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American Red Cross Case

American Red Cross Case

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Case Tl

American

As Marsha "Marty" Johnson Evans American Red Cross on August 5, with the challenge of restoring the . . During the past 24 of negative

.allhandto ensure respectforthe human being. It promotes mutual understanding. mental health counseling.countries. Swimming and lifeguard classes.~ndnational capacity. Source:www. being guided solely by their needs. www. e72 Case 11:: American Red Cross . obtain.onal. prepare for.independently.ievethe suffering of individuals. must allNaysmaintain their autonomy so that they may be able atall times to act in accordance with the principles of the Movement. In~ependence: The Movement isindependent.andappreciation.org. demonstrate courage and accountability under pressure. shelter. food and nutrition information. > Ej(hibit 2 Values of the American Red Cross • • • • • • • Humanitarianism: We existto serve others in need. Unity: There can be only one Red Cross or one Red Crescent Society in anyone country. Educational services to prepare for disasters.found. Each year 83. ~~lpingOthers:Weareattentive and responsive tothose we serve. endeavors. financial assistance.Itmust carryon its humanitarian work throughout its territory.ithoutdiscrimination to the wounded on the battlefield.~~irit:Asafamilvofdonors. the Movementmay not fake sides in or engage atany time in controversies of a political. "."_--'-" f)(hibit 1 Principles ofIntemational Red Cross • • • • • • • Hurilanity:ThelnternationalBed Cross and Red Crescent Movement. while auxiliari.rning:We seek. always listening totlieirneeds and lookingforways to serve through existing or new initiatives. providing fer victims of disasters andh_elpingpeople prevent. to identify. race. awareness required for exceptional service. friendship.l1lJou~lea.redcross. 1111~f)~if)lity:ltrnakesno discrimination asto nationality. Help for the homeless.orpoliticafopinions. ~~spect: Vv.III~tal'Y. and respond to emergencies. collectively and individually.000 volunteers help disaster victims by providing food. inits internati.redcross.generosity. and so on. and maintain competencies andthe.000 hospitals with about half of the blood used in the United States. living well programs. and lasting peace amongst all peoples. transportation. Itmust be opento all. "~. and support the rights and diversity of each person in our organization a?dinthecommunities we serve. or ideological nature. seniors. born of a desire tobring assistance IN.eavors rel. Its purpose is to protect life and he. effectively. class.~utrality: In order to continue to enjoy the confidence of all. Int~grity:Weact with honesty.en~.to prevent and alleviate human suffering WQereit may be.the. hUIllanitari an services of their governments and subject tothe laws of theirrespective. Health and Safety Services. Voluntary Service:ltis a voluntary relief movement not prompted in any manner by desireJorgain. 9~nti. Disaster Services. and to give priority to to lT1?sturgentcases of distress. always tpimprove. in which all Societies have equal status and share equal responsibilities and duties in helping eachother.religious beliefs. The American Red Cross supplies 3.esin. and so forth.is worldwide.The National Societies. and efficiently with resources entrusted to us.eacknowledge. in excess of 6 million pints of blood. racial. Source: American Red Cross. andstaff we search for ways to provide hope to servewhileidemonstratingcompassion. Stevvardship: We act respgnsibly.respect. HIV/AIDS education. religious. Community Services. Universality: The International Hed Cross and Red Crescent Movement. and without discrimination. and youth.volunteeJs. and openly share ideas and i_nformationwith each other. cooperation.org.

and so forth. director of outreach at Action Without Borders has stated. 4. there were costs associated with a Web site that many nonprofit groups did not realize. it's only going to get more pervasive. 13 In February 2001 the American Red Cross teamed up with Coinstar. Wireless communication allows the American Red Cross to make faster damage assessment at the scene. Youth Involvement. Helping kids. As a result of recent research and development. and diarrhea in poor countries and to support primary health care.400 chapters and to expand its reach across America. Massachusetts General Hospital and the American Red Cross jointly own a patent for a protein associated with the underlying cause of Alzheimer's disease. Products and services: Fees for products.000 hospitals with blood donations. The Red Cross has routinely published the latest public health information. Emergency disaster response. "The Internet has definitely changed how the whole organization thinks. strengthen public health. vice president of Disaster Services at the American Red Cross.P Strategic Alliances The American Red Cross has established a number of alliances with other organizations. teens. Archer stated. In the near future. grants. primary health care programs. A donation to the World Hemophilia Foundation of plasma product is used to treat hemophilia. Investment income and other income: Investment income from endowments and reserve funds and income from contracts to provide various programs. materials. and the use of new technology will make this information available online. feeding programs. International Services. to collect Red Cross donations for disaster relief efforts." a service that enables blood drive sponsors to use their intranets to recruit donors and allows hospital customers to order blood products online. and it's not necessarily that. find relatives in a disaster area. Jane Delano Society. lack of pure water. 8 The Internet provides information about nonprofit organizations and can provide "click-to-donate" sites for those individuals who are willing to help out with contributions while they are online. Cindy Archer also believed that "more and more people are coming onlinethis isn't going to go away. In 1999 the American Red Cross joined the Federal Emergency Management Agency for "TOPOFF. The Web site helps visitors locate local Red Cross shelters.C.570 billion (see Exhibits 3. and obtain information about donating and volunteering. Red Cross delegates help local citizens rebuild infrastructure. "Some of them think this is going to be a kind of panacea for doing fund-raising. fees from collecting. and young adults. D.1 Technology and Operations Technology has helped the American Red Cross better coordinate its efforts among its 1.• and so forth. and so on. and 5). legacies." a nationwide disaster simulation to help prepare for acts of terrorism. the American Red Cross supplies over 3.712 billion. It works with the World Health Organization to alleviate malnutrition. administer funds. In 2000 it launched "iGiveLife. Funding disaster services: Expenses to solicit donations. and tissue services. Geneva Conventions. staff expenses at disaster sites. Total operating expenses for the fiscal year 2001-2002 were $3. Consumers could drop loose change into the Coinstar machines located in local supermarkets.v'? However. Student nurses. and so on. and courses. the Internet serves as a vital source of information to the American public and as a new way to collect donations."? Archer worked on developing a Web site where visitors could enter a zip code and quickly find information. Biomedical services: Facility maintenance. Total operating revenues for fiscal year 2000-2001 were $2. The communication network allows it to locate family members during crises more efficiently. John Clizbe..117 billion. Volunteering. and distributing blood and tissue. other monetary and in-kind contributions. You feel this sense of urgency whenever there's a disaster-e-you want that information up as quickly as you can get it. indicated that "If every American near a Coinstar machine would donate a handful • • Disaster costs: Assistance to victims. Nursing. Financial Overview In fiscal year 2001-2002 the American Red Cross had operating revenues of $4. Each year more than 12 million Americans take advantage of lifesaving courses offered by the Red Cross. and major expenses included:" can Red Cross in Washington. Russ Finkelstein. Coinstar machines were located within two miles of 130 million Americans."!' About 12 million Americans enroll in Red Cross courses each year. Recruiting and organizing volunteers. In addition. The Red Cross is able to provide long-term aid and education to those in need. Three main funding sources for the American Red Cross were:" • • Contributions: Fund-raising efforts by the United Way & Combined Federal Campaign. It is now possible to make these courses available online. and improve response time to local disasters. online media manager for the Ameri- . expenses in blood. For Cindee Archer.. it may be possible for the American Red Cross to offer an online shopping network to generate additional resources. These "click" sites appeal to a newer and often younger audience for the nonprofits. plasma. keep up with breaking news. Inc. Total operating expenses for the 2000-2001 fiscal year were $2. testing. Also.743 billion.

587 mitl11ents and contingencies L..964 325.453 296.354 2.453 120..437.089 2.924 2.633 4.lles.411 $439.825 197.57.545 34.293 3. 2001) $146. •.149 2.823 950. 2002 (with summarized information as of June 30.042 92..894 18.674 28.784 in 2001 Other assets Total current assets Investments Contributions receivable Prepaid pension costs Land.798 1.029.374.626 1.575.374.924 liabilities 20.050 $ 1.570 15. and other property.103 56 15.252 12.654 183 29.680 (-'elnsieln and postretirement liabilities benefits 357.238 2.892 1.825 319.149 287.92 22.247 309._ ~jhibit 3 (ill thousands) Consolidated Statement of Financial Position.293 63 63 23.514 15.541 11.801 126.556 379. current portion Other Inventories.164.913 548. Annual Report.301 in 2001: Trade Contributions.602.. 2002.042 93.662 39.500 771.750 in 2002 and $6.385 6.525.209 823.525.653 366.137 liabilities and netassets Cross.180 13.0. $2.421 1. net of allowance for doubtful accounts of $19. net 304.544 155.623 936.374 203.569 11.541 35.066 $380.840 12.385 American.092 20 83 380.. June 30.386 12..'c· _~.036 357.272 $3.913 Receival.453 120.604 in 2002 and $19.Red .547 986.buildings.162 585.704 380.473 7.543 16.894 18.402 3.826 823.258 110.619 $771.626 1. net of allowance for obsolescence of $7.. 9.209 39.243 15.

410) 420.034 21.085 (131. response Biomedical services Health and safety services Community services International services program services Supporting services: Fund raising Management and general 61.108 45.083 3.960 1.330 (135.182 311.069 2.137 in net assets from operations gains (losses) effect of accounting change in net assets beginning of year end of year Red Cross.077 137.649 $ 757.901 174.208 $2.156 617.259.924.594 49.619 22.616 154.587 .699.712.156 11 617.727 115.058 150.844 2.035.970 337.747) 19.437. Year ended June 30.4 Consolidated Statement of Activities.902 32.614 152.066 546.978 203.118 22.549 84.164.201 (31.171 82.448.171 81.463 51.089 1. 103.195.960 108.876) 2.18 22.302 30.960 1.090 121)24 50.259.022 705 Armed Forces Emergency Services Disaster services liberty disaster relief-Sept.5.518 (548) 419.906 61.614 152.351 230.901 174.980 360.182 311.164.035.736 3.060 6.967 213.742.575.726 263.016 22.236 213.222 67~175 36.086 $380.394 49.872.071 ) 2.756 284.342 2.902 32. 2002 (with summarized information for the year ended 30.872.674.513 308.845 1.513 308.931 61. 2002.488 58.097 4.601 989.570.686.272 65.195) 411.466.261 1.175 81.736 3.410 3.077 136.582 58.135 2.2001) (in thousands) $ 205.137 $2.083 3.402 $1. Annual Report.931 420.570.289' 1.405 40.915 906 1.967 213.604 (63.822 1.900) (28.238 2.728 76.848 136.745 96.008 (1.924.117.727 (2.848 136.815) 1.

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and transportation were provided to families of missing foreign nationals. and other services to victims' families and others affected. the Red Cross set up family assistance centers to provide counseling. unfair trade practices. American Red Cross Growth and Integrated Development. Somerset County.5 million. the president and chief executive officer of the Red Cross. a Mars Incorporated Company. COO of Coinstar. their families. and Coral Blood Services alleged the Red Cross had cost them more than $25 million in lost business. MD. and at the Pentagon to provide meals. They further alleged that the American Red Cross priced some blood products (e. the American Red Cross released a spending plan for the first $300 million in the Liberty Fund. and blue M&Ms specifically to benefit the Red Cross. food.3 billion. child care. "Everything is happening at such a fast pace. The Red Cross is a fine organization. She indicated that organization officials earmarked $100 million from the fund to provide short-term financial assistance to families of victims. and help from a myriad of volunteers contributed to Red Cross efforts to provide aid to survivors. the Red Cross would be that much better prepared to respond to disaster immediately. which prohibits monopolization. declarations.of change on their next supermarket visit. The remainder was earmarked to help the Red Cross improve its own organization and expand into new aid programs that might be needed in the event of future terrorist attacks. those handfuls will make a huge difference in our capacity to help others thisyear. senior vice president. the Red Cross had annual sales of more than $1."? Blythe Kubina. The American Red Cross has a heavy burden-to live up to the inspiration and memory of those lost. a Red Cross spokeswoman." Rich Stillman. 2001. or rescue workers. Within 15 days of the September 11. If all Americans donate the change in their wallet or pocket. the Red Cross had collected $202 million in donations. frequent schedule changes. the Red Cross created the Liberty Disaster Relief Fund to be used exclusively to meet the needs of people directly affected by the September 11 tragedy. a Red Cross spokesperson. and creative displays in stores across the country. Because of the large dollar amount of donations from the American people. "We believe that's unfair and illegal. Less than 50 percent of the money raised was targeted for victims. the plaintiffs alleged the Red Cross violated Section 2 of the Sherman Antitrust Act. The workers were unhappy about long hours. Bernadine Healy." "Through appearances on television."20 Recent Problems Events between 2000 and 2002 provided the American Red Cross with a number of challenges. Funds were used for travel. sleeping quarters. HemaCare Corp. In January 2002 Masterfoods USA presented a check to the Red Cross in the amount of$3. Pennsylvania. based on Healy'S policy of using donations for a "long period of C78 Case 11:: Amer lean Red Cr ass . attack. "You no longer need a credit card or checkbook to provide financial support to those in need. said in a written statement." In January 2001 a California blood supplier filed an antitrust suit against the American Red Cross claiming the organization used its clout to eliminate competitors. 15 One hundred percent of all profits from the sales of these M&Ms were donated to the American Red Cross Disaster Relief Fund.P This planned distribution of funds. We have been in full compliance with the law. In providing more than half the nation's blood. "We believe the American Red Cross has done nothing inappropriate regarding HemaCare's claims to unfair business practices and we were surprised by this lawsuit.'? Unfair Trade Practices Lawsuit The Red Cross derived 60 percent of its revenues from the sale of blood. stated. We just want them to play by the rules that are reasonable and fair and compete on a level playing field. "What has taken place is extraordinary. and will explore efforts in joint training exercises. and Liberty Disaster Relief Fund After the terrorist attacks on September 11. victims' families. William Nicely. said. Millions of dollars. In the lawsuit.' stated Skip Seitz.g. The ASAE provides the Red Cross with demographic information about associations and assistance with identifying organizations they wish to contact during times of need. The national campaign theme used for this promotion was "Taking Care of America Everyday. radio and newspapers.2001. counseling. platelets) below production costs to drive out competitors while it charged higher prices for the same products in markets where there is no competition. Respite centers were set up in New York City. and relief workers. white. In response to the tragedy. and changes in legislation. and other items to relief workers and volunteers." unfair competition under the California Business and Professional Code. thousands of blood donations. Financial assistance. It is with great humility and pride that we carry out this noble obligation/'P On October 12. said in a written statement. HemaCare's chief executive officer. and increasing health benefit costs. In August 2001 the American Red Cross and the American Society of Association Executives (ASAE) signed an agreement under which the two organizations will share data regarding disasters. Deborah Goldburg. financial assistance. the American Red Cross rose to the challenge of providing the most extensive relief operation in its 120-year history. the new M&Ms' captured the heart of America. lodging. and we will vigorously defend this lawsuit."!" Masterfoods USA. and meals for volunteers and staff working on-site. Worker Strike In June 2000 Red Cross workers who collected blood donations and delivered them to hospitals went on strike after rejecting a contract offer by the American Red Cross.. Right now we are just trying to keep up with responses/'" Goldburg stated that the entire amount raised by the Red Cross since the disaster would go into the newly created Liberty Fund. and we must respond in an extraordinary way. created a special package of red. stated. The lawsuit also charged tortuous interference.

All chapters must have an independent annual review. In addition. we will never have public truSt.000people $169 270 94 3. and extend the use of toll-free telephone lines." Harold Decker. "Donors charged the organization with abuse of their good intentions. fires." Healy finally responded with her announcement of retirement. 2002. The trouble is. By November 2001 about 10 percent of the red blood cells collected on September 11 and 12 had expired. agreed to a March 30 deadline for the updated report. Chapters that have over $100.P In a congressional hearing. She stated that Wallace's claim that chapters "are not even required to submit financial reports" is completely false. In fact. $ millions gir~Gt.'dE)ceasedand seriously injured .000 in annual expenses must have an external audit conducted by an independent CPA.uncertainty and recovery.P 60 Minutes Program 1. and very clear direction for our September 11 relief effort. it's in small print." In response. a spokesperson for the Red Cross. the Better Business Bureau Wise Giving Alliance removed the American Red Cross from its "give.P? On March 7. participate in a database to be shared among relief agencies. there is so little accountability that local chapters-and there are more than one thousand of them-aren't even required to submit financial reports to Red Cross headquarters in Washington.althservices for 232. mental he. It appears to have contained some inaccuracies concerning floods. Chapters must meet specific national guidelines to maintain their charters. we can save a life" public service announcement.i" The donors blasted Healy because they expected their donations to be helping September 11 disaster victims now. 2. David McLaughlin stated."28 In addition to donating money.26 On November 14. "If we don't subject ourselves to public scrutiny. The attorney general of New York State threatened legal action. interim CEO and president of the Red Cross. announced changes adopted by the American Red Cross Board of Governors to meet the immediate and long-term needs of people affected by the September 11 terrorist attacks. hire an additiona1200 caseworkers. allegedly because the American Red Cross did not provide a timely report to the alliance.000people. it took us too long to hear their message. 14 months after the fire. These donations were given in response to Healy'S "Together.S. stated. and Bennett Weiner. their trust. McLaughlin. 2001. "They also decided to put a disclaimer in their ads saying that donations will be used for this and other disasters. David T. In his letter Decker requested a public retraction of Taylor's statements and that the Better Business Bureau's current report on the Red Cross be restored to the give.500 families affected by the attacks." caused a huge uproar.266families of .org" Web site. volunteers. sent a letter to CBS News indicating the errors and an explanation."?" In an article in U." she said.000families of displaced workers and disaster workers Provision for 14million meals. "The people of this country have given the Red Cross their hard-earned dollars. and health services for 129. "Today we are recognizing the work of our staff. the American Red Cross saluted the staff and volunteers who provided assistance to the more than 54. In a comment about advertising practices. president of the alliance.32 Another onslaught of negative publicity for the American Red Cross occurred March 10. Deborah Daley reported. interim president. the "this and other disasters" language appears in the same font and size as the rest of the body copy appealing for support. announced that the American Red Cross received $930 million in contributions and this money was used to provide the following. A letter from Harold Decker to the Wise Giving Alliance explained that a request by the alliance for an updated report from the Red Cross was received in January 2002. and donors who responded to September 11th. chairman of the American Red Cross Board of Governors.'! BBB Wise Giving Alliance On February 16. COO of the alliance. Deborah Daley. and the financial accountability of Red Cross chapters. Experts questioned the wisdom of calling for blood donations when there were very few blood recipients. Wallace reported. Mike Wallace reported. Regrettably. Harold Decker. Wallace reported. "As oflast week. Given the recent activities of the American Red Cross. on the CBS news show 60 Minutes. The Red Cross does regular audits of chapters. "Outside audits of local Red Cross chapters are rare. "I had no choice. "In the West Virginia flood ad. 2002. H. made some unsupported public statements regarding the Red Cross that were reported in the Philadelphia Inquirer. it was determined that such a report could not be provided by the due date." The Lancet reported. CFO of the Red Cross.assistanceto 3.~ssistanceto 51. The Red Cross would provide increased financial support to families.. 2002.org Web site. Art Taylor. Healy was confronted with allegations of "panicking the public into wasteful donations of blood. As for the Alpine fire in Southern California. Jack Campbell. claiming that the organization's board had pushed her OUt. News & World Report." Deborah Daley responded that chapters are accountable in a number of ways. the American public donated blood for the disaster victims. David McLaughlin stated. . The largest 126 chapters must send quarterly financial reports to the national Red Cross.

October 1: 8. 26. Modern Healthcare 31. Annual Report. American 3. 2001. 22(25): 37. 19. 15. Red Cross faces antitrust lawsuit. American 4. Charity olympics. ASAE and American Red Cross formalize partnership agreement.S.. Looking to the Future After a five-month search."?" Evans remarked that: In the midst of responding to the extraordinary demands of 9/11 and a lot of criticism about these efforts. 2001. 2001. Red Cross announces major changes in Liberty Fund: Fund solely used for people affected by September 11 tragedy. Taylor. Blood. Charity olympics. and most especially their dedication. Newsweek: Former Red Cross head says her fundraising message was clear . she is well poised to guide our organization as we continue to provide vital services in a world faced by new challenges. American Red Cross. politics. Red Red Red Red Red Cross. Ibid. US Newswire. US Newswire. PR Newswire. Ibid. 2000. Sanborn. March 7. 24. Levine.000 in the months since last September. In his announcement. and the American Red Cross. Becker. Blood. June 27. December 9. American 6. 9. Modern Healthcare 31. 34. Press release. How should she proceed? Endnotes 1. Nonprofits reap rewards of the Web-Internet proves to be a great fund-raising tool for charities. Red Cross announces major changes in Liberty Fund. 2001. Cross. Stephanie. Marsha Johnson Evans must confront the many issues faced by the American Red Cross. 8. 23. www. 2001. Tyrangiel.. 28. some 45. Annual Report. A torrent of donations. Ibid. Ibid. American Red Cross. February 1. 18. Reports. American Red Cross. News & WorldReport. 7. and the American Red Cross. Cinda. November 24: 1789. Red Cross faces antitrust lawsuit. 2001. Evans has served as national executive director of the Girl Scouts of the USA for the past four years. 25. 27. Infoworld. Tyrangiel. 2001. November 19. 2002. Blood. Greenberg. C80 Case 11:: American Red CI ass . January 1: 20. November 14. Tyrangiel. American 2. Samantha. Ibid. 2001-2002. 2002. Fund Raising Management. 2000. 2002. 2002. 12.. U. 14. said." As she begins to guide the organization. 22. Press release. their talent. 2002. Daniel S. 20. February 1. Press release. February 12. Marsha." Deborah Daley responded that the chapter has provided up-to-date financial information on its response to the Alpine fire three times since November. 2000. Navy. Cross. 21. 16. Lancet. Mark. 31. Ibid. Cross.org. Red Cross workers on strike. politics. PR Newswire. 53(8): 12.redcross. The charity olympics: After weeks of record giving. 30. Press release. 2000. American Red Cross. 11. November 5: 75. David McLaughlin. With great insight into our mission. 29. Press release. 200 I. Greenberg. my observation is that the Red Cross never lost sight of its responsibility to every community and every victim of the other disasters that occurred. chairman of the Board of Governors of the American Red Cross. Reports. Annual Cross. 32. 2001. Greenberg. 33. 35. politics. but there are costs. where she earned the rank of rear admiral. prior to which she had a 29-year career in the U. charities wrestle with how best to spend money pouring in since attacks. American 5. Taylor. Ibid. Johnson Evans was named president and CEO of the American Red Cross on June 27. February 16. Red Crossroads. 2002. Americans want to know: Is that money helping? Time. The timely and capable response day-in and day-out to these disasters speaks volumes about the character of the volunteers and staff. Association Management. 31(4): 33.S. Annual June 27. American Red Cross. 2002. Josh. 17.San Diego was still waiting for a full accounting of how the money donated for the fire victims has been and will be spent. 13. 2000-2001. and the American Red Cross. American Red Cross letter to Better Business Bureau's Wise Giving Alliance. American Red Cross and Coinstar to launch new fundraising technology to prepare for disasters. "Marty's unique style of leadership along with her experience as established administrator will bring new vigor to the American Red Cross. Ibid. 10.

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