Sustainability of American Red Cross in Question as Deficits Persist

When Gail McGovern became president and CEO of the American Red Cross in 2008, she pledged to revitalize the struggling organization and lead a "revolution" that would create, among other things, "a Red Cross location in every single community." During her tenure, however, she and her handpicked team have presided over a series of missteps that have eroded the organization's capacity to aid Americans in times of need, ProPublica reports.

While McGovern has overseen the trimming of more than a third of the organization's payroll, in part by eliminating thousands of jobs, she also has watched the organization stumble in its response to a number of recent disasters. When a wildfire swept through three Northern California counties in September, for example, the Red Cross showed up but managed to provide shelter to only twenty-five of the thousand victims at one site before local officials relieved the chapter of its responsibilities. What's more, because of the chapter's strict rules and general disorganization, many evacuees ended up sleeping outside for more than a week, while the organization itself quietly revised the formula it uses to determine cash benefits to victims of home fires and other disasters: whereas a family of four whose home had burned down previously would have received $900 in immediate assistance, after the revisions they were eligible for a maximum cash grant of $500.

According to ProPublica, McGovern recruited more than ten former AT&T executives to top positions on her team, and in 2011 that team unveiled a five-year plan that called for growing the organization's revenue to $4 billion from $3 billion. In its most recent Form 990, however, the organization reported less than $3 billion in revenue, a drop of more than $400 million from the previous year, primarily due to the loss of nearly $350 million in contributions and grants. The organization reported a $73 million deficit in fiscal year 2014.

In a statement to ProPublica, the Red Cross said that McGovern inherited an organization that was both inefficient and financially unsustainable, and it denied that staff cuts had affected its capacity to provide emergency assistance to victims of disasters.

While morale among paid staff and volunteers has reportedly plummeted during her tenure — in an internal survey conducted earlier this year, only 35 percent of employees said they trusted the organization's leadership — the board of governors remains steadfast in its support of the embattled McGovern. Indeed, in a recent letter to ProPublica, board chair Bonnie McElveen-Hunter wrote: "Over the last seven years, Gail — a recognized business leader with proven success running large organizations — has worked tirelessly to develop and direct the plan of action that has reduced expenses, strengthened service delivery and brought the Red Cross into the twenty-first century so we can reach more people and continue to fulfill our mission for decades to come."

Justin Elliott. "The Corporate Takeover of the Red Cross." ProPublica 12/14/2015.