American Red Cross Faces Major Post-Katrina Overhaul

Published October 30, 2006

| Associated Press

The American Red Cross, stung by criticism of how it handled Hurricane Katrina and the Sept. 11 attacks, announced plans Monday for a major overhaul that would include slashing its 50-member board and reducing the influence of presidentially appointed overseers.

The reforms are intended to ease recurring friction between board members and Red Cross management, and to address complaints that the organization was at times too bureaucratic and unaccountable after Katrina and the terror attacks.

Some of the changes in the 60-year-old governance structure can be implemented unilaterally, but the main proposals will require approval from Congress for revisions in the organization's congressional charter.

A key U.S. senator who has pressed the Red Cross for reforms, Chuck Grassley, chairman of the Senate Finance Committee, praised the proposals and expressed hope that Congress would swiftly approve them. "It's good news that the Red Cross' board recognized that a Band-Aid won't do," Grassley said.

The changes, approved without opposition by the existing board, result from an unprecedented six-month review by a panel of outside experts.

Highlights of the reforms that would need congressional approval include:

—Explicitly delegating responsibility for day-to-day operations to the Red Cross' full-time professional management, with the board focusing mainly on longer-term strategic oversight.

—Reducing the board of governors to between 12 and 20 members by March 31, 2012. An interim goal is to have no more than 25 members by 2009.

—Creating a single category of board members. Now, most are elected by local chapters, some are elected by the board, and others, including the chairman, are appointed by the U.S. president.

—Shifting seven of the presidentially appointed governors — all but the chairman — into a newly created Cabinet Council that will be merely advisory.

The board would also ask management to improve and expand awareness of the organization's whistleblower process among Red Cross employees and volunteers. Grassley, among others, had urged this step, saying the organization's instinct in the past was to play down internal problems instead of confronting them.

"This is a historic day for the American Red Cross," said the board's current chairwoman, Bonnie McElveen-Hunter. "We will succeed together to become the Red Cross the American people expect and deserve."

The 125-year-old charity was by far the biggest player outside the government in responding to Hurricane Katrina, raising $2 billion, mobilizing 235,000 volunteers and helping hundreds of thousands of displaced people. Yet it was sharply criticized for responding too slowly in some low-income, minority areas, for over-reliance on inexperienced staff, and for reluctance to work closely with other nonprofits.

The Red Cross itself, in a candid internal report, acknowledged that shortcomings included overwhelmed volunteers, inflexible attitudes and inadequate anti-fraud measures.

To address fraud and other issues of financial accountability, the board is trying to recruit a new chief audit executive with more authority than any predecessors.

The board also is searching for a new president. The position has been filled on an interim basis by Jack McGuire, a Red Cross veteran, since Marsha Evans resigned last December following friction with the board.

It was the second time in three years that such feuding led to a leadership change after a national disaster. The previous president, Dr. Bernadette Healy, said she was forced to resign partly because of disputes with the board over whether money received after the Sept. 11 attacks should be placed in a separate fund or a general disaster fund.

McGuire, explaining the need for a radical overhaul, noted that the charity's governance structure was last changed in 1946.

"We had a board that was designed and set up by guiding principles from a time that's no longer relevant," he said.

Paul Light, a New York University professor of public service who studies charities, said he was impressed by the recommendations.

"Everything on their list — they're all good things," he said. "The devil is in the details. ... but it's worth giving them the benefit of the doubt. It's a good, strong step forward."

Grassley has been examining the Red Cross since its post-Sept. 11 controversy. He plans to meet with McElveen-Hunter on Nov. 15 to discuss the proposed changes.

"Certain incidents have shaken public confidence in the Red Cross," Grassley said. "Getting the governance right is critical if a charity is going to succeed in its mission."

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