[DOCID: f:hr087.110]
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110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-87
======================================================================
THE AMERICAN NATIONAL RED CROSS GOVERNANCE MODERNIZATION ACT OF 2007
_______
April 16, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Lantos, from the Committee on Foreign Affairs, submitted the
following
R E P O R T
[To accompany H.R. 1681]
[Including cost estimate of the Congressional Budget Office]
The Committee on Foreign Affairs, to whom was referred the
bill (H.R. 1681) to amend the Congressional Charter of The
American National Red Cross to modernize its governance
structure, to enhance the ability of the board of governors of
The American National Red Cross to support the critical mission
of The American National Red Cross in the 21st century, and for
other purposes, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
The Amendment.................................................... 1
Summary.......................................................... 7
Background and Purpose........................................... 7
Hearings......................................................... 9
Committee Consideration.......................................... 10
Votes of the Committee........................................... 10
Committee Oversight Findings..................................... 10
New Budget Authority and Tax Expenditures........................ 10
Congressional Budget Office Cost Estimate........................ 10
Intergovernmental and Private Sector Impact...................... 11
Performance Goals and Objectives................................. 11
Constitutional Authority Statement............................... 11
New Advisory Committees.......................................... 11
Congressional Accountability Act................................. 11
Earmark Identification........................................... 11
Section-by-Section Analysis and Discussion....................... 12
Changes in Existing Law Made by the Bill, as Reported............ 14
Red Cross Report on Corporate Compliance and Accountability...... 23
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``The American National Red Cross
Governance Modernization Act of 2007''.
SEC. 2. FINDINGS; SENSE OF CONGRESS.
(a) Findings.--Congress makes the following findings:
(1) Substantive changes to the Congressional Charter of The
American National Red Cross have not been made since 1947.
(2) In February 2006, the board of governors of The American
National Red Cross (the ``Board of Governors'') commissioned an
independent review and analysis of the Board of Governors'
role, composition, size, relationship with management,
governance relationship with chartered units of The American
National Red Cross, and whistleblower and audit functions.
(3) In an October 2006 report of the Board of Governors,
entitled ``American Red Cross Governance for the 21st Century''
(the ``Governance Report''), the Board of Governors recommended
changes to the Congressional Charter, bylaws, and other
governing documents of The American National Red Cross to
modernize and enhance the effectiveness of the Board of
Governors and governance structure of The American National Red
Cross.
(4) It is in the national interest to create a more efficient
governance structure of The American National Red Cross and to
enhance the Board of Governors' ability to support the critical
mission of The American National Red Cross in the 21st century.
(5) It is in the national interest to clarify the role of the
Board of Governors as a governance and strategic oversight
board and for The American National Red Cross to amend its
bylaws, consistent with the recommendations described in the
Governance Report, to clarify the role of the Board of
Governors and to outline the areas of its responsibility,
including--
(A) reviewing and approving the mission statement for
The American National Red Cross;
(B) approving and overseeing the corporation's
strategic plan and maintaining strategic oversight of
operational matters;
(C) selecting, evaluating, and determining the level
of compensation of the corporation's chief executive
officer;
(D) evaluating the performance and establishing the
compensation of the senior leadership team and
providing for management succession;
(E) overseeing the financial reporting and audit
process, internal controls, and legal compliance;
(F) holding management accountable for performance;
(G) providing oversight of the financial stability of
the corporation;
(H) ensuring the inclusiveness and diversity of the
corporation;
(I) ensuring the chapters of the corporation are
geographically and regionally diverse;
(J) providing oversight of the protection of the
brand of the corporation; and
(K) assisting with fundraising on behalf of the
corporation.
(6)(A) The selection of members of the Board of Governors is
a critical component of effective governance for The American
National Red Cross, and, as such, it is in the national
interest that The American National Red Cross amend its bylaws
to provide a method of selection consistent with that described
in the Governance Report.
(B) The new method of selection should replace the current
process by which--
(i) 30 chartered unit-elected members of the Board of
Governors are selected by a non-Board committee which
includes 2 members of the Board of Governors and other
individuals elected by the chartered units themselves;
(ii) 12 at-large members of the Board of Governors
are nominated by a Board committee and elected by the
Board of Governors; and
(iii) 8 members of the Board of Governors are
appointed by the President of the United States.
(C) The new method of selection described in the Governance
Report reflects the single category of members of the Board of
Governors that will result from the implementation of this Act:
(i) All Board members (except for the chairman of the
Board of Governors) would be nominated by a single
committee of the Board of Governors taking into account
the criteria outlined in the Governance Report to
assure the expertise, skills, and experience of a
governing board.
(ii) The nominated members would be considered for
approval by the full Board of Governors and then
submitted to The American National Red Cross annual
meeting of delegates for election, in keeping with the
standard corporate practice whereby shareholders of a
corporation elect members of a board of directors at
its annual meeting.
(7) The United States Supreme Court held The American
National Red Cross to be an instrumentality of the United
States, and it is in the national interest that the
Congressional Charter confirm that status and that any changes
to the Congressional Charter do not affect the rights and
obligations of The American National Red Cross to carry out its
purposes.
(8) Given the role of The American National Red Cross in
carrying out its services, programs, and activities, and
meeting its various obligations, the effectiveness of The
American National Red Cross will be promoted by the creation of
an organizational ombudsman who--
(A) will be a neutral or impartial dispute resolution
practitioner whose major function will be to provide
confidential and informal assistance to the many
internal and external stakeholders of The American
National Red Cross;
(B) will report to the chief executive officer and
the audit committee of the Board of Governors; and
(C) will have access to anyone and any documents in
The American National Red Cross.
(b) Sense of Congress.--It is the sense of Congress that--
(1) charitable organizations are an indispensable part of
American society, but these organizations can only fulfill
their important roles by maintaining the trust of the American
public;
(2) trust is fostered by effective governance and
transparency, which are the principal goals of the
recommendations of the Board of Governors in the Governance
Report and this Act;
(3) Federal and State action play an important role in
ensuring effective governance and transparency by setting
standards, rooting out violations, and informing the public;
(4) while The American National Red Cross is and will remain
a Federally chartered instrumentality of the United States, and
it has the rights and obligations consistent with that status,
The American National Red Cross nevertheless should maintain
appropriate communications with State regulators of charitable
organizations and should cooperate with them as appropriate in
specific matters as they arise from time to time; and
(5) while The American National Red Cross is and will remain
a Federally chartered instrumentality of the United States, and
it has the rights and obligations consistent with that status,
The American National Red Cross nevertheless should maintain
appropriate communications and collaborations with local,
community, and faith-based non-profit organizations, including
those organizations that work within minority communities.
SEC. 3. ORGANIZATION.
Section 300101 of title 36, United States Code, is amended--
(1) in subsection (a), by inserting ``a Federally chartered
instrumentality of the United States and'' before ``a body
corporate and politic''; and
(2) in subsection (b), by inserting at the end the following
new sentence: ``The corporation may conduct its business and
affairs, and otherwise hold itself out, as the `American Red
Cross' in any jurisdiction.''.
SEC. 4. PURPOSES.
Section 300102 of title 36, United States Code, is amended--
(1) by striking ``and'' at the end of paragraph (3);
(2) by striking the period at the end of paragraph (4) and
inserting ``; and''; and
(3) by adding at the end the following paragraph:
``(5) to conduct other activities consistent with the
foregoing purposes.''.
SEC. 5. MEMBERSHIP AND CHAPTERS.
Section 300103 of title 36, United States Code, is amended--
(1) in subsection (a), by inserting ``, or as otherwise
provided,'' before ``in the bylaws'';
(2) in subsection (b)(1)--
(A) by striking ``board of governors'' and inserting
``corporation''; and
(B) by inserting ``policies and'' before
``regulations related''; and
(3) in subsection (b)(2)--
(A) by inserting ``policies and'' before
``regulations shall require''; and
(B) by striking ``national convention'' and inserting
``annual meeting''.
SEC. 6. BOARD OF GOVERNORS.
Section 300104 of title 36, United States Code, is amended to read as
follows:
``Sec. 300104. Board of governors
``(a) Board of Governors.--
``(1) In general.--The board of governors is the governing
body of the corporation with all powers of governing and
directing, and of overseeing the management of the business and
affairs of, the corporation.
``(2) Number.--The board of governors shall fix by
resolution, from time to time, the number of members
constituting the entire board of governors, provided that--
``(A) as of March 31, 2009, and thereafter, there
shall be no fewer than 12 and no more than 25 members;
and
``(B) as of March 31, 2012, and thereafter, there
shall be no fewer than 12 and no more than 20 members
constituting the entire board.
Procedures to implement the preceding sentence shall be
provided in the bylaws.
``(3) Appointment.--The governors shall be appointed or
elected in the following manner:
``(A) Chairman.--
``(i) In general.--The board of governors, in
accordance with procedures provided in the
bylaws, shall recommend to the President an
individual to serve as chairman of the board of
governors. If such recommendation is approved
by the President, the President shall appoint
such individual to serve as chairman of the
board of governors.
``(ii) Vacancies.--Vacancies in the office of
the chairman, including vacancies resulting
from the resignation, death, or removal by the
President of the chairman, shall be filled in
the same manner described in clause (i).
``(iii) Duties.--The chairman shall be a
member of the board of governors and, when
present, shall preside at meetings of the board
of governors and shall have such other duties
and responsibilities as may be provided in the
bylaws or a resolution of the board of
governors.
``(B) Other members.--
``(i) In general.--Members of the board of
governors other than the chairman shall be
elected at the annual meeting of the
corporation in accordance with such procedures
as may be provided in the bylaws.
``(ii) Vacancies.--Vacancies in any such
elected board position and in any newly created
board position may be filled by a vote of the
remaining members of the board of governors in
accordance with such procedures as may be
provided in the bylaws.
``(b) Terms of Office.--
``(1) In general.--The term of office of each member of the
board of governors shall be 3 years, except that--
``(A) the board of governors may provide under the
bylaws that the terms of office of members of the board
of governors elected to the board of governors before
March 31, 2012, may be less than 3 years in order to
implement the provisions of subparagraphs (A) and (B)
of subsection (a)(2); and
``(B) any member of the board of governors elected by
the board to fill a vacancy in a board position arising
before the expiration of its term may, as determined by
the board, serve for the remainder of that term or
until the next annual meeting of the corporation.
``(2) Staggered terms.--The terms of office of members of the
board of governors (other than the chairman) shall be staggered
such that, by March 31, 2012, and thereafter, \1/3\ of the
entire board (or as near to \1/3\ as practicable) shall be
elected at each successive annual meeting of the corporation
with the term of office of each member of the board of
governors elected at an annual meeting expiring at the third
annual meeting following the annual meeting at which such
member was elected.
``(3) Term limits.--No person may serve as a member of the
board of governors for more than such number of terms of office
or years as may be provided in the bylaws.
``(c) Committees and Officers.--The board--
``(1) may appoint, from its own members, an executive
committee to exercise such powers of the board when the board
is not in session as may be provided in the bylaws;
``(2) may appoint such other committees or advisory councils
with such powers as may be provided in the bylaws or a
resolution of the board of governors;
``(3) shall appoint such officers of the corporation,
including a chief executive officer, with such duties,
responsibilities, and terms of office as may be provided in the
bylaws or a resolution of the board of governors; and
``(4) may remove members of the board of governors (other
than the chairman), officers, and employees under such
procedures as may be provided in the bylaws or a resolution of
the board of governors.
``(d) Advisory Council.--
``(1) Establishment.--There shall be an advisory council to
the board of governors.
``(2) Membership; appointment by president.--
``(A) In general.--The advisory council shall be
composed of no fewer than 8 and no more than 10
members, each of whom shall be appointed by the
President from principal officers of the executive
departments and senior officers of the Armed Forces
whose positions and interests qualify them to
contribute to carrying out the programs and purposes of
the corporation.
``(B) Members from the armed forces.--At least 1, but
not more than 3, of the members of the advisory council
shall be selected from the Armed Forces.
``(3) Duties.--The advisory council shall advise, report
directly to, and meet, at least 1 time per year with the board
of governors, and shall have such name, functions and be
subject to such procedures as may be provided in the bylaws.
``(e) Action Without Meeting.--Any action required or permitted to be
taken at any meeting of the board of governors or of any committee
thereof may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing, or by
electronic transmission and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings
of the board or committee. Such filing shall be in paper form if the
minutes are maintained in paper form and shall be in electronic form if
the minutes are maintained in electronic form.
``(f) Voting by Proxy.--
``(1) In general.--Voting by proxy is not allowed at any
meeting of the board, at the annual meeting, or at any meeting
of a chapter.
``(2) Exception.--The board may allow the election of
governors by proxy during any emergency.
``(g) Bylaws.--
``(1) In general.--The board of governors may--
``(A) at any time adopt bylaws; and
``(B) at any time adopt bylaws to be effective only
in an emergency.
``(2) Emergency bylaws.--Any bylaws adopted pursuant to
paragraph (1)(B) may provide special procedures necessary for
managing the corporation during the emergency. All provisions
of the regular bylaws consistent with the emergency bylaws
remain effective during the emergency.
``(h) Definitions.--For purposes of this section--
``(1) the term `entire board' means the total number of
members of the board of governors that the corporation would
have if there were no vacancies; and
``(2) the term `emergency' shall have such meaning as may be
provided in the bylaws.''.
SEC. 7. POWERS.
Subsection (a)(1) of section 300105 of title 36, United States Code,
is amended by striking ``bylaws'' and inserting ``policies''.
SEC. 8. ANNUAL MEETING.
Section 300107 of title 36, United States Code, is amended to read as
follows:
``Sec. 300107. Annual meeting
``(a) In General.--The annual meeting of the corporation is the
annual meeting of delegates of the chapters.
``(b) Time of Meeting.--The annual meeting shall be held as
determined by the board of governors.
``(c) Place of Meeting.--The board of governors is authorized to
determine that the annual meeting shall not be held at any place, but
may instead be held solely by means of remote communication subject to
such procedures as are provided in the bylaws.
``(d) Voting.--
``(1) In general.--In matters requiring a vote at the annual
meeting, each chapter is entitled to at least 1 vote, and
voting on all matters may be conducted by mail, telephone,
telegram, cablegram, electronic mail, or any other means of
electronic or telephone transmission, provided that the person
voting shall state, or submit information from which it can be
determined, that the method of voting chosen was authorized by
such person.
``(2) Establishment of number of votes.--
``(A) In general.--The board of governors shall
determine on an equitable basis the number of votes
that each chapter is entitled to cast, taking into
consideration the size of the membership of the
chapters, the populations served by the chapters, and
such other factors as may be determined by the board.
``(B) Periodic review.--The board of governors shall
review the allocation of votes at least every 5
years.''.
SEC. 9. ENDOWMENT FUND.
Section 300109 of title 36, United States Code is amended--
(1) by striking ``nine'' from the first sentence thereof; and
(2) by striking the second sentence and inserting the
following: ``The corporation shall prescribe policies and
regulations on terms and tenure of office, accountability, and
expenses of the board of trustees.''.
SEC. 10. ANNUAL REPORT AND AUDIT.
Subsection (a) of section 300110 of title 36, United States Code, is
amended to read as follows:
``(a) Submission of Report.--As soon as practicable after the end of
the corporation's fiscal year, which may be changed from time to time
by the board of governors, the corporation shall submit a report to the
Secretary of Defense on the activities of the corporation during such
fiscal year, including a complete, itemized report of all receipts and
expenditures.''.
SEC. 11. COMPTROLLER GENERAL OF THE UNITED STATES AND OFFICE OF THE
OMBUDSMAN.
(a) In General.--Chapter 3001 of title 36, United States Code, is
amended by redesignating section 300111 as section 300113 and by
inserting after section 300110 the following new sections:
``Sec. 300111. Authority of the Comptroller General of the United
States
``The Comptroller General of the United States is authorized to
review the corporation's involvement in any Federal program or activity
the Government carries out under law.
``Sec. 300112. Office of the Ombudsman
``(a) Establishment.--The corporation shall establish an Office of
the Ombudsman with such duties and responsibilities as may be provided
in the bylaws or a resolution of the board of governors.
``(b) Report.--
``(1) In general.--The Office of the Ombudsman shall submit
annually to the appropriate Congressional committees a report
concerning any trends and systemic matters that the Office of
the Ombudsman has identified as confronting the corporation.
``(2) Appropriate congressional committees.--For purposes of
paragraph (1), the appropriate Congressional committees are the
following committees of Congress:
``(A) Senate committees.--The appropriate
Congressional committees of the Senate are--
``(i) the Committee on Finance;
``(ii) the Committee on Foreign Relations;
``(iii) the Committee on Health, Education,
Labor, and Pensions;
``(iv) the Committee on Homeland Security and
Governmental Affairs; and
``(v) the Committee on the Judiciary.
``(B) House committees.--The appropriate
Congressional committees of the House of
Representatives are--
``(i) the Committee on Energy and Commerce;
``(ii) the Committee on Foreign Affairs;
``(iii) the Committee on Homeland Security;
``(iv) the Committee on the Judiciary; and
``(v) the Committee on Ways and Means.''.
(b) Clerical Amendment.--The table of sections for chapter 3001 of
title 36, United States Code, is amended by striking the item relating
to section 300111 and inserting the following:
``300111. Authority of the Comptroller General of the United States.
``300112. Office of the Ombudsman.
``300113. Reservation of right to amend or repeal.''.
Summary
The ``American National Red Cross Governance Modernization
Act of 2007'' (H.R. 1681) amends the Congressional Charter of
the American National Red Cross (hereinafter ``the Red Cross'')
for the purposes of modernizing its governance structure and
enhancing the ability of the Red Cross Board of Governors to
support the critical mission of the Red Cross in the 21st
century. The bill explicitly delegates to Red Cross management
the responsibilities for day-to-day operations; reduces the
Board of Governors' size by more than half; creates a single
category of governors, changes the process of how members are
selected; and transitions seven of the Presidentially-appointed
governors into a newly created Cabinet Advisory Council.
Finally, the bill requires the Red Cross to establish an Office
of the Ombudsman to improve the whistleblower process within
the organization.
Background and Purpose
Wherever disaster strikes, the American Red Cross responds.
In times of crisis, its staff of 35,000 and more than a million
volunteers take on the daunting task of translating the
compassion of the American people into shelter, clothing, and
food. When a fire puts a family out of its home or a tornado
tears through a community, the Red Cross is always on the
scene. The Red Cross addressed the needs of people in crises in
over 75,000 incidents last year alone. But disaster relief
organizations such as the American Red Cross have come under
heightened scrutiny after 9/11 and the Gulf Coast hurricanes.
Such organizations must now demonstrate as never before that
they are acting responsibly and in the best interests of the
American people.
The Committee notes that Hurricanes Katrina and Rita, in
particular, crystallized the need for reform of the Red Cross.
The Committee understands that while the Red Cross performed
admirably in its relief response, there were also reports of
shortcomings in its performance. Criticisms and questions were
raised about the practicability of the Federal Government's
reliance on a volunteer organization to respond to mass
disasters. The Committee notes that the Red Cross received
numerous complaints about racial insensitivity by Red Cross
volunteers toward disaster victims. The Red Cross was also
criticized for miscounting the number of Hurricane Katrina
evacuees who were residing in hotels. In addition, news reports
stated that Red Cross relief funds were given to persons who
did not qualify for aid.
The Committee applauds the leadership of the American Red
Cross for wisely undertaking a comprehensive review of its
governance structure in the aftermath of such criticism. On
February 17, 2006, the Red Cross established the ``Independent
Governance Advisory Panel'' which conducted a six-month, top-
to-bottom governance audit to carefully examine Red Cross
governance and to provide current examples of ``best
practices'' in for-profit and nonprofit corporations. The Red
Cross asked the Governance Panel to focus on the following
topics: the size and composition of the Board of Governors,
participation by and independence of governors and the process
for selecting candidates for the board; the organization and
functioning of the Board of Governors, including the
composition, structure and roles of the board's committees; the
roles and relationships of the Board of Governors and
management; the Board of Governors' oversight of the governance
practices of the local chapters; and the relationships and
lines of reporting between the Audit Committee of the Board of
Governors, the outside auditor, and the internal audit
functions, including the whistleblower process as its applies
to Red Cross employees and volunteers, as well as
constituencies served by the Red Cross.
The Committee notes that after more than 100 interviews of
past and present Red Cross officers, volunteer chapter leaders,
donors and others, the panel delivered to the Board of
Governors a series of recommendations in a more than 150-page
report, American Red Cross Governance for the 21st Century: A
Report of the Board of Governors, calling for major reform in
the Red Cross' governance structure. On October 30, 2006, the
Board of Governors unanimously approved the panel's
recommendations to reform its governance structure. The
Committee finds that the last time the Red Cross reorganized
itself was in 1947. At that time, local chapters gained
influence by getting seats on the board; however, over the
years, the board swelled to 50 members. Its unwieldy size and
parochial nature made the CEO's job one of the least secure at
any American charity. In the past seven years, the Red Cross
has had three chief executives and three interim executives.
The Committee observes that the Red Cross managers find
themselves at odds with a board dominated by local chapter
representatives who lack the experience required to oversee a
large corporation and who are protective of local chapter
interests.
The recommendations unanimously approved by the Board of
Governors include reducing the size of the board, simplifying
the board's structure, eliminating appointed positions on the
board and replacing them with a Cabinet Advisory Council,
clarifying the board's role to focus solely on governance,
strategic oversight and direction of the Red Cross, and
improving the whistleblower functions in the Red Cross.
The Committee notes that such recommendations require
congressional action. On March 15, 2007, the Senate passed the
companion bill, S. 655, which was spearheaded by Senator
Grassley and Senator Kennedy. The Committee held a hearing on
March 14, 2007 on American Red Cross Governance Reform with
Chairwoman Bonnie McElveen-Hunter and Karen Hastie Williams who
headed the governance panel. On March 26, 2007, Chairman Tom
Lantos and Ranking Member Ileana Ros-Lehtinen introduced H.R.
1681, the ``The American National Red Cross Governance
Modernization Act of 2007''.
The ``The American National Red Cross Governance
Modernization Act of 2007'':
(1) Permits the Red Cross to conduct business as the
``American Red Cross'';
(2) Reduces the Board of Governors from 50 members to
between 12 and 25 members by March 31, 2009, and to
between 12 and 20 members by March 31, 2012;
(3) Reduces Presidential appointees to the Board of
Governors from eight to one, with the President
appointing the chairman of the board;
(4) Abolishes local chapter selection of 30 board
members and board selection of 12 members;
(5) Requires each board member, except the
presidential appointee, to be elected by delegates at
the Red Cross annual convention;
(6) Establishes a Presidentially-appointed advisory
council of eight to ten members, who would be officers
of executive departments that work with the Red Cross;
(7) Eliminates the requirement that the number of
trustees overseeing the Red Cross endowment be fixed at
nine;
(8) Authorizes the Comptroller General to review the
Red Cross' involvement in any Federal program or
activity that the Government carries out by law; and
(9) Requires the Red Cross to establish an Office of
the Ombudsman, which would report annually to Congress.
The Committee passed H.R. 1681 with a voice vote with two
amendments to the findings section offered by Congresswoman
Sheila Jackson Lee to ensure that the local chapters of the Red
Cross are geographically and regionally diverse and that the
Red Cross should maintain appropriate communications and
collaborations with local, community, and faith-based nonprofit
organizations, including those organizations that work within
minority communities.
In addition, the Committee has expressed concern about Red
Cross' transparency and accountability through accessibility
and reporting, as reflected by Ranking Republican Member Ileana
Ros-Lehtinen's inquiries at the March 14, 2007, hearing on this
subject. After engaging in a dialogue with the Red Cross on
ways to improve the transparency and accountability of the Red
Cross, the Red Cross presented a paper on Red Cross practices
to ensure corporate compliance and transparency through
accessibility and reporting. The Committee is satisfied that
the Red Cross has addressed the Committee's concerns on
transparency and accountability.
While the changes in H.R. 1681 would not directly affect
the organization's disaster response, the Committee believes
they will undoubtedly help promote the kind of leadership
necessary to make Red Cross management and operations run more
smoothly.
Hearings
In the 110th Congress, the Committee held a hearing on
March 14, 2007, on American Red Cross Governance Reform with
Chairman of the Red Cross, Bonnie McElveen-Hunter, and Chair of
the Independent Governance Advisory Panel, Karen Hastie
Williams.
Committee Consideration
The Committee marked up H.R. 1681 on March 27, 2007. The
bill was reported favorably, as amended, by voice vote, a
quorum being present.
Votes of the Committee
Clause (3)(b) of rule XIII of the Rules of the House of
Representatives requires that the results of each record vote
on an amendment or motion to report, together with the names of
those voting for or against, be printed in the Committee
Report. There were no votes during consideration of H.R. 1681.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c) (2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 1681, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under Section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 2, 2007.
Hon. Tom Lantos, Chairman,
Committee on Foreign Affairs,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1681, the American
National Red Cross Governance Modernization Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sarah Puro,
who can be reached at 226-2860.
Sincerely,
Peter R. Orszag.
Enclosure.
H.R. 1681--American National Red Cross Governance Modernization Act of
2007
H.R. 1681 would make amendments to the Congressional
charter of the American National Red Cross. CBO estimates that
enacting H.R. 1681 would have no impact on the federal budget.
Enacting the legislation would not affect direct spending or
revenues.
H.R. 1681 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
H.R. 1681 would amend the charter of the American National
Red Cross by limiting the number of members of the Board of
Governors to no more than 20 by 2012 and changing the process
by which the members of the Board of Governors are appointed.
The bill also would establish an Office of the Ombudsman within
the Red Cross and an Advisory Council composed of eight to 10
senior federal employees. Because the operations of the Red
Cross are not reflected in the federal budget, CBO estimates
that enacting H.R. 1681 would have no budgetary impact.
The CBO staff contact for this estimate is Sarah Puro, who
can be reached at 226-2860. This estimate was approved by Peter
H. Fontaine, Deputy Assistant Director for Budget Analysis.
Intergovernmental and Private Sector Impact
H.R. 1681 contains no intergovernmental or private-sector
mandates as defined in UMRA and would not affect the budgets of
state, local, or tribal governments.
Performance Goals and Objectives
Pursuant to clause (3)(c) of House rule XIII, upon
enactment of this legislation, the Red Cross should modernize
its governance structure and enhancing the ability of the Red
Cross Board of Governors to support the critical mission of the
Red Cross in the 21st century.
Constitutional Authority Statement
Pursuant to clause 3(d) (1) of rule XIII of the Rules of
the House of Representatives, the Committee finds the authority
for this legislation in article I, section 8 of the
Constitution.
New Advisory Committees
H.R. 1681 establishes a Federal advisory council to the
Board of Governors composed of eight to 10 presidential
appointees, with at least one but no more than three from the
Armed Forces.
Congressional Accountability Act
H.R. 1681 does not apply to the Legislative Branch.
Earmark Identification
H.R. 1681 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(d), 9(e), or 9(f) of rule XXI.
Section-by-Section Analysis and Discussion
Section 1. Short title
This section states that the act may be referred to as the
``The American National Red Cross Governance Modernization Act
of 2007''.
Section 2. Findings; Sense of Congress
This section contains congressional findings describing the
background and need for changes to the congressional charter of
the Red Cross that would improve the governance structure of
the organization. The findings note that substantive changes to
the congressional charter of the Red Cross have not been made
since 1947. It also details the results and recommendations of
the independent governance audit that was commissioned by the
Board of Governors of the Red Cross on the board's role,
composition, size, and relationship with management, governance
relationship with chartered units of the Red Cross, and
whistleblower and audit functions.
The findings highlight the importance of improving the
governance structure of the Red Cross, including the governance
and strategic oversight of the Board of Governors of the
organization. The findings also identify the importance of
ensuring geographically and regionally diverse chapters. In
addition, the findings include a provision stressing the need
for the Red Cross to maintain appropriate communications and
collaborations with local, community, and faith-based nonprofit
organizations, including organizations that work within
minority communities.
This section also contains a Sense of Congress which states
that charitable organizations are an indispensable part of
American society, and they must maintain the trust of the
American public which is fostered by effective governance and
transparency. The Sense of Congress provisions discuss the
important role Federal and State action play in ensuring
effective governance and transparency of the organization by
setting standards, rooting out violations, and informing the
public; and recommends that the Red Cross should maintain
appropriate communications and cooperate with State regulators
of charitable organizations to ensure effective governance and
transparency.
Section 3. Organization
Section 3 amends Section 300101 of title 36 of the United
States Code by: (1) adding that the Red Cross is a Federally
chartered instrumentality of the United States in the
description of the organization; and (2) authorizing the
organization to conduct its business and affairs under the name
of the ``American Red Cross'' in any jurisdiction.
Section 4. Purposes
Section 4 amends Section 300102 of title 36 of the United
States Code by making technical changes and providing an
additional purpose for the Red Cross to conduct other
activities that are consistent with the activities the Red
Cross has been historically authorized to carry out.
Section 5. Membership and chapters
Section 5 amends Section 300103 of title 36 of the United
States Code by authorizing the corporation, rather than the
Board of Governors as previously authorized, to prescribe the
policies and regulations relating to the Red Cross chapters. In
addition, the section amends the charter by providing that
delegates will be selected to the annual meeting rather than
the national convention as previously authorized. The section
makes additional technical changes to Section 300103 of title
36 of the United States Code.
Section 6. Board of Governors
Section 6 amends Section 300104 of title 36 of the United
States Code by amending the Board of Governor's role, size,
composition, and relationship with management. This section
bestows on the Board of Governors ``all powers of governing and
directing, and of overseeing the management of the business and
affairs of the corporation.'' This section also reduces the
size of the Board of Governors from 50 members to between 12
and 25 members by March 31, 2009, and to between 12 and 20
members by March 31, 2012. It provides that the chairman of the
Board of Governors will be appointed by the President with
recommendations from the Board of Governors and that vacancies
in the office of the chairman must be filled in the same
manner.
The chairman will act as a member of the Board of Governors
and shall preside at the board meetings. The other members of
the Board of Governors shall be elected at the Red Cross annual
meeting and any vacancies in any elected board position and in
any newly created board position may be filled by a vote of the
remaining board members. The section determines the term of
office of each board member as 3 years, with the exception of
board members elected under the provisions of subparagraphs (A)
and (B) of subsection (a)(2), and those board members elected
by the board to fill a vacancy. It also provides for staggered
terms such that, by March 31, 2012, and thereafter, one-third
of the entire board must be elected at each successive annual
meeting of the Red Cross, and term limits as provided in the
Red Cross bylaws. The Committee notes that the changes
reflected in this section are generally consistent with the
relationship that national societies in other countries have to
their governments as autonomous auxiliaries to public
authorities in each such country.
The section provides the board with the power to appoint an
executive committee to exercise such powers of the board when
the board is not in session and other committees or advisory
councils with such powers as the bylaws or a resolution by the
Board of Governors may provide. In addition, the board is
required to appoint officers of the corporation, including a
chief executive officer, and has the authority to remove
members of the Board of Governors, other than the chairman,
officers, and employees under the bylaws or a resolution of the
Board of Governors.
Section 6 also establishes a Federal advisory council to
the Board of Governors composed of eight to 10 presidential
appointees, with at least one but no more than three from the
Armed Forces. The section does not confer any powers to the
council. This section provides exceptions for when action by
the Board of Governors may be taken without a meeting; in
addition, it does not allow voting by proxy at any meeting of
the board or a chapter, or at the annual meeting except the
board may allow the election of governors by proxy during an
emergency. Finally, the section allows the Board of Governors
to adopt bylaws at any time, including bylaws that would be
effective in an emergency.
Section 7. Powers
Section 7 amends Paragraph (a)(1) of section 300105 of
title 36 of the United States Code by removing the power of the
corporation to adopt bylaws, but instead to adopt policies.
Section 8. Annual meeting
Section 8 amends Section 300107 of title 36 of the United
States Code by defining the annual meeting, designating the
time and place of the annual meeting, and determining the
voting guidelines and requirements for the annual meeting.
Section 9. Endowment fund
Section 9 amends Section 300109 of title 36 of the United
States Code by eliminating the requirement that the number of
trustees overseeing the Red Cross endowment be fixed at nine
and gives the corporation, rather than the Board of Governors,
the authority of prescribing the policies and regulations on
the terms and tenure of office, accountability, and expenses of
the board of trustees.
Section 10. Annual report and audit
Section 10 amends section 300110(a) of title 36 of the
United States Code by requiring the corporation to submit a
report at the end of the corporation's fiscal year, which may
be changed by the Board of Governors, to the Secretary of
Defense on the activities of the corporation during such fiscal
year.
Section 11. Comptroller General of the United States and the Office of
the Ombudsman
Section 11 amends Chapter 3001 of title 36 of the United
States Code by adding new sections 300111 and 300112.
Section 300111 authorizes the Comptroller General of the
United States to review the Red Cross' involvement in any
Federal program or activity the U.S. Government carries out
under law.
Section 300112 establishes an Office of the Ombudsman which
reports annually to Congress on any trends and systemic matters
that the Office of the Ombudsman identifies as confronting the
Red Cross. The report would be submitted to the Senate
Committee on Finance, the Senate Committee on Foreign
Relations, the Senate Committee on Health, Education, Labor,
and Pensions, the Senate Committee on Homeland Security and
Governmental Affairs, and the Senate Committee on the
Judiciary. The report would also be submitted to the House
Committee on Energy and Commerce, the House Committee on
Foreign Affairs, the House Committee on Homeland Security, the
House Committee on the Judiciary, and the House Committee on
Ways and Means.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 36, UNITED STATES CODE
* * * * * * *
SUBTITLE III--TREATY OBLIGATION ORGANIZATIONS
CHAPTER 3001--THE AMERICAN NATIONAL RED CROSS
Sec.
300101. Organization.
* * * * * * *
[300111. Reservation of right to amend or repeal.]
300111. Authority of the Comptroller General of the United States.
300112. Office of the Ombudsman.
300113. Reservation of right to amend or repeal.
* * * * * * *
Sec. 300101. Organization
(a) Federal Charter.--The American National Red Cross (in
this chapter, the ``corporation'') is a Federally chartered
instrumentality of the United States and a body corporate and
politic in the District of Columbia.
(b) Name.--The name of the corporation is ``The American
National Red Cross''. The corporation may conduct its business
and affairs, and otherwise hold itself out, as the ``American
Red Cross'' in any jurisdiction.
* * * * * * *
Sec. 300102. Purposes
The purposes of the corporation are--
(1) * * *
* * * * * * *
(3) to act in matters of voluntary relief and in
accordance with the military authorities as a medium of
communication between the people of the United States
and the Armed Forces of the United States and to act in
those matters between similar national societies of
governments of other countries through the
International Committee of the Red Cross and the
Government, the people, and the Armed Forces of the
United States; [and]
(4) to carry out a system of national and
international relief in time of peace, and to apply
that system in mitigating the suffering caused by
pestilence, famine, fire, floods, and other great
national calamities, and to devise and carry out
measures for preventing those calamities[.]; and
(5) to conduct other activities consistent with the
foregoing purposes.
Sec. 300103. Membership and chapters
(a) Membership.--Membership in the corporation is open to all
the people of the United States and its territories and
possessions, on payment of an amount specified, or as otherwise
provided, in the bylaws.
(b) Chapters.--(1) The chapters of the corporation are the
local units of the corporation. The [board of governors]
corporation shall prescribe policies and regulations related
to--
(A) * * *
* * * * * * *
(2) The policies and regulations shall require that each
chapter adhere to the democratic principles of election
specified in the bylaws in electing the governing body of the
chapter and selecting delegates to the [national convention]
annual meeting of the corporation.
[Sec. 300104. Board of governors
[(a) Board of Governors.--(1) The board of governors is the
governing body of the corporation with all powers of governing
and managing the corporation. The board has 50 members. The
governors shall be appointed or elected in the following
manner:
[(A) The President shall appoint eight governors, one
of whom the President shall designate to act as the
principal officer of the corporation with the title and
functions provided in the bylaws. The other governors
appointed by the President shall be officials of
departments and agencies of the United States
Government, whose positions and interests qualify them
to contribute to carrying out the programs and purposes
of the corporation. At least one, but not more than
three, of those officials shall be selected from the
Armed Forces.
[(B) The chapters shall elect 30 governors at the
national convention under procedures for nomination and
election that ensure equitable representation of all
chapters, with regard to geographical considerations,
the size of the chapters, and the size of the
populations served by the chapters.
[(C) The board shall elect 12 governors as members-
at-large. Those governors shall be individuals who are
representative of the national interests that the
corporation serves, and with which it is desirable that
the corporation have close association.
[(2) One-third of the members elected to the board shall be
elected at each national convention, and take office at that
time or as soon as practicable after the convention.
[(b) Term of Office and Vacancies.--(1) The term of office of
each governor is 3 years. However, the term of office of a
governor appointed by the President (except the principal
officer of the corporation) expires if, before the end of the
3-year term, the governor retires from the official position
held at the time of appointment as a governor.
[(2) The President shall fill as soon as practicable a
vacancy in the office of the principal officer of the
corporation or in the position of another governor appointed by
the President. The board shall make a temporary appointment to
fill a vacancy occurring in an elected position on the board.
An individual appointed by the board to fill a vacancy serves
until the next national convention.
[(c) Executive Committee.--The board may--
[(1) appoint, from its own members, an executive
committee of at least 11 individuals to exercise the
powers of the board when the board is not in session;
and
[(2) appoint and remove, or provide for the
appointment and removal of, officers and employees of
the corporation, except the principal officer of the
corporation.
[(d) Voting by Proxy.--Voting by proxy is not allowed at any
meeting of the board, at the national convention, or at any
meeting of a chapter. However, the board may allow the election
of governors by proxy at the national convention if the board
believes a national emergency makes attendance at the national
convention impossible.]
Sec. 300104. Board of governors
(a) Board of Governors.--
(1) In general.--The board of governors is the
governing body of the corporation with all powers of
governing and directing, and of overseeing the
management of the business and affairs of, the
corporation.
(2) Number.--The board of governors shall fix by
resolution, from time to time, the number of members
constituting the entire board of governors, provided
that--
(A) as of March 31, 2009, and thereafter,
there shall be no fewer than 12 and no more
than 25 members; and
(B) as of March 31, 2012, and thereafter,
there shall be no fewer than 12 and no more
than 20 members constituting the entire board.
Procedures to implement the preceding sentence shall be
provided in the bylaws.
(3) Appointment.--The governors shall be appointed or
elected in the following manner:
(A) Chairman.--
(i) In general.--The board of
governors, in accordance with
procedures provided in the bylaws,
shall recommend to the President an
individual to serve as chairman of the
board of governors. If such
recommendation is approved by the
President, the President shall appoint
such individual to serve as chairman of
the board of governors.
(ii) Vacancies.--Vacancies in the
office of the chairman, including
vacancies resulting from the
resignation, death, or removal by the
President of the chairman, shall be
filled in the same manner described in
clause (i).
(iii) Duties.--The chairman shall be
a member of the board of governors and,
when present, shall preside at meetings
of the board of governors and shall
have such other duties and
responsibilities as may be provided in
the bylaws or a resolution of the board
of governors.
(B) Other members.--
(i) In general.--Members of the board
of governors other than the chairman
shall be elected at the annual meeting
of the corporation in accordance with
such procedures as may be provided in
the bylaws.
(ii) Vacancies.--Vacancies in any
such elected board position and in any
newly created board position may be
filled by a vote of the remaining
members of the board of governors in
accordance with such procedures as may
be provided in the bylaws.
(b) Terms of Office.--
(1) In general.--The term of office of each member of
the board of governors shall be 3 years, except that--
(A) the board of governors may provide under
the bylaws that the terms of office of members
of the board of governors elected to the board
of governors before March 31, 2012, may be less
than 3 years in order to implement the
provisions of subparagraphs (A) and (B) of
subsection (a)(2); and
(B) any member of the board of governors
elected by the board to fill a vacancy in a
board position arising before the expiration of
its term may, as determined by the board, serve
for the remainder of that term or until the
next annual meeting of the corporation.
(2) Staggered terms.--The terms of office of members
of the board of governors (other than the chairman)
shall be staggered such that, by March 31, 2012, and
thereafter, \1/3\ of the entire board (or as near to
\1/3\ as practicable) shall be elected at each
successive annual meeting of the corporation with the
term of office of each member of the board of governors
elected at an annual meeting expiring at the third
annual meeting following the annual meeting at which
such member was elected.
(3) Term limits.--No person may serve as a member of
the board of governors for more than such number of
terms of office or years as may be provided in the
bylaws.
(c) Committees and Officers.--The board--
(1) may appoint, from its own members, an executive
committee to exercise such powers of the board when the
board is not in session as may be provided in the
bylaws;
(2) may appoint such other committees or advisory
councils with such powers as may be provided in the
bylaws or a resolution of the board of governors;
(3) shall appoint such officers of the corporation,
including a chief executive officer, with such duties,
responsibilities, and terms of office as may be
provided in the bylaws or a resolution of the board of
governors; and
(4) may remove members of the board of governors
(other than the chairman), officers, and employees
under such procedures as may be provided in the bylaws
or a resolution of the board of governors.
(d) Advisory Council.--
(1) Establishment.--There shall be an advisory
council to the board of governors.
(2) Membership; appointment by president.--
(A) In general.--The advisory council shall
be composed of no fewer than 8 and no more than
10 members, each of whom shall be appointed by
the President from principal officers of the
executive departments and senior officers of
the Armed Forces whose positions and interests
qualify them to contribute to carrying out the
programs and purposes of the corporation.
(B) Members from the armed forces.--At least
1, but not more than 3, of the members of the
advisory council shall be selected from the
Armed Forces.
(3) Duties.--The advisory council shall advise,
report directly to, and meet, at least 1 time per year
with the board of governors, and shall have such name,
functions and be subject to such procedures as may be
provided in the bylaws.
(e) Action Without Meeting.--Any action required or permitted
to be taken at any meeting of the board of governors or of any
committee thereof may be taken without a meeting if all members
of the board or committee, as the case may be, consent thereto
in writing, or by electronic transmission and the writing or
writings or electronic transmission or transmissions are filed
with the minutes of proceedings of the board or committee. Such
filing shall be in paper form if the minutes are maintained in
paper form and shall be in electronic form if the minutes are
maintained in electronic form.
(f) Voting by Proxy.--
(1) In general.--Voting by proxy is not allowed at
any meeting of the board, at the annual meeting, or at
any meeting of a chapter.
(2) Exception.--The board may allow the election of
governors by proxy during any emergency.
(g) Bylaws.--
(1) In general.--The board of governors may--
(A) at any time adopt bylaws; and
(B) at any time adopt bylaws to be effective
only in an emergency.
(2) Emergency bylaws.--Any bylaws adopted pursuant to
paragraph (1)(B) may provide special procedures
necessary for managing the corporation during the
emergency. All provisions of the regular bylaws
consistent with the emergency bylaws remain effective
during the emergency.
(h) Definitions.--For purposes of this section--
(1) the term ``entire board'' means the total number
of members of the board of governors that the
corporation would have if there were no vacancies; and
(2) the term ``emergency'' shall have such meaning as
may be provided in the bylaws.
Sec. 300105. Powers
(a) General.--The corporation may--
(1) adopt [bylaws] policies and regulations;
* * * * * * *
[Sec. 300107. Annual meeting
[The annual meeting of the corporation is the national
convention of delegates of the chapters. The national
convention shall be held annually on a date and at a place
specified by the board of governors. In matters requiring a
vote at the national convention, each chapter is entitled to at
least one vote. The board shall determine on an equitable basis
the number of votes that each chapter is entitled to cast,
taking into consideration the size of the membership of the
chapters and of the populations served by the chapters. The
board shall review the allocation of votes at least every 5
years.]
Sec. 300107. Annual meeting
(a) In General.--The annual meeting of the corporation is the
annual meeting of delegates of the chapters.
(b) Time of Meeting.--The annual meeting shall be held as
determined by the board of governors.
(c) Place of Meeting.--The board of governors is authorized
to determine that the annual meeting shall not be held at any
place, but may instead be held solely by means of remote
communication subject to such procedures as are provided in the
bylaws.
(d) Voting.--
(1) In general.--In matters requiring a vote at the
annual meeting, each chapter is entitled to at least 1
vote, and voting on all matters may be conducted by
mail, telephone, telegram, cablegram, electronic mail,
or any other means of electronic or telephone
transmission, provided that the person voting shall
state, or submit information from which it can be
determined, that the method of voting chosen was
authorized by such person.
(2) Establishment of number of votes.--
(A) In general.--The board of governors shall
determine on an equitable basis the number of
votes that each chapter is entitled to cast,
taking into consideration the size of the
membership of the chapters, the populations
served by the chapters, and such other factors
as may be determined by the board.
(B) Periodic review.--The board of governors
shall review the allocation of votes at least
every 5 years.
* * * * * * *
Sec. 300109. Endowment fund
The endowment fund of the corporation shall be kept and
invested under the management and control of a board of [nine]
trustees elected by the board of governors. [The board of
governors shall prescribe regulations on terms and tenure of
office, accountability, and expenses of the board of trustees.]
The corporation shall prescribe policies and regulations on
terms and tenure of office, accountability, and expenses of the
board of trustees.
Sec. 300110. Annual report and audit
[(a) Submission of Report.--As soon as practicable after July
1 of each year, the corporation shall submit a report to the
Secretary of Defense on the activities of the corporation
during the fiscal year ending June 30, including a complete,
itemized report of all receipts and expenditures.]
(a) Submission of Report.--As soon as practicable after the
end of the corporation's fiscal year, which may be changed from
time to time by the board of governors, the corporation shall
submit a report to the Secretary of Defense on the activities
of the corporation during such fiscal year, including a
complete, itemized report of all receipts and expenditures.
* * * * * * *
Sec. 300111. Authority of the Comptroller General of the United States
The Comptroller General of the United States is authorized to
review the corporation's involvement in any Federal program or
activity the Government carries out under law.
Sec. 300112. Office of the Ombudsman
(a) Establishment.--The corporation shall establish an Office
of the Ombudsman with such duties and responsibilities as may
be provided in the bylaws or a resolution of the board of
governors.
(b) Report.--
(1) In general.--The Office of the Ombudsman shall
submit annually to the appropriate Congressional
committees a report concerning any trends and systemic
matters that the Office of the Ombudsman has identified
as confronting the corporation.
(2) Appropriate congressional committees.--For
purposes of paragraph (1), the appropriate
Congressional committees are the following committees
of Congress:
(A) Senate committees.--The appropriate
Congressional committees of the Senate are--
(i) the Committee on Finance;
(ii) the Committee on Foreign
Relations;
(iii) the Committee on Health,
Education, Labor, and Pensions;
(iv) the Committee on Homeland
Security and Governmental Affairs; and
(v) the Committee on the Judiciary.
(B) House committees.--The appropriate
Congressional committees of the House of
Representatives are--
(i) the Committee on Energy and
Commerce;
(ii) the Committee on Foreign
Affairs;
(iii) the Committee on Homeland
Security;
(iv) the Committee on the Judiciary;
and
(v) the Committee on Ways and Means.
Sec. [300111.] 300113. Reservation of right to amend or repeal
Congress reserves the right to amend or repeal the provisions
of this chapter.
* * * * * * *
American Red Cross Corporate Compliance and Ethics
A REPORT TO THE HOUSE COMMITTEE ON FOREIGN AFFAIRS--MARCH 2007
Over the past several years, and particular since passage
of the Sarbanes Oxley Act in 2002 (Pub. L. No. 107-204, 116
Stat. 745), the American National Red Cross has taken a
holistic approach to voluntarily implement corporate ethics and
compliance practices.
To achieve this, the American Red Cross has incorporated
some of the best practices from the corporate and nonprofit
sectors, which include the refinement of its internal and
independent external audits, whistleblower reporting and
protections, enterprise risk management, a unit focused on
Investigations, Compliance and Ethics (ICE), and most recently,
the creation of the Office of the Ombudsman.
At the center of corporate compliance is the Board of
Governor's Audit and Risk Management Committee, which receives
and reviews reports presented by these independent units.
Through these internal and external functions, the American
Red Cross endeavors to achieve system-wide corporate
compliance. In addition, the organization strives to meet the
expectations of transparency and accountability of the United
States Congress, internal employee and volunteer stakeholders,
and external stakeholders such as clients, donors, suppliers,
partners, and the American public. As an independent 501(c)(3)
nonprofit organization, the American Red Cross relies on the
generosity of the American public to fulfill its mission. The
American Red Cross takes seriously all allegations of waste,
fraud and abuse as well as other complaints against the
organization. Allegations of illegal and unethical activities
are fully investigated and, if necessary, reported to
appropriate authorities for further action. Fostering such
faith, trust and confidence with the American public is an
imperative.
This document will identify the various aspects of
corporate compliance, as well Red Cross practices to ensure
transparency through accessibility and reporting.
Red Cross Board of Governor's Audit and Risk Management Committee
The Audit and Risk Management Committee of the American Red
Cross Board of Governors oversees the integrity of the
financial statements of the organization, the qualifications
and independence of the organization's independent auditors,
the performance of the external and internal auditors,
investigations, the organization's enterprise risk management
functions, the organization's compliance with legal and
regulatory requirements, and the Ombudsman. It is composed of
entirely independent directors of the Red Cross, and members of
the Committee must possess qualifications and financial
knowledge that enable them to discharge the responsibilities of
the committee. At least one member is required to be a
``financial expert.''
Audits
Both internal and external audit functions of the American
Red Cross report directly to the Audit and Risk Management
Committee of the Board of Governors.
The internal audit services, led by a Chief Audit
Executive, is authorized to examine all aspects of the American
Red Cross including but not limited to national headquarters,
blood services and chapters. During their review, the auditors
are given complete access to manual and electronic records,
properties and personnel. Moreover, to ensure impartial and
unbiased actions, they are fully independent of the activities
they audit. The Chief Audit Executive has direct access to the
Audit and Risk Management Committee and reports functionally
and directly to the Committee and administratively to the CEO.
The external audit services, conducted by KPMG LLP, review
the financial statements and related financial controls of the
American Red Cross. To ensure impartiality, the lead partner
rotates every five years.
Investigations, Compliance and Ethics (ICE)
The Investigations, Compliance and Ethics (ICE) Unit at the
American Red Cross is the central investigatory unit charged
with investigating allegations of waste, fraud and abuse. The
ICE unit is led by a Vice President, who reports to the
organization's General Counsel, and consists of more than 40
investigators and compliance and ethics specialists.
The American Red Cross encourages all employees and
volunteers to alert their supervisors directly if they suspect
a dishonest act. If employees or volunteers are not comfortable
contacting management, they may call the 24-hour, toll-free
Concern Connection Line (CCL), which is overseen by ICE.
Through this toll-free number, the CCL allows any employee or
volunteer to report confidentially and anonymously any
allegation of waste, fraud or abuse. The Red Cross provides
whistleblower protections and a ``no retaliation'' policy to
all Red Cross employees and volunteers.\1\
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\1\ The Red Cross also has a Biomedical Response Line (BRL), which
allows individuals to report anonymously and confidentially any issues
involving biomedical services or FDA compliance issues. These issues
are addressed by the Biomedical Services Quality and Regulatory Affairs
group.
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The American Red Cross is committed to the highest
standards of ethics and workplace conduct. All staff and
volunteers are required to read and sign the Code of Business
Ethics and Conduct, which provides the guidance necessary for
Red Cross employees and volunteers to maintain an environment
of integrity. In that regard, ICE oversees Red Cross ethics
policy and training programs, including the aforementioned Code
of Business Ethics and Conduct. Through training, volunteers
and employees will be more familiar with a culture of values
and ethics and will know how to report instances of unethical
behavior.
The ICE unit also manages the Office of Corporate
Compliance (which handles grants compliance). In conducting
investigations, the unit has unfettered access to all
organizational records, physical properties, and individuals.
The Vice President of ICE reports regularly to the President
and Chief Executive Officer, senior management, and the Audit
and Risk Management Committee of the Board of Governors.
Enterprise risk management
In an effort to mitigate risk by the corporation, the
American Red Cross has appointed a Chief Risk Officer who is
charged with developing an enterprise risk management (ERM)
program for the entire organization. Modeled on the best
practices of corporate America as a means to better protect
corporate assets, enterprise risk establishes a disciplined
approach for the organization's various business units to
identify, evaluate, manage and report risks and opportunities.
The Red Cross ERM Unit provides counsel to business units
to identify, evaluate, and mitigate risk; enhance decision-
making at all levels by requiring a clear articulation between
business objectives and risk versus reward; assist in
identifying insufficient internal controls (particularly in the
areas of waste, fraud and abuse); and provide the Board's Audit
and Risk Management Committee with information regarding the
corporate level risks and mitigation.
Office of the Ombudsman
Most recently, the American Red Cross has created an Office
of the Ombudsman. This office will act as a neutral and
impartial dispute resolution center whose major function will
be to provide confidential and informal assistance to the many
internal and external constituents with concerns or complaints
about the American Red Cross. The Office of the Ombudsman will
have unfettered access to the entire corporation and all
personnel, corporate reports, documents, and will report
directly to the organization's Chief Executive Officer and on a
regular basis to the Audit and Risk Management Committee of the
Board of Governors.
In addition to conflict resolution, the Office of the
Ombudsman will report annually to the U.S. Congressional
Committees of jurisdiction, areas and types of concerns,
including trends and systemic matters that the Ombudsman
determines to be confronting the organization. As a practice,
these reports will also be made available to the public through
the Red Cross external website, www.redcross.org.
American Red Cross transparency
The American Red Cross endeavors to achieve enhanced
corporate transparency and accountability to internal and
external stakeholders. One mechanism is the public website,
www.redcross.org. The American Red Cross will make available on
that public website detailed information of the programs
described above explaining the Red Cross corporate compliance
and ethics programs, including audits, investigations (ICE),
the Office of the Ombudsman, the Concerned Connection Line
(CCL) and Biomedical Response Line (BRL), and Enterprise Risk
Management (ERM), as well as contact information for each of
these units.
Additionally, the Red Cross will fulfill reporting
requirements to the U.S. Congress and regulatory agencies and
will make these reports available to the American public
through its external website, www.redcross.org.\2\
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\2\ To protect the confidentiality and integrity of clients to the
Ombudsman and ICE investigations, the American Red Cross will redact
any confidential, identifying, or proprietary information as necessary.
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The American Red Cross is committed to be transparent and
accountable to the American public. As such, the American Red
Cross already makes available, in its entirety, the annual IRS
Form 990, external independent audit, and consolidated
financial statements on its external website, www.redcross.org.
In addition, the Red Cross requires chapters to share copies of
their annual audit and/or annual report in response to any
public inquiries about local Red Cross activities. The Red
Cross will continue to provide this information on its public
website.
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