posted on 19 June 2016
Special Report from ProPublica
-- this post authored by Justin Elliott and Laura Sullivan (NPR)
This story was co-published with NPR.
- - Charles Grassley, who just finished a yearlong investigation of the Red Cross.
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:
The report concludes:
In an interview about the report, Grassley said that even after a year of back-and-forth with the Red Cross:
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.
Over a year of written exchanges with Grassley's staff, the Red Cross repeatedly revised its figures for the same projects.
Grassley said in the interview:
In a statement, the Red Cross said that while it has not yet seen the senator's report, the charity and McGovern have been transparent, and donors' money was properly spent. The statement says:
The Red Cross was created by congressional charter more than a century ago, and receives a range of special benefits from the government.
Here are more details from the report:
The Red Cross wasn't able to detail how tens of millions of dollars were spent
On a page recently added to its website, the Red Cross says the so-called program costs for Haiti - roughly $70 million - went to
But pressed by Grassley's investigators, the Red Cross could not give an accounting of the oversight it says it did with the money. 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 echoes confidential findings made by consultants hired by the Red Cross, which were previously reported by ProPublica and NPR. An internal evaluation of one of the group's water and sanitation projects found there was "no correct process for monitoring project spending." Another assessment found that the group's figures on how many people helped in a hygiene project were "fairly meaningless."
In response to Grassley's investigation, the Red Cross for the first time posted online a list of specific projects in Haiti. But the accounting on the list, along with other materials provided to Grassley, raises more questions than it answers.
Documents provided by the Red Cross to Grassley show that the charity at times spent large sums of money on management even when it appeared to be simply writing a check to other organizations that were doing actual projects.
In 2010, the Red Cross gave $4.3 million to its sister organization, the International Federation of the Red Cross (IFRC) for disaster preparedness work. On top of the $4.3 million, according to budget figures the charity provided Grassley, the American Red Cross spent another $2 million on its own - to "manage" granting money to another organization.
The IFRC then took out its own overhead and administrative costs before using the money to help Haitians.
When asked why the Red Cross needed $2 million dollars to give money to its sister organization, the group said in its statement the costs were
The Red Cross added that:
CEO Gail McGovern and her aides tried to stymie congressional oversight - and then made false statements about it
In 2014, Rep. Bennie Thompson, D-Miss., of the House Homeland Security Committee asked the Government Accountability Office to examine the Red Cross' disaster services, in part because of problems in its response to Superstorm Sandy in 2012.
McGovern recently told Grassley's investigators that the Red Cross:
That statement was untrue, according to the report:
The Red Cross, the committee found:
The report lists eight examples of things the Red Cross declined to provide to government investigators. They range from descriptions of the charity's internal oversight processes to interviews with chapter officials involved in the response to Superstorm Sandy.
In its statement to ProPublica and NPR, the group doubled-down on McGovern's earlier assertion:
Sen. Charles Grassley. (Andrew Harrer/Bloomberg via Getty Images)
McGovern has publicly portrayed the Red Cross as a beacon of openness.
She said at the National Press Club in 2011:
But Grassley's report notes that, as ProPublica revealed last year, McGovern had tried outright to kill the GAO investigation.
Grassley's report found that while the Red Cross couldn't kill the investigation,
In meetings and email correspondence over the course of several months, Red Cross General Counsel David Meltzer questioned GAO's legal authority to look at the Red Cross.
The Red Cross argued that investigators',according to a GAO's account included in Grassley's report:
The negotiations reached an almost absurd denouement when the American Red Cross - or ARC - presented a hypothetical about why handing out blankets would not be subject to federal oversight.
As Grassley's report puts it:
As Grassley's report notes, the Red Cross' congressional charter explicitly gives the GAO the authority to scrutinize the group.
The Red Cross undercut its own ethics unit
The Red Cross has about 20,000 employees. But its ethics office, which investigates waste, fraud, and abuse, is composed of just three people, according to the Grassley report. That's down from roughly 65 staffers a decade ago.
One of the three remaining employees, the "compliance coordinator," does intake of phone calls and does not do investigations. Another, the chief investigator, is based in New York, away from Red Cross headquarters in Washington.
Requests by the head of the unit, Teala Brewer, for more staff have gone unfulfilled by the general counsel, Meltzer, according to the report.
The report concludes that the Office of Investigations, Compliance, and Ethics was left so under-resourced that it is
Update, Jun. 17, 2016: The Red Cross has released a full response to Grassley's report.
More of Our Red Cross Reporting
ProPublica is covering how one of the country's most venerated charities has failed disaster victims, broken promises and made dubious claims of success.
After Superstorm Sandy, Americans opened their wallets to the Red Cross. They trusted the charity and believed it was up to the job. They were wrong. Read the story.
Even as the group has publicly celebrated its work, insider accounts detail a string of failures. Read the story.
Red Cross CEO Gail McGovern, who was hired to revitalize the charity, has cut hundreds of chapters and thousands of employees. Read the story.
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