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

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

Nursing. It works with the World Health Organization to alleviate malnutrition. You feel this sense of urgency whenever there's a disaster-e-you want that information up as quickly as you can get it. Products and services: Fees for products. it may be possible for the American Red Cross to offer an online shopping network to generate additional resources. the Internet serves as a vital source of information to the American public and as a new way to collect donations. materials. and diarrhea in poor countries and to support primary health care. and it's not necessarily that. Helping kids. Geneva Conventions. Recruiting and organizing volunteers. 13 In February 2001 the American Red Cross teamed up with Coinstar. Biomedical services: Facility maintenance. Massachusetts General Hospital and the American Red Cross jointly own a patent for a protein associated with the underlying cause of Alzheimer's disease. D. and obtain information about donating and volunteering. and the use of new technology will make this information available online. grants. and so on.570 billion (see Exhibits 3. to collect Red Cross donations for disaster relief efforts. and young adults. "Some of them think this is going to be a kind of panacea for doing fund-raising. Three main funding sources for the American Red Cross were:" • • Contributions: Fund-raising efforts by the United Way & Combined Federal Campaign. legacies. director of outreach at Action Without Borders has stated.. fees from collecting. A donation to the World Hemophilia Foundation of plasma product is used to treat hemophilia. indicated that "If every American near a Coinstar machine would donate a handful • • Disaster costs: Assistance to victims. In the near future. Inc. "The Internet has definitely changed how the whole organization thinks. Student nurses. feeding programs. Red Cross delegates help local citizens rebuild infrastructure." a service that enables blood drive sponsors to use their intranets to recruit donors and allows hospital customers to order blood products online. International Services. It is now possible to make these courses available online. and major expenses included:" can Red Cross in Washington."? Archer worked on developing a Web site where visitors could enter a zip code and quickly find information.P Strategic Alliances The American Red Cross has established a number of alliances with other organizations. the American Red Cross supplies over 3. Coinstar machines were located within two miles of 130 million Americans. Total operating expenses for the fiscal year 2001-2002 were $3. Each year more than 12 million Americans take advantage of lifesaving courses offered by the Red Cross.• and so forth. Consumers could drop loose change into the Coinstar machines located in local supermarkets. staff expenses at disaster sites."!' About 12 million Americans enroll in Red Cross courses each year. other monetary and in-kind contributions. The Web site helps visitors locate local Red Cross shelters. there were costs associated with a Web site that many nonprofit groups did not realize. In addition. teens. These "click" sites appeal to a newer and often younger audience for the nonprofits. Russ Finkelstein. and 5). Total operating revenues for fiscal year 2000-2001 were $2. Archer stated. and courses. and distributing blood and tissue. and so forth. The Red Cross has routinely published the latest public health information. Total operating expenses for the 2000-2001 fiscal year were $2. As a result of recent research and development. expenses in blood.400 chapters and to expand its reach across America." a nationwide disaster simulation to help prepare for acts of terrorism. and improve response time to local disasters. lack of pure water. Jane Delano Society. and tissue services. 4. Funding disaster services: Expenses to solicit donations. For Cindee Archer. find relatives in a disaster area. Youth Involvement. administer funds. online media manager for the Ameri- . Emergency disaster response. 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. Also. vice president of Disaster Services at the American Red Cross. In 1999 the American Red Cross joined the Federal Emergency Management Agency for "TOPOFF.000 hospitals with blood donations.. primary health care programs. testing. John Clizbe.712 billion. In 2000 it launched "iGiveLife. keep up with breaking news.C. The communication network allows it to locate family members during crises more efficiently. Cindy Archer also believed that "more and more people are coming onlinethis isn't going to go away. and so on. Financial Overview In fiscal year 2001-2002 the American Red Cross had operating revenues of $4. Investment income and other income: Investment income from endowments and reserve funds and income from contracts to provide various programs. plasma.v'? However. strengthen public health. Wireless communication allows the American Red Cross to make faster damage assessment at the scene.1 Technology and Operations Technology has helped the American Red Cross better coordinate its efforts among its 1.117 billion.743 billion. it's only going to get more pervasive. Volunteering.

894 18.825 319.92 22.623 936.892 1.293 63 63 23. •.924 2.149 2.473 7. Annual Report.525.541 11.374.164.544 155.lles.238 2.575.042 93..354 2.798 1.453 296. net of allowance for obsolescence of $7.411 $439.587 mitl11ents and contingencies L.704 380.654 183 29.293 3.092 20 83 380.784 in 2001 Other assets Total current assets Investments Contributions receivable Prepaid pension costs Land.'c· _~.453 120.066 $380..180 13..402 3.653 366.569 11.602.662 39.633 4. 2001) $146.301 in 2001: Trade Contributions.547 986..514 15.247 309.556 379.162 585.036 357.823 950. 2002 (with summarized information as of June 30.050 $ 1..437._ ~jhibit 3 (ill thousands) Consolidated Statement of Financial Position.385 American.750 in 2002 and $6.626 1.453 120.826 823.buildings. net of allowance for doubtful accounts of $19.089 2.525..674 28.137 liabilities and netassets Cross. current portion Other Inventories.374 203.680 (-'elnsieln and postretirement liabilities benefits 357.825 197.243 15.042 92. $2.421 1. 9.604 in 2002 and $19.801 126.500 771.149 287.385 6.924 liabilities 20.541 35.913 548.209 823.252 12. 2002.894 18. and other property.103 56 15.Red .570 15.545 34.57.626 1.374.913 Receival.0.029.964 325.543 16.840 12.209 39.272 $3. June 30.619 $771.386 12.258 110.. net 304.

259.901 174.906 61.182 311.582 58.727 115.518 (548) 419.410 3.876) 2.330 (135.845 1.171 81.182 311.117.924.674.2001) (in thousands) $ 205.342 2.699.4 Consolidated Statement of Activities.18 22.513 308.970 337.405 40.035.289' 1.222 67~175 36.742.195.466.097 4.090 121)24 50.236 213.488 58. 2002.712.967 213.872.351 230.135 2.5.901 174.900) (28.604 (63.960 108.156 617.086 $380.822 1.238 2.437.156 11 617. response Biomedical services Health and safety services Community services International services program services Supporting services: Fund raising Management and general 61.902 32.736 3.967 213.118 22.022 705 Armed Forces Emergency Services Disaster services liberty disaster relief-Sept.570.083 3.513 308.060 6.587 .302 30.848 136.619 22.614 152.549 84. Year ended June 30.575.071 ) 2.915 906 1.448.931 420.077 137.164.594 49.728 76.570.058 150.016 22.171 82.848 136.008 (1. 2002 (with summarized information for the year ended 30.686.261 1.924.931 61.402 $1.035.394 49.872.164.747) 19.756 284.745 96. 103.463 51.089 1.815) 1.259.726 263.649 $ 757.601 989.272 65.616 154. Annual Report.034 21.902 32.960 1.108 45.195) 411.137 in net assets from operations gains (losses) effect of accounting change in net assets beginning of year end of year Red Cross.208 $2.066 546.727 (2.614 152.980 360.085 (131.736 3.978 203.137 $2.069 2.960 1.410) 420.175 81.201 (31.077 136.083 3.844 2.

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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. HemaCare's chief executive officer. We have been in full compliance with the law. the president and chief executive officer of the Red Cross. In response to the tragedy. attack.. Funds were used for travel. In the lawsuit. counseling. Deborah Goldburg. which prohibits monopolization. lodging.of change on their next supermarket visit. and blue M&Ms specifically to benefit the Red Cross. "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. food."? Blythe Kubina. victims' families.3 billion. declarations. and other services to victims' families and others affected. "Everything is happening at such a fast pace. a Mars Incorporated Company. financial assistance. Because of the large dollar amount of donations from the American people.'? Unfair Trade Practices Lawsuit The Red Cross derived 60 percent of its revenues from the sale of blood. and Liberty Disaster Relief Fund After the terrorist attacks on September 11. "We believe that's unfair and illegal. the plaintiffs alleged the Red Cross violated Section 2 of the Sherman Antitrust Act. She indicated that organization officials earmarked $100 million from the fund to provide short-term financial assistance to families of victims. We just want them to play by the rules that are reasonable and fair and compete on a level playing field. or rescue workers. "You no longer need a credit card or checkbook to provide financial support to those in need. and creative displays in stores across the country. 2001. "What has taken place is extraordinary. and help from a myriad of volunteers contributed to Red Cross efforts to provide aid to survivors. radio and newspapers." Rich Stillman. those handfuls will make a huge difference in our capacity to help others thisyear. The lawsuit also charged tortuous interference. platelets) below production costs to drive out competitors while it charged higher prices for the same products in markets where there is no competition. Millions of dollars.P This planned distribution of funds. the American Red Cross rose to the challenge of providing the most extensive relief operation in its 120-year history. thousands of blood donations. and we must respond in an extraordinary way. white. senior vice president. and meals for volunteers and staff working on-site.5 million. It is with great humility and pride that we carry out this noble obligation/'P On October 12. The workers were unhappy about long hours. and we will vigorously defend this lawsuit. said in a written statement. Somerset County." unfair competition under the California Business and Professional Code. In January 2002 Masterfoods USA presented a check to the Red Cross in the amount of$3.2001. MD. 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. and transportation were provided to families of missing foreign nationals. and relief workers. stated. a Red Cross spokesperson." "Through appearances on television."!" Masterfoods USA. 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. the Red Cross had collected $202 million in donations. The American Red Cross has a heavy burden-to live up to the inspiration and memory of those lost. a Red Cross spokeswoman.g. and changes in legislation. 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. the American Red Cross released a spending plan for the first $300 million in the Liberty Fund. They further alleged that the American Red Cross priced some blood products (e. Less than 50 percent of the money raised was targeted for victims. William Nicely. Bernadine Healy. the new M&Ms' captured the heart of America. In providing more than half the nation's blood." 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. The ASAE provides the Red Cross with demographic information about associations and assistance with identifying organizations they wish to contact during times of need. stated. Within 15 days of the September 11. American Red Cross Growth and Integrated Development. Pennsylvania. If all Americans donate the change in their wallet or pocket. unfair trade practices. child care. HemaCare Corp. based on Healy'S policy of using donations for a "long period of C78 Case 11:: Amer lean Red Cr ass ."20 Recent Problems Events between 2000 and 2002 provided the American Red Cross with a number of challenges. the Red Cross would be that much better prepared to respond to disaster immediately. said.' stated Skip Seitz. frequent schedule changes. The Red Cross is a fine organization. The national campaign theme used for this promotion was "Taking Care of America Everyday. their families. created a special package of red. COO of Coinstar. 15 One hundred percent of all profits from the sales of these M&Ms were donated to the American Red Cross Disaster Relief Fund. said in a written statement. and Coral Blood Services alleged the Red Cross had cost them more than $25 million in lost business. and will explore efforts in joint training exercises. the Red Cross had annual sales of more than $1. and increasing health benefit costs. Respite centers were set up in New York City. sleeping quarters. Financial assistance. and at the Pentagon to provide meals. the Red Cross set up family assistance centers to provide counseling. and other items to relief workers and volunteers. 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.

32 Another onslaught of negative publicity for the American Red Cross occurred March 10.'! BBB Wise Giving Alliance On February 16. allegedly because the American Red Cross did not provide a timely report to the alliance. "The people of this country have given the Red Cross their hard-earned dollars. The Red Cross would provide increased financial support to families. agreed to a March 30 deadline for the updated report. chairman of the American Red Cross Board of Governors. The attorney general of New York State threatened legal action. "In the West Virginia flood ad. and Bennett Weiner. Deborah Daley." Deborah Daley responded that chapters are accountable in a number of ways. . Mike Wallace reported. their trust. "Today we are recognizing the work of our staff." caused a huge uproar.org Web site. In a comment about advertising practices. "Donors charged the organization with abuse of their good intentions. hire an additiona1200 caseworkers. 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. Given the recent activities of the American Red Cross. H. Jack Campbell. It appears to have contained some inaccuracies concerning floods. The largest 126 chapters must send quarterly financial reports to the national Red Cross. volunteers. "They also decided to put a disclaimer in their ads saying that donations will be used for this and other disasters.000people $169 270 94 3. "If we don't subject ourselves to public scrutiny. we can save a life" public service announcement. "I had no choice. She stated that Wallace's claim that chapters "are not even required to submit financial reports" is completely false. 2002. claiming that the organization's board had pushed her OUt. the "this and other disasters" language appears in the same font and size as the rest of the body copy appealing for support. In fact. 2002. 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." she said. Experts questioned the wisdom of calling for blood donations when there were very few blood recipients.S." Healy finally responded with her announcement of retirement. and extend the use of toll-free telephone lines.althservices for 232.P? On March 7. president of the alliance. it was determined that such a report could not be provided by the due date. a spokesperson for the Red Cross. and very clear direction for our September 11 relief effort."?" In an article in U. All chapters must have an independent annual review. Healy was confronted with allegations of "panicking the public into wasteful donations of blood. mental he. The Red Cross does regular audits of chapters. on the CBS news show 60 Minutes. By November 2001 about 10 percent of the red blood cells collected on September 11 and 12 had expired."28 In addition to donating money. we will never have public truSt.000 in annual expenses must have an external audit conducted by an independent CPA. the American public donated blood for the disaster victims.266families of . stated. As for the Alpine fire in Southern California. sent a letter to CBS News indicating the errors and an explanation.~ssistanceto 51. made some unsupported public statements regarding the Red Cross that were reported in the Philadelphia Inquirer. "Outside audits of local Red Cross chapters are rare. Art Taylor. $ millions gir~Gt. Harold Decker." Harold Decker. it's in small print. 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. 2.000families of displaced workers and disaster workers Provision for 14million meals. Wallace reported. participate in a database to be shared among relief agencies. McLaughlin. 14 months after the fire. These donations were given in response to Healy'S "Together. Chapters must meet specific national guidelines to maintain their charters. In addition. CFO of the Red Cross. Wallace reported. 2001." The Lancet reported. News & World Report. David McLaughlin stated. 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. interim president. David T.500 families affected by the attacks.. "As oflast week." In response. announced that the American Red Cross received $930 million in contributions and this money was used to provide the following.'dE)ceasedand seriously injured . and donors who responded to September 11th. Regrettably. David McLaughlin stated. The trouble is.i" The donors blasted Healy because they expected their donations to be helping September 11 disaster victims now.P 60 Minutes Program 1.P In a congressional hearing.uncertainty and recovery. Deborah Daley reported. 2002. the American Red Cross saluted the staff and volunteers who provided assistance to the more than 54.26 On November 14.000people. it took us too long to hear their message. and the financial accountability of Red Cross chapters. and health services for 129.assistanceto 3. interim CEO and president of the Red Cross. Chapters that have over $100. fires. the Better Business Bureau Wise Giving Alliance removed the American Red Cross from its "give. COO of the alliance.org" Web site.

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

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