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

The American Red Cross supplies 3. > Ej(hibit 2 Values of the American Red Cross • • • • • • • Humanitarianism: We existto serve others in need. awareness required for exceptional service. Educational services to prepare for disasters. endeavors. food and nutrition information. HIV/AIDS education.III~tal'Y.ievethe suffering of individuals. It promotes mutual understanding.~utrality: In order to continue to enjoy the confidence of all.religious beliefs. race.redcross. class. mental health counseling. inits internati.eavors rel. being guided solely by their needs.l1lJou~lea.allhandto ensure respectforthe human being. Itmust be opento all. financial assistance. ~~lpingOthers:Weareattentive and responsive tothose we serve.generosity. racial. in which all Societies have equal status and share equal responsibilities and duties in helping eachother. obtain. Its purpose is to protect life and he.eacknowledge. Swimming and lifeguard classes.volunteeJs. while auxiliari. always listening totlieirneeds and lookingforways to serve through existing or new initiatives.org. and to give priority to to lT1?sturgentcases of distress.found. Help for the homeless. seniors. Community Services. transportation. 9~nti. prepare for. and lasting peace amongst all peoples.the. and openly share ideas and i_nformationwith each other.countries. friendship. andstaff we search for ways to provide hope to servewhileidemonstratingcompassion.to prevent and alleviate human suffering WQereit may be. and so on.ithoutdiscrimination to the wounded on the battlefield. e72 Case 11:: American Red Cross .independently. Health and Safety Services. Int~grity:Weact with honesty. and support the rights and diversity of each person in our organization a?dinthecommunities we serve. and youth. and maintain competencies andthe. ". Stevvardship: We act respgnsibly. Source: American Red Cross. born of a desire tobring assistance IN."_--'-" f)(hibit 1 Principles ofIntemational Red Cross • • • • • • • Hurilanity:ThelnternationalBed Cross and Red Crescent Movement. shelter.onal.is worldwide. Unity: There can be only one Red Cross or one Red Crescent Society in anyone country. in excess of 6 million pints of blood.orpoliticafopinions. and respond to emergencies. Source:www. Universality: The International Hed Cross and Red Crescent Movement.andappreciation. Each year 83.000 hospitals with about half of the blood used in the United States. religious.rning:We seek. Voluntary Service:ltis a voluntary relief movement not prompted in any manner by desireJorgain. collectively and individually. providing fer victims of disasters andh_elpingpeople prevent. and so forth. and efficiently with resources entrusted to us.en~.org. . must allNaysmaintain their autonomy so that they may be able atall times to act in accordance with the principles of the Movement.The National Societies. 1111~f)~if)lity:ltrnakesno discrimination asto nationality.~ndnational capacity.~~irit:Asafamilvofdonors. Disaster Services. the Movementmay not fake sides in or engage atany time in controversies of a political. cooperation. hUIllanitari an services of their governments and subject tothe laws of theirrespective. or ideological nature.esin.respect. living well programs. always tpimprove.redcross. ~~spect: Vv. effectively.000 volunteers help disaster victims by providing food.Itmust carryon its humanitarian work throughout its territory. demonstrate courage and accountability under pressure. www. to identify. "~. In~ependence: The Movement isindependent. and without discrimination.

Three main funding sources for the American Red Cross were:" • • Contributions: Fund-raising efforts by the United Way & Combined Federal Campaign. testing. Helping kids. and 5)."!' About 12 million Americans enroll in Red Cross courses each year.. It is now possible to make these courses available online. Inc. In 2000 it launched "iGiveLife. For Cindee Archer. You feel this sense of urgency whenever there's a disaster-e-you want that information up as quickly as you can get it. Consumers could drop loose change into the Coinstar machines located in local supermarkets. and major expenses included:" can Red Cross in Washington. The communication network allows it to locate family members during crises more efficiently. online media manager for the Ameri- .. 4. A donation to the World Hemophilia Foundation of plasma product is used to treat hemophilia. Nursing. vice president of Disaster Services at the American Red Cross.743 billion. and so on. Funding disaster services: Expenses to solicit donations. expenses in blood. and obtain information about donating and volunteering. The Red Cross has routinely published the latest public health information. Massachusetts General Hospital and the American Red Cross jointly own a patent for a protein associated with the underlying cause of Alzheimer's disease. to collect Red Cross donations for disaster relief efforts. strengthen public health. it may be possible for the American Red Cross to offer an online shopping network to generate additional resources. director of outreach at Action Without Borders has stated. Student nurses. it's only going to get more pervasive. Biomedical services: Facility maintenance. lack of pure water. and so forth. Archer stated. In the near future. In addition. and young adults. grants. 13 In February 2001 the American Red Cross teamed up with Coinstar. materials. Red Cross delegates help local citizens rebuild infrastructure.• and so forth. Geneva Conventions. John Clizbe.1 Technology and Operations Technology has helped the American Red Cross better coordinate its efforts among its 1. 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. The Red Cross is able to provide long-term aid and education to those in need. administer funds.117 billion. and improve response time to local disasters. primary health care programs. and so on. feeding programs.v'? However. Russ Finkelstein.C. indicated that "If every American near a Coinstar machine would donate a handful • • Disaster costs: Assistance to victims. plasma. Youth Involvement. and the use of new technology will make this information available online."? Archer worked on developing a Web site where visitors could enter a zip code and quickly find information. legacies. Each year more than 12 million Americans take advantage of lifesaving courses offered by the Red Cross. Financial Overview In fiscal year 2001-2002 the American Red Cross had operating revenues of $4. D." a nationwide disaster simulation to help prepare for acts of terrorism. fees from collecting. In 1999 the American Red Cross joined the Federal Emergency Management Agency for "TOPOFF. Volunteering.000 hospitals with blood donations. the Internet serves as a vital source of information to the American public and as a new way to collect donations. other monetary and in-kind contributions. and diarrhea in poor countries and to support primary health care. "The Internet has definitely changed how the whole organization thinks. Emergency disaster response. Coinstar machines were located within two miles of 130 million Americans. and distributing blood and tissue. As a result of recent research and development.P Strategic Alliances The American Red Cross has established a number of alliances with other organizations. Cindy Archer also believed that "more and more people are coming onlinethis isn't going to go away. Jane Delano Society." a service that enables blood drive sponsors to use their intranets to recruit donors and allows hospital customers to order blood products online. Total operating expenses for the 2000-2001 fiscal year were $2. staff expenses at disaster sites. It works with the World Health Organization to alleviate malnutrition. Wireless communication allows the American Red Cross to make faster damage assessment at the scene. The Web site helps visitors locate local Red Cross shelters. the American Red Cross supplies over 3. International Services. Products and services: Fees for products.400 chapters and to expand its reach across America. Total operating expenses for the fiscal year 2001-2002 were $3. "Some of them think this is going to be a kind of panacea for doing fund-raising. and courses. keep up with breaking news. and tissue services. there were costs associated with a Web site that many nonprofit groups did not realize.570 billion (see Exhibits 3. Also. and it's not necessarily that. teens. find relatives in a disaster area. These "click" sites appeal to a newer and often younger audience for the nonprofits. Investment income and other income: Investment income from endowments and reserve funds and income from contracts to provide various programs. Total operating revenues for fiscal year 2000-2001 were $2.712 billion. Recruiting and organizing volunteers.

lles.092 20 83 380.623 936.293 3.924 2.801 126. and other property.180 13.545 34.823 950.556 379.92 22. 2002.964 325.674 28.247 309.301 in 2001: Trade Contributions.892 1.374.209 823.036 357. net 304.'c· _~.162 585.149 2..825 319.354 2.547 986.750 in 2002 and $6. June 30.662 39. •.575.626 1.653 366.587 mitl11ents and contingencies L.149 287.272 $3.137 liabilities and netassets Cross.402 3.066 $380.029.798 1.604 in 2002 and $19.437.293 63 63 23.386 12.924 liabilities 20.374 203. 9.buildings.103 56 15. Annual Report.514 15.385 6.654 183 29.525. $2.894 18.633 4.050 $ 1.374....619 $771.042 92.411 $439.Red .57.784 in 2001 Other assets Total current assets Investments Contributions receivable Prepaid pension costs Land.569 11. net of allowance for obsolescence of $7.913 548.826 823..543 16.243 15.825 197._ ~jhibit 3 (ill thousands) Consolidated Statement of Financial Position.252 12. 2002 (with summarized information as of June 30.0.209 39. net of allowance for doubtful accounts of $19.473 7.421 1.680 (-'elnsieln and postretirement liabilities benefits 357.089 2.042 93.704 380.385 American.541 35.602.541 11.453 120.. 2001) $146.570 15. current portion Other Inventories.840 12..258 110.626 1.913 Receival.544 155.894 18.500 771.525.453 120.238 2.453 296.164.

924. 2002 (with summarized information for the year ended 30.488 58.960 1.058 150.604 (63.077 136.077 137.570.448.238 2.614 152.674.156 617.736 3.616 154.594 49.117.614 152.302 30.259.619 22.330 (135.876) 2.900) (28.967 213. response Biomedical services Health and safety services Community services International services program services Supporting services: Fund raising Management and general 61.164.582 58.261 1.601 989.549 84.931 420.171 82.402 $1.924.980 360.156 11 617.066 546.083 3.437.090 121)24 50.466.848 136.135 2.195.463 51.872.060 6.201 (31.086 $380.686.208 $2.845 1.970 337.035.171 81.222 67~175 36.872.2001) (in thousands) $ 205.289' 1.405 40.085 (131.259.016 22.089 1.570.960 1.18 22.978 203.822 1.902 32.4 Consolidated Statement of Activities.742.182 311.394 49.022 705 Armed Forces Emergency Services Disaster services liberty disaster relief-Sept.164.118 22.902 32.728 76.575.712.518 (548) 419.069 2.745 96.182 311. Annual Report.410) 420.083 3.727 115. 2002.960 108.071 ) 2.513 308.351 230.815) 1.195) 411.699.272 65.513 308.844 2.747) 19.035. Year ended June 30.137 $2.915 906 1.931 61.649 $ 757.137 in net assets from operations gains (losses) effect of accounting change in net assets beginning of year end of year Red Cross.736 3.901 174.587 .175 81.901 174.410 3.5.967 213.756 284.726 263. 103.727 (2.034 21.342 2.008 (1.097 4.848 136.236 213.906 61.108 45.

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and other services to victims' families and others affected. 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. said in a written statement. counseling. and creative displays in stores across the country. 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. sleeping quarters.3 billion. In providing more than half the nation's blood. Respite centers were set up in New York City." Rich Stillman. platelets) below production costs to drive out competitors while it charged higher prices for the same products in markets where there is no competition. Pennsylvania. "You no longer need a credit card or checkbook to provide financial support to those in need. and transportation were provided to families of missing foreign nationals. and increasing health benefit costs. and we must respond in an extraordinary way. Within 15 days of the September 11. the Red Cross had annual sales of more than $1. unfair trade practices. the plaintiffs alleged the Red Cross violated Section 2 of the Sherman Antitrust Act. The ASAE provides the Red Cross with demographic information about associations and assistance with identifying organizations they wish to contact during times of need. William Nicely.' stated Skip Seitz. the Red Cross had collected $202 million in donations. 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. Less than 50 percent of the money raised was targeted for victims. lodging. and will explore efforts in joint training exercises. The workers were unhappy about long hours. COO of Coinstar. She indicated that organization officials earmarked $100 million from the fund to provide short-term financial assistance to families of victims. white. the American Red Cross rose to the challenge of providing the most extensive relief operation in its 120-year history. 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. "What has taken place is extraordinary. The national campaign theme used for this promotion was "Taking Care of America Everyday. and changes in legislation. the new M&Ms' captured the heart of America. thousands of blood donations. We just want them to play by the rules that are reasonable and fair and compete on a level playing field." 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. In response to the tragedy. stated.of change on their next supermarket visit. financial assistance. "Everything is happening at such a fast pace. or rescue workers. attack. declarations. The Red Cross is a fine organization.'? Unfair Trade Practices Lawsuit The Red Cross derived 60 percent of its revenues from the sale of blood.5 million. Deborah Goldburg. and we will vigorously defend this lawsuit.2001. a Mars Incorporated Company. senior vice president. In January 2002 Masterfoods USA presented a check to the Red Cross in the amount of$3. said in a written statement. MD. HemaCare Corp." unfair competition under the California Business and Professional Code. In the lawsuit. and Liberty Disaster Relief Fund After the terrorist attacks on September 11. stated. and help from a myriad of volunteers contributed to Red Cross efforts to provide aid to survivors." "Through appearances on television.. food. Somerset County. 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. Millions of dollars. "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. the president and chief executive officer of the Red Cross."? Blythe Kubina. American Red Cross Growth and Integrated Development. If all Americans donate the change in their wallet or pocket. and other items to relief workers and volunteers. child care. HemaCare's chief executive officer."20 Recent Problems Events between 2000 and 2002 provided the American Red Cross with a number of challenges. those handfuls will make a huge difference in our capacity to help others thisyear. created a special package of red. the American Red Cross released a spending plan for the first $300 million in the Liberty Fund. said. They further alleged that the American Red Cross priced some blood products (e. It is with great humility and pride that we carry out this noble obligation/'P On October 12. and meals for volunteers and staff working on-site. "We believe that's unfair and illegal. Financial assistance. victims' families. based on Healy'S policy of using donations for a "long period of C78 Case 11:: Amer lean Red Cr ass . 2001. Because of the large dollar amount of donations from the American people. Bernadine Healy.P This planned distribution of funds. 15 One hundred percent of all profits from the sales of these M&Ms were donated to the American Red Cross Disaster Relief Fund. which prohibits monopolization. frequent schedule changes. radio and newspapers. The American Red Cross has a heavy burden-to live up to the inspiration and memory of those lost.g. the Red Cross set up family assistance centers to provide counseling. and at the Pentagon to provide meals. The lawsuit also charged tortuous interference."!" Masterfoods USA. We have been in full compliance with the law. Funds were used for travel. their families. and relief workers. the Red Cross would be that much better prepared to respond to disaster immediately. and blue M&Ms specifically to benefit the Red Cross. and Coral Blood Services alleged the Red Cross had cost them more than $25 million in lost business. a Red Cross spokeswoman.

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

10. Becker. Cross. Ibid. politics. Annual Report. American Red Cross. Newsweek: Former Red Cross head says her fundraising message was clear . 2002. Josh. Marsha Johnson Evans must confront the many issues faced by the American Red Cross. 2001. Modern Healthcare 31. 34. US Newswire. February 1. American 3. How should she proceed? Endnotes 1. American Red Cross. News & WorldReport. 2002. 2002. 20. In his announcement. 35. Modern Healthcare 31. Tyrangiel. Cross. 2002. PR Newswire. February 1. Greenberg. Ibid. Blood. chairman of the Board of Governors of the American Red Cross. October 1: 8. and the American Red Cross. Infoworld. Ibid. Annual Report. With great insight into our mission.000 in the months since last September. US Newswire. A torrent of donations. 12. Annual June 27. 8. American Red Cross. 16. Levine. Red Red Red Red Red Cross. 11. www. Tyrangiel." Deborah Daley responded that the chapter has provided up-to-date financial information on its response to the Alpine fire three times since November. Charity olympics. but there are costs. Lancet. January 1: 20. Red Cross announces major changes in Liberty Fund. 23. 2000. Stephanie. American 4. 19. some 45. Tyrangiel. 2002. said. 29. Red Cross faces antitrust lawsuit. March 7. Cross. December 9. 26. Press release. 2000. Blood. American Red Cross. Cinda. Ibid.. U. American 5. 21. Blood. 31(4): 33. Reports. Evans has served as national executive director of the Girl Scouts of the USA for the past four years. 2001. Looking to the Future After a five-month search. Annual Cross. 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.redcross. 9. Daniel S. February 16. Red Cross announces major changes in Liberty Fund: Fund solely used for people affected by September 11 tragedy. and the American Red Cross. 2001. Mark. Greenberg. 25. 14. ASAE and American Red Cross formalize partnership agreement. Nonprofits reap rewards of the Web-Internet proves to be a great fund-raising tool for charities. 200 I. 7. Ibid. Association Management. 27. and the American Red Cross. 17. American 6. American Red Cross and Coinstar to launch new fundraising technology to prepare for disasters. 28.S. Sanborn. Charity olympics. Red Cross faces antitrust lawsuit. Press release. 2000-2001. Marsha. prior to which she had a 29-year career in the U. Ibid." As she begins to guide the organization. Press release. Taylor. 2001. The charity olympics: After weeks of record giving. 2000. 18. "Marty's unique style of leadership along with her experience as established administrator will bring new vigor to the American Red Cross. 32. 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.San Diego was still waiting for a full accounting of how the money donated for the fire victims has been and will be spent. charities wrestle with how best to spend money pouring in since attacks. Ibid. Red Crossroads. 15. C80 Case 11:: American Red CI ass . Reports. Press release.S. their talent. 22(25): 37. 2001.. 2001. 2002. 30. David McLaughlin.org. Navy. The timely and capable response day-in and day-out to these disasters speaks volumes about the character of the volunteers and staff. November 14. Red Cross workers on strike. November 24: 1789. and most especially their dedication. 53(8): 12. 13. American 2. Taylor. American Red Cross letter to Better Business Bureau's Wise Giving Alliance. June 27. politics. 31. where she earned the rank of rear admiral. February 12. politics. 2000. 33. 2002. Americans want to know: Is that money helping? Time. 2001-2002. November 5: 75.. November 19. Fund Raising Management. Greenberg."?" Evans remarked that: In the midst of responding to the extraordinary demands of 9/11 and a lot of criticism about these efforts. Samantha. Johnson Evans was named president and CEO of the American Red Cross on June 27. 2001. Press release. 2001. 24. 22. PR Newswire. Ibid.

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