Red Cross to Make Reforms in Wake of Katrina

WASHINGTON – Criticized for its response to Hurricane Katrina, the American Red Cross will overhaul the way it handles future disasters by relinquishing control over some aid dollars and cracking down internally on waste and abuse.

The nation's largest charity promised the changes in a statement to a Senate panel Monday, following its acknowledgment last year that its $2 billion response to the Gulf Coast storm fell short.

Responding to allegations of waste, the Red Cross said it was moving to standardize financial controls, hire more investigators to review whistleblower complaints and cede control to religious groups in some underserved areas.

"Could the Red Cross and the entire nonprofit community have done better? Undoubtedly," wrote Red Cross chairman Bonnie McElveen-Hunter to Senate Finance Chairman Charles Grassley, R-Iowa, whose committee is leading a congressional inquiry.

"There is no excuse for the instances of improper conduct which impacted on our performance and response during Hurricane Katrina and on our continued relief and recovery efforts along the Gulf Coast," McElveen-Hunter said.

The proposals come as some lawmakers, including Reps. Jim McCrery, R-La., and Bennie Thompson, D-Miss., have questioned whether Congress should rethink its national disaster response plan that gives the Red Cross the primary role and the dollars that flow with it.

Some critics have said the Red Cross failed to respond quickly enough in some low-income, minority areas, while internally some volunteers and employees have questioned whether charity dollars are being put to their best use.

In a major shift, the Red Cross told the Senate committee that it will funnel money, training and resources to other charitable groups so they can establish shelters in areas where Red Cross local chapters have less presence.

It acknowledged the potential difficulties in ceding this power, but the Red Cross said it was committed to change and had hired a new vice president for diversity to coordinate the effort.

"These would be shelters the Red Cross would recognize and support financially but would not necessarily run," according to McElveen-Hunter, who said the specifics had yet to be hammered out. "The Red Cross understands that partnership does not mean assisting the Red Cross in its mission, but helping others achieve the shared mission of serving the affected community."

The Red Cross, however, would not release — at Grassley's request — the details of hundreds of internal complaints made by employees and charities that allege fraud, safety violations and employment disputes. It cited the confidential nature of its phone complaint line.

The charity also disputed as unfounded some whistleblower allegations made public by the Finance Committee last month — including possible theft as well as charges the Red Cross had inflated thousands of food orders from suppliers at a New Orleans feeding site in mid-September, explaining that it had relied on estimates from city officials.

Grassley said Monday that he appreciated the efforts but expressed concern that "their deeds match their good words." He said that the Red Cross response rejecting some whistleblower complaints "seems to quibble over inconsequential details" and that several of the allegations did expose problems in Louisiana.

"I worry that the Red Cross management still doesn't get it," Grassley said.

The changes include:

—Upgrading service and call centers by acquiring supplies to feed and shelter 1 million people for six days and to handle 100,000 cases a day. It also will stock 1 million debit cards for emergency disaster relief.

—Improving coordination with Red Cross local chapters with proposed measures this summer to increase board participation and governance.

—Hiring outside investigators and auditors to review whistleblower complaints deemed credible after an internal review. They include the existence of unauthorized Red Cross distribution centers or warehouses in New Orleans; improper use of Red Cross supplies at political rallies; and failure to conduct background checks on volunteers.

The Senate inquiry comes after the Red Cross has seen two presidents resign in a little more than four years. Both resignations came after clashes with the board of governors on the tail of major disasters: Dr. Bernadine Healy stepped down shortly after the Sept. 11, 2001, terror attacks and, more recently, Marsha Evans quit following Katrina.