WASHINGTON – Sen. Chuck Grassley today introduced legislation to give the congressional watchdog arm complete access to Red Cross records for oversight purposes and improve the Red Cross’ internal investigative function. The American Red Cross Transparency Act follows the results of a Grassley inquiry into the Red Cross’ response to the 2010 Haiti earthquake. The inquiry found that the Red Cross spent one-fourth of the $487.6 million raised for the relief effort on program management, fund-raising and other expenses; that it tried to quash a congressional watchdog review of its practices, successfully limiting the scope of the review; and has a poorly staffed ethics and investigations unit.
“The Red Cross is critical to disaster relief, and the American people rely on the organization to respond when tragedy strikes,” Grassley said. “This legislation strengthens transparency, oversight and access measures that will make the Red Cross more accountable to the donating public. Donors need confidence as they give so generously to help the Red Cross perform its invaluable mission.”
The American Red Cross Transparency Act, S. 3128, has two components. One, it gives the Government Accountability Office, the watchdog arm of Congress, complete access to the Red Cross’ records when needed to conduct oversight. If the Red Cross refuses to comply, the legislation provides the GAO with the authority to bring an action in court to force compliance. The Grassley inquiry and investigative reporting by ProPublica and NPR documented how the Red Cross tried to shut down a GAO inquiry into its disaster responses, including Superstorm Sandy, and successfully limited the scope of the review after months of dispute with the GAO. Also, the Red Cross claimed it gave the GAO everything it asked for, contrary to the evidence of communications between the GAO and the Red Cross.
Two, the legislation would improve the Red Cross’ internal investigative unit by making it more independent from management. The bill would move the unit from under the authority of the general counsel to the authority of the board of governors. Grassley’s inquiry found the investigative unit to be severely understaffed and underused, with only three staffers, despite requests for more. In its current state, the investigations unit is simply not performing at the level that donors and congressional overseers expect.
The Red Cross is congressionally chartered and considered a federal instrumentality, unique among tax-exempt organizations. The federal taxpayers pay for some of the Red Cross’ work directly through federal tax dollars for disaster responses and indirectly through the tax dollars foregone to the Red Cross through its tax exemption and through tax deductions donors take for charitable donations to the organization.
The bill has been referred to the Judiciary Committee, which has jurisdiction over federal charters.
Grassley, chairman of the Judiciary Committee, and a senior member of the Finance Committee, sent the results of his Red Cross Haiti inquiry as a memo to his fellow committee members on both committees last month.
Grassley began the inquiry last July after reporting from ProPublica and NPR documented problems with the Red Cross’ Haiti earthquake response, such as plans to build permanent homes that produced very few results.
Grassley has a long history of holding tax-exempt organizations accountable and working for greater transparency for public benefit. In addition to an earlier inquiry and legislation involving the Red Cross, he successfully pressed well-funded colleges to spend more of their tax-favored endowments on student aid. He authored accountability measures for tax-exempt hospitals that were enacted into law and is overseeing their implementation to help low-income patients. He released the results of an inquiry into a Missouri hospital, Mosaic Life Care, resulting in almost $17 million in debt relief for low-income patients. Grassley is looking at spending concerns at the Wounded Warrior Project.
The legislation is available here.