine Subject: Re: Request for State Party Quarterly Financial Statements. Dear Mr. Herzfeldt, "Financial Statements" is the term widely understood to include an income statement, a balance sheet, and a cash flow statement for publicly traded companies or large private held companies who wish to become public at some point in the future. We are not a company we are a committee, we are not publicly traded, and we will never go public as an entity and the bylaws of our party do not require these types of statements or that they be formatted according to Generally Accepted Accounting Principles(GAAP). We maintain our books using Quickbooks(which are GAAP compliant) and that allows us to comply with the requirement of our Line of Credit which requires that we maintain our books according to GAAP guidelines. That line of credit does not require that we publish financial statements according to GAAP or any other standard and neither do our bylaws. The quarterly statement I distributed to the State Central Committee is in fact an income statement or also known as a profit and loss statement. You mention the need for a balance sheet. A balance sheet contains assets, liabilities, and shareholders equity. As a political committee we have no assets other than cash which is represented in these quarterly statements as net income at the end of each month and the end of the quarter. We do not have shareholders equity either because again we are not a company. As for liabilities we will report any long term liabilities going forward but since all liabilities have been or should be settled within a single quarter it is unlikely that they will show up as liabilities because they will be part of the expense totals shown in the income statement not ongoing liabilities. We will share a history of liabilities with the executive committee, in executive session, in our August meeting to bring them up to date on what we have found. Based on these factors a balance sheet is not relevant nor is

it called for by our bylaws. As for a cash flow statement; the statement we provided also serves as a cash flow statement due to the nature of our operations. A cash flow statement is like an income statement except that it does not look at future incoming cash, via receivables, or future outgoing cash needs via accounts payable. A cash flow statement records the amount of cash and cash equivalents entering or leaving a company. We are not a company but for the sake of answering your question by providing an income statement and listing the loan amounts in January and February taken against a line of credit we have enabled the SCC members to effectively have a cash flow statement by simply subtracting the loan amounts from the total contributions you then have incoming cash and outgoing cash shown and a cash flow statement. We do not use cash equivalents so it is unnecessary to provide further information then this. In any month or quarter where cash flow was insufficient to pay our bills a negative will appear on the quarterly statement. If the negative amount cannot be covered by cash balances you would see an additional loan. If you feel the need to take our political committee and make it a requirement to publish GAAP financial statements I would recommend that you reach out to the head of the bylaws committee, Mark Baisley, and provide him with language changes you would like to see in our bylaws. He will need those changes prior to August 26th which is his committee's deadline for submission of those changes to the SCC. Our bylaws do not afford the SCC power over financial decisions within the Colorado Republican Committee. They also do not afford the executive committee this power either other than to approve salaries and a budget which they did in April of this year. Quarterly financial statements, specified in the bylaws, have never been given out before which means we have no bench mark from the past to work with and neither you nor I can speculate on what the intent was at the time this clause was inserted and approved in the bylaws so we must follow the bylaws as written and that is exactly what we did.

I have removed the email for Marilyn Marks on this reply because she is not a State Central Committee member as your email above implied. Should you have any additional questions please feel free to reach out to me and I will answer them accordingly. Sincerely, Steve House Steve House Chairman Colorado Republican Committee 5950 S. Willow Drive, Suite 210 Greenwood Village, Email Communication D From: Kim Herzfeldt Date: Saturday, August 1, 2015 at 2:33 PM To: "steve@colcgop.org" Cc: Marilyn Marks , Ken Clark, Elaine Brofford, Mike McAlpine , Randy Corporon, Subject: Request for State Party Quarterly Financial Statements. Dear Chairman House: As members of the Central Committee we write encouraging you to take this opportunity to ensure accountability and demonstrate to the members your intent to bring this party together going forward. Your response will set the stage for improved intra-party communications going forward into 2016. As members of the Colorado Republican Central Committee we are entitled to receive quarterly financial statements of the party. On Thursday, we received the attached documents in non-standard format. These documents are insufficient to meet the obligations of the party to keep its members properly informed of the financial

affairs of the party by providing quarterly financial statements. " Financial statements" is the term widely understood to include an income statement (or equivalent), a balance sheet, and a cash flow statement, and must be prepared in accordance with GAAP for the party. As you are aware, the bylaws require that the Chairman, "shall provide or cause to be provided quarterly financial statements to the Executive Committee and to the CRC. Please promptly provide the Central Committee members with the quarterly financial statements for Quarters 1 and 2 of 2015, prepared in accordance with Generally Accepted Accounting Principles. Thank you for your consideration. Kim Herzfeldt, Arapahoe County Elaine Brofford, Denver County Ken Clark, Denver County Randy Corporon, Arapahoe County Mike McAlpine, Boulder County