Grassley Releases Memo on Red Cross’ Haiti Earthquake Relief Response, Finds Red Cross Does Not Know How Much Each Project Cost, Spent Significant Amount of Donor Funds on Program Management, Other Internal Expenses
WASHINGTON – Sen. Chuck Grassley today released the results of his inquiry into the American Red Cross’ response to the 2010 Haiti earthquake. The inquiry finds 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. The inquiry also found that the Red Cross tried to quash a congressional watchdog review of its practices, successfully limited the scope of the review, and has a poorly staffed ethics and investigations unit.
“The Red Cross documented good works to help the Haitian people, but the accounting for how much it spent on each program in Haiti and the amount of money spent on management and administrative expenses were hard to come by,” Grassley said. “When the information was forthcoming, it became clear that the Red Cross does not know how much each project in Haiti cost. The Red Cross should be as detailed and transparent as possible about where donor money goes and how it’s used. People who give generously to any charitable cause expect transparency and the careful use of every dollar. That’s especially true for the Red Cross as an organization we all rely on for disaster relief.”
Grassley’s inquiry found that of the $487.6 million donated for the Haiti relief, the Red Cross spent $123.9 million or 25.4 percent on three categories: management, general and fundraising expenses; program costs; and a contingency fund. The remaining funds — approximately $363.7 million — were provided to partner organizations, which took their own cut for administrative expenses.
The inquiry found that the Red Cross “does not track costs on a project by project basis; instead it uses a complex, yet inaccurate, process to track its spending.” The Red Cross was unable to provide the exact cost of each project and program in Haiti. The Red Cross also was unable to provide a comprehensive financial accounting of oversight activities that the Red Cross said it performed over Haiti projects.
The Grassley review also found that the head of the Red Cross attempted to terminate a review by the Government Accountability Office into the organization’s internal organization and disaster responses, including Superstorm Sandy. The Red Cross successfully limited the scope of the review after months of dispute with the GAO, and 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.
In addition, the Grassley inquiry found that the Red Cross’ internal investigations unit, called the Office of Investigations, Compliance and Ethics, has only three employees and lacks independence from management. “A more robust” department would serve the Red Cross and its donors, the review finds.
Grassley, chairman of the Judiciary Committee, and a senior member of the Finance Committee, sent the results of his inquiry as a memo to his fellow committee members on both committees.
Grassley began the inquiry last July after reporting from the news outlets NPR and ProPublica documented problems with the Red Cross’ Haiti earthquake response, such as plans to build permanent homes that produced very few results.
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 Red Cross is congressionally chartered and considered a federal instrumentality, unique among tax-exempt organizations.
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 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.
Grassley’s memo summarizing his Red Cross inquiry is available here.