Red Cross Faces Internal Charges of Misappropriation of Hurricane Funds, Goods

Red Cross Faces Internal Charges of Misappropriation of Hurricane Funds, Goods

The American Red Cross is investigating wide-ranging accusations of impropriety among volunteers during its response to Hurricane Katrina, the New York Times reports.

The accusations include improper diversion of relief supplies, failure to follow required Red Cross procedures in tracking and distributing supplies, and use of felons as volunteers in the disaster area in violation of Red Cross rules. While there are no official estimates of the value of cash and supplies that might have been misappropriated, Red Cross volunteers who came forward with the accusations put the amount in the millions of dollars. Among the specific problems identified were the disappearance of rented cars, generators, and nearly a third of the nine thousand air mattresses donated by a private company, as well as the unauthorized possession of computer equipment that could be used to add funding to debit cards and manipulate databases.

"We're in the middle of this," said interim Red Cross CEO John F. McGuire, "and we're looking at a range of possible problems, from issues between a few people that are really nothing other than bad will, to failure to follow good management principles and Red Cross procedures that have caused a lot of waste, to criminal activity."

In interviews, more than a dozen volunteers from around the country described an organization that had virtually no cost controls, little oversight of its inventory, and no mechanism to conduct basic background checks on volunteers given substantial responsibility. Similar descriptions were included in a report — assigned by the organization and conducted by a Maryland attorney and a Wisconsin security guard who had previously uncovered wrongdoing in Texas after the hurricane — that cited "a breathtaking systematic failure" by senior managers to enforce inventory-control procedures and "outright contempt" for internal fiscal controls. McGuire said the organization has pursued every tip, and any finding of criminal activity would be turned over to law enforcement authorities. "The vast majority are misconceptions," he added. "The key for us is to know whether we've got a problem in the Red Cross system and procedures...or whether we have a criminal problem."

The organization, which raised $3.6 billion for its hurricane relief efforts last year, has already drawn stern criticism for its uneven response to Hurricane Katrina, most notably from Sen. Charles E. Grassley (R-IA), chairman of Senate Finance Committee, who has threatened to revoke the organization's charter if it does not overhaul its operations. "The allegations from Red Cross volunteers are wide ranging and include possible criminal misconduct," Grassley said. "The Red Cross needs to change its mind-set so it addresses volunteers' concerns swiftly and appropriately, regardless of whether a Senate committee chairman is asking the questions."

Stephanie Strom. "Red Cross Sifting Internal Charges Over Katrina Aid." New York Times 03/24/2006.