Red Cross Faces Senate Inquiry

By Grant Williams

The American Red Cross and its Board of Governors are under investigation by the Senate Finance Committee following

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the recent resignation of the charity's chief executive and the organization's handling of recent disasters, including Hurricane Katrina.

In a letter sent to the Red Cross board today, Sen. Charles E. Grassley, the Iowa Republican who is the committee's chairman, said he was concerned by the departure of Marsha J. Evans this month and had questions about the practices and effectiveness of the governing board.

Mr. Grassley's inquiry comes on the heels of a Congressional hearing in which members of the House of Representatives called on nonprofit groups to better coordinate their disaster-relief efforts following what many consider to be a flawed response to Hurricane Katrina.

"It's time for the Red Cross board to start answering questions about its role in the turmoil at the top of this première charitable organization," Senator Grassley said in a statement accompanying the public release of his letter.

"In fact," he continued, "the name and notoriety of the Red Cross make it essential for those governing the organization to go the extra mile to ensure public confidence not only in the Red Cross but in the nonprofit sector generally."

In his letter — which was addressed to Bonnie McElveen-Hunter, the charity's board chair — Senator Grassley noted that, at the time of the departure of Ms. Evans, a Red Cross spokesman said the resignation was a result of a problem of coordination and communication between Ms. Evans and the board.

"The American public deserves more than a papering over of the reasons for her departure," wrote Mr. Grassley. "If coordination and communication is at issue, then please provide a detailed discussion of what exactly were these issues. Please provide all written memos, communications, e-mail, etc., that support these concerns cited by the Red Cross spokesman that justify this explanation of Ms. Evans's departure."

In a short statement, the Red Cross said it has "enjoyed a positive working relationship with the senator and welcome his questions as well as the opportunity to respond to his concerns." The Red Cross said it would reply to Mr. Grassley by January 30 as he had requested.

Senator Grassley, who has worked to impose new federal rules on nonprofit organizations and their boards, previously investigated the Red Cross after the charity faced a public outcry for the way it handled contributions related to the September 11, 2001 terrorist attacks. Ms. Evans joined the Red Cross in 2002.

"Given that the Red Cross is a tax-exempt organization, chartered by Congress and, most importantly, is designated by the federal government to play a vital role in response to disasters, it is the duty of Congress to engage in oversight to ensure that the Red Cross is performing its role effectively," said Mr. Grassley in his letter to the charity.

Senator Grassley asked the Red Cross to explain in detail how its board operates. He requested a copy of all minutes of board meetings for the past five years; a copy of all communications (including e-mail messages) between board members and the chief executive for the past five years; a description of the work and duties of the board chair; a copy of the most recent "self-evaluation" of the board's performance; and a copy of the board's most recent evaluation of the "effectiveness" of the charity's operations.

Senator Grassley also asked for details of governance changes that Ms. Evans had helped put into operation and the response of board members to the changes.

Hurricane Response

On the matter of the Red Cross response to hurricanes and other disasters, Mr. Grassley said he had heard from nonprofit organizations and colleagues that "a top concern has been the Red Cross's poor working relationship with leaders of local charities" in coordinating relief efforts.

"These concerns were not made of other major charities, such as the Salvation Army," he wrote. "I would appreciate your response to this concern, and, if you agree, what the Red Cross will do to address this matter in the future."

Mr. Grassley said that, while the Red Cross is the lead charity for disaster relief, "it is understandable that there are times when the Red Cross cannot reach certain populations that are in need of assistance. Often it is local charities that fulfill this mission of disaster relief — responding to the needs of populations that the Red Cross is unable or incapable of assisting." Mr. Grassley said he wanted to know what the Red Cross believes is its "appropriate response to such local charities."

What's more, Senator Grassley asked the Red Cross to tell him how much money it has received in donations for Hurricane Katrina relief efforts and how and when it will spend the funds in keeping with its role and mission.

The senator also requested that the charity provide details of its work following last year's tsunamis and asked how its programs are "in keeping with past Red Cross practice as I understand of responding to only the immediate aftermath of an emergency or disaster."

In terms of the overall fund-raising efforts of the Red Cross, Mr. Grassley said that he wondered "when you ask for funds for a specific purpose, how do you protect that designated account? Please provide a list of all your designated accounts, both fund balance and purpose. Do you use such designated funds for any other purpose?"

Senator Grassley also had questions about the compensation of Red Cross employees and officials. He asked for details of Ms. Evans' employment and severance packages and how the charity sets its pay of top workers in order that it not be deemed excessive under federal tax law.

The Red Cross was also asked by the senator to explain all contracts that it has with governments at all levels; why it apparently has an insurance subsidiary in Bermuda; and how much money the Red Cross has spent on "government relations and public relations" over the past three years.