Because of Lack of Transparency at American Red Cross, The Federal Government Wants To Step In

Grassley, Thompson Introduce American Red Cross Transparency Act of 2017

WASHINGTON – Sen. Chuck Grassley (R-Iowa) and Rep. Bennie Thompson (D-Miss.) today introduced legislation to give the congressional watchdog arm complete access to American Red Cross records for oversight purposes. The bipartisan, bicameral American Red Cross Transparency Act of 2017 responds to concerns that the Red Cross tried to quash a review by the Government Accountability Office (GAO) of its practices, successfully limiting the scope of the review, and has failed to be as transparent as it should be.

“The American people rely on the Red Cross to respond when tragedy strikes,” Grassley said. “The Red Cross is congressionally chartered and is a federal instrumentality.  It receives federal tax dollars for some of its disaster responses, and it receives the financial benefits of tax exemption and tax-deductible donations.  For those reasons, Congress has a responsibility to make sure the Red Cross answers questions asked on the public’s behalf and is operating up to the standards required of it during national disasters.   The Red Cross has shown an unwillingness at times to answer questions.  This legislation strengthens transparency to help make the Red Cross more accountable to the public.”  

“Response to and recovery from large-scale emergencies and natural disasters the scale of Hurricanes Katrina, Rita, and Sandy are complicated and difficult and we must always look for ways to improve,” Thompson said.  “If the Red Cross continues to thwart oversight and stall goodwill attempts to be investigated, their operational challenges are sure to persist and improvement will never happen. To ensure that Red Cross will respect the GAO’s audit authority, I am partnering with Senator Grassley to introduce bipartisan legislation that clarifies Congress’ intent regarding GAO’s oversight authority and give GAO new tools to enforce it.  We owe it to our constituents to ensure that the Red Cross is subjected to the oversight necessary to ensure that funds that Americans so generously donate are not misused and that the Red Cross is a reliable response and recovery partner to the Federal government.”

The American Red Cross Transparency Act gives the GAO complete access to the Red Cross’ records when needed to conduct oversight.  If the Red Cross refuses to comply, the legislation provides the GAO with the authority to bring an action in court to force compliance.  

Ten years ago, Congress gave the GAO the broad authority to “review [Red Cross’] involvement in any Federal program or activity the Government carries out under law.”  Despite clear legislative intent, the Red Cross essentially stonewalled GAO when it tried to carry out an investigation requested by Thompson in September 2013.  After two years of stall tactics, delays, and a request from the Red Cross’ president that Thompson  cancel his GAO request and conduct future oversight via cell phone, the GAO analyzed information the Red Cross begrudgingly made available to complete its investigation.  Grassley explored the GAO access problem as part of his inquiry of problems with the Red Cross’ Haiti earthquake response.  He sent the results as a memo to his fellow committee members on both the Judiciary and Finance committees in 2016.

The Red Cross is congressionally chartered and considered a federal instrumentality, unique among tax-exempt organizations.  The federal taxpayers pay for some of the Red Cross’ work directly through federal tax dollars for disaster responses and indirectly through the tax dollars foregone to the Red Cross through its tax exemption and through tax deductions donors take for charitable donations to the organization. 

The legislation is available here. 

American Red Cross Again In Serious Trouble

by Gary Snyder

A lengthy joint report published this week by ProPublica and NPR finds that the Red Cross completely failed many of its rescue efforts during Hurricanes Isaac and Sandy in 2012.

ARC tried to cover up foul up after foul up. Some of the overt mistakes included allegations that 1) diverted (see internal report) 80 nearly empty trucks that should’ve contained food were told to drive around to “look like you're giving disaster relief” so that the agency would impress Red Cross “brass” in the area; 2) the caterer couldn’t produce lunches and dinners so Red Cross volunteers had to distribute cold leftovers; 3) used an emergency response vehicle and staff for a photo-op for 5 hours; 4) shelters were not properly staffed, materials and food resources; 5) more

Two weeks after Sandy hit, Red Cross Chief Executive Gail McGovern declared that the group’s relief efforts had been “near flawless.” The group’s self-assessments, drawn together just weeks later, were far less congratulatory.

  

The charity, nevertheless, ultimately raised $312 million to help Sandy victims. (ProPublica has raised questions about the opacity of Red Cross disclosures on how this money was spent.)

There is a long a rich history of poor leadership, misappropriations, political intervention and questionable representation of the operations of the organization. 

Although blood-compliance problems are seldom in the forefront for the public, decades of Red Cross problems include unsuccessful attempts to improve its blood-collection program to meet government safety standards. After a Federal Drug Administration Consent Decree the agency, ARC continues to be cited by the U.S. Federal Drug Administration for failure to take precautions to assure the safety of the blood donations. This failure has resulted in huge fines amounting in tens of millions of dollars. In 2010 alone, federal health regulators fined the American Red Cross $16 million for sloppy screening of donated blood.

There are several reasons for years of lax governmental oversight by Congress. The Red Cross was created under a special Congressional charter. The President of the United States, who is honorary president of the organization, appoints eight members of its board of governors. This relationship has caused significant problems in several of the Red Cross administrations. The American Red Cross was essentially pardoned from its misdeeds. In the past, it was bailed out with a $100 million no-strings attached tax-payer funded bonus to cover a shortfall.

Leadership has been a serious problem. The current president is the seventh CEO in as many years, counting the interim heads.

The boards and administrations have taken so little action about the problems that the American National Red Cross Modernization Act of 2007 (Pub. Law 110-26), a bill to strengthen the governance structure of the American Red Cross, was signed into law to provide to provide the first major overhaul of the organization since its 1947 congressional charter.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Another Scathing Review Of The American Red Cross

by Gary Snyder

Apparently members of Congress think that the American Red Cross lied to them.

Let’s see what they will do!

POLITICO reports on a blistering Senate report on the American Red Cross raises fundamental questions about the integrity of the country’s most storied charity and its stewardship of donors’ dollars.

The report, which was released today by Sen. Charles Grassley, R-Iowa, and contains nearly 300 pages of supporting documents, found:

·              After the 2010 Haiti earthquake, the Red Cross spent tens of  millions of dollars more than it has previously acknowledged on internal expenses. The Red Cross told Grassley that the money was largely spent on oversight to make sure the Haiti aid was used properly. But Grassley’s office found that the charity “is unable to provide any financial evidence that oversight activities in fact occurred."

·              Red Cross CEO Gail McGovern made false statements to Grassley’s office about whether the charity cooperated with congressional investigators.

·              McGovern and her subordinates have kept the charity’s own internal investigations and ethics unit “severely undermanned and underfunded.” The charity is “reluctant to support the very unit that is designed to police wrongdoing within the organization.”

There are “substantial and fundamental concerns about (the Red Cross) as an organization,” the report concludes.

Grassley launched his investigation following stories by ProPublica and NPR on Red Cross failures in providing disaster relief, including after the Haiti earthquake. The group raised nearly half a billion dollars after the disaster, more than any other nonprofit. But our reporting found that, for example, an ambitious plan to build housing resulted in just six permanent homes.

Red Cross officials, including McGovern, have repeatedly told the public that the charity retains 9 percent of donations to cover management and administrative costs. But Grassley found that a full 25 percent of donations — or around $125 million — were spent on fundraising and management, a contingency fund, and a vague, catchall category the Red Cross calls “program costs.”

On top of that 25 percent, the Red Cross sent the bulk of the donated money to other nonprofits to do the work on the ground. Those other nonprofits then took their own cuts for overhead costs — as much as 11 percent.

Pressed by Grassley’s investigators, the Red Cross could not give an accounting of the oversight it says it did with the money from the Haitian relief. After repeated requests by Grassley’s investigators over the course of months, the Red Cross finally last month produced a document with a narrative description of oversight but no financial details.

In general, the Red Cross itself doesn’t know how much money it spent on each project in Haiti because of a “complex, yet inaccurate” accounting system, the report found.

The report concludes that the Office of Investigations, Compliance, and Ethics was left so under-resourced that it is “unable to perform its primary function; namely, to perform investigations, ensure compliance, and maintain ethical standards.”

The report echoes confidential findings made by consultants hired by the Red Cross, which were previously reported by ProPublica and NPR.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Red Cross Gets Caught Again. This Time For Attempting To Kill Federal Investigation

by Gary Snyder

The Government Accounting Office last year started a Congressional inquiry into the Red Cross’ federally mandated role responding to disasters and whether the group gets enough oversight.

American Red Cross CEO Gail McGovern wanted no such investigation so she asked Rep. Bennie Thompson, D-Miss. the ranking member of the homeland security committee to kill it. McGovern suggested that, in lieu of the investigation, the congressman call her directly with questions. She provided her personal cell phone number.

Thompson criticized McGovern’s request to spike the investigation.“Over time, the public has come to accept the American Red Cross as a key player in the nation’s system for disaster relief,” he said. “It is unfortunate that in light of numerous allegations of mismanagement, the American Red Cross would shun accountability, transparency and simple oversight."

One veteran observer of congressional investigations said he couldn’t remember another instance in which the subject of a GAO inquiry asked for the inquiry to be called off.

The GAO inquiry continued despite McGovern’s appeal. The agency’s final report is expected to be released next month, according to a GAO spokesman.

McGovern’s effort echoes other instances in which the Red Cross has resisted requests for more information about its work. Last year, the Red Cross fought a ProPublica public records request about its Superstorm Sandy response by hiring a law firm and citing “trade secrets.” (The group later reversed its stance.)

The Red Cross has also declined to detail its spending in response to the Haiti earthquake. Sen. Charles Grassley, R-Iowa, recently questioned the Red Cross for including rules barring the release of financial information in its Haiti contracts.

American Red Cross’ CEO McGovern has long portrayed her organization as a beacon of openness, once declaring “we made a commitment that we want to lead the effort in transparency.” (propublica)

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)