Report: Management at Red Cross needs first-aid

• Cost-accounting system called unreliable
• New chief operating officer hired

February 3, 1997
Web posted at: 7:00 p.m. EST

From Correspondent Gene Randall

WASHINGTON (CNN) -- The American Red Cross has some bleeding to stop ... its own.

That's the bottom line in a review of the $1.7 billion, not-for-profit agency by the accounting firm KPMG Peat Marwick.

The review, which is hundreds of pages long, portrays the Red Cross as a badly-run business where corporate management decision-making is not coherent. And even where it says the agency does well, in disaster services, the analysis offers a warning.

"The lack of a reliable, disciplined system to account for receipts (and) match pledges with receipts," says the report, "could result in approximately 25 percent of disaster funds not being accounted for...."

A senior Red Cross official called that contention totally unfounded.

According to the accounting report, the Red Cross' planning, budgeting, performance evaluation and accountability are disconnected and dysfunctional.

Cost-accounting system called unreliable

The report was commissioned by acting Red Cross head Gene Dyson while its president, Elizabeth Dole, was helping her husband campaign for the presidency of the United States.

Dole returned to the Red Cross early last month, and Dyson has left the organization. Dole was not available for comment Monday.

As reported in the new edition of The Non-Profit Times newspaper, the Peat Marwick report portrays a Red Cross with no reliable cost-accounting system and where compliance with established procurement procedures is inadequate.

According to the Times, the report says the Red Cross, which last year spent about $300 million on goods and services, is guilty of "a casual approach to policy and financial responsibility."

A Red Cross official says there is, in fact, a well-defined system of accountability, but the tenor of the report offers a sharp contrast with the views expressed by Dole on CNN on January 2.

"We have gone forward with many efficiencies at national headquarters," she said, "integrating our planning and budgeting, providing a contractor office, instead of eight different places where companies sign contracts with the Red Cross, streamlining, cutting back on fat in the system...."

New chief operating officer hired

Asked in January if she rejected the idea that the Red Cross was mismanaged, she said, "You bet I do, and I think the record proves that."

Last November, Money Magazine reported that the American Red Cross dedicated 92 percent of its income to its programs, more than any other charity the magazine reviewed.

While taking issue with much of the Peat Marwick analysis, the Red Cross has already implemented one key recommendation: the hiring of a chief operating officer who will report directly to Dole.

Dozens of other recommendations are still under review.

Related site:

• American Red Cross

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