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American Red Cross
2025 E Street, NW
Washington, DC 20006

MAY 2003

(202) 737-8300

www.redcross.org

Expiration Date: March 2005

Year, State Incorporated: 1905, chartered by Congress
Affiliates: approximately 1,000 local chapters
Boardman Indemnity Ltd. (wholly owned captive insurance subsidiary)
Stated Purpose: "To provide relief to victims of disasters and help people prevent, prepare for, and respond to emergencies."
Evaluation Conclusions

The American Red Cross meets the CBBB Standards for Charitable Solicitations.

In reaching the conclusion that the American Red Cross (Red Cross) meets the standards, the BBB Wise Giving Alliance considered the following:

After a review of copies of recent Red Cross appeals, the Alliance concluded that the Red Cross has demonstrated it has implemented its previously announced plans to change its disaster appeal language to help donors understand how their gift will be used. The revised disaster fund raising policy of the Red Cross notes that:

* All solicitations to the Red Cross Disaster Relief Fund (i.e., advertisements, direct mail, Web sites, telemarketing, other public communications) include the following language: "You can help the victims of [this disaster] and thousands of other disasters across the country each year by making a financial gift to the American Red Cross Disaster Relief Fund, which enables the Red Cross to provide shelter, food, counseling and other assistance to those in need."

* Donors are asked to confirm that they understand the purpose for which their donation will be used.

* Donors receive an acknowledgment that reconfirms their intent and the purposes for which their contributions will be used.

* The general public and potential donors who may respond to a specific disaster are informed when it appears that contributions exceed the anticipated disaster expenses. They are encouraged to contribute instead to their local Red Cross and/or to the Red Cross Disaster Relief Fund to support future disaster relief activities"

Under written agreements with corporate sponsors, advertisements for various consumer products state that their purchase will benefit the Red Cross. The Red Cross has strengthened its efforts to have these cause-related marketing partners disclose more about the financial benefits of each relationship. The Red Cross has provided copies of recent cause-related marketing promotions involving the sale of consumer products that disclose the actual or anticipated amount of the purchase price that will go to the Red Cross. All existing cause-related marketing partners have been requested to make similar disclosures in all future promotions.
BLOOD COLLECTION ACTIVITIES

The Red Cross states that as a result of the blood collection lessons learned from September 11, 2001, it has developed a "Donor Surge Capacity Plan" to ensure that the Red Cross does not collect blood beyond the imminent need of the disaster at hand or its available capacity. Among other things, the plan involves: partnering with other blood collection organizations; determining the medical need for blood; facilitating transportation, if needed, from one facility to another; and communicating a common message to the national blood community and the public about the state of the blood supply in the disaster-affected community.

On April 11, 2003 the Food and Drug Administration (FDA) announced that the Red Cross has agreed to substantial revisions in a consent decree, originally signed in 1993, regarding the handling of donated blood. The consent decree specifies how the Red Cross will manage, monitor and resolve problems with blood if they arise. The FDA reports that the revised decree includes many of the same provisions as in the original 1993 consent decree, updated to provide a series of clear deadlines for completing specific requirements and penalty fees if the Red Cross fails to meet compliance standards. The Red Cross indicates that no public financial donations will be used to pay for these assessments should they arise. For further information on the revised FDA consent decree, visit www.fda.gov.
COMPLAINTS

During the past two years, the Alliance received complaints from the public about the Red Cross. The complaints referenced a variety of subjects including, but not limited to, eligibility for benefits, acknowledgement of donations not received, removal from mailing lists, expectations not met regarding the use of funds and other miscellaneous concerns. The Red Cross responded to the issues raised by directly contacting the individuals who lodged complaints.
9/11 ACTIVITIES

As of March 28, 2003, the Red Cross reports that the Liberty Disaster Relief Fund received a total of approximately $1.07 billion (including $60.1 million of in-kind donations.) To date, about $821.70 million (or 77%) of this amount has been spent. The Red Cross indicates that the remaining amount ($246 million) will be spent on long term recovery and relief activities. Below is a more detailed explanation of expenditures incurred.

FAMILIES OF DECEASED/SERIOUSLY INJURED (Amount spent through 3/28/03: $334.1 Million)
The Red Cross provided financial support to families who lost a breadwinner as a result of September 11 attacks. The Near-term Family Gift Program provided financial assistance to more than 3,300 families. This assistance included up to one year of food, clothing, utilities, mortgage or rent payments, childcare, tuition, medical bills, funeral and memorial service costs, and other time sensitive expenses. In addition, a one-time Supplemental Gift of $55,000 was issued to the estates of those killed and to those who were seriously injured and disabled on September 11.

DISPLACED WORKERS / RESIDENTS / OTHERS (Amount spent through 3/28/03: $281.3 Million)
The purpose of this program is to provide financial support to families whose homes were destroyed or made inaccessible, or those who lost jobs or income within the affected areas of the terrorist attacks, as well as rescuers and other disaster workers who responded to this disaster. The Red Cross reports over 55,000 people have received direct financial assistance from this program.

LONG-TERM SERVICES TO THOSE DIRECTLY AFFECTED (Amount spent through 3/28/03: $8.1 Million)
The purpose of this program is to provide future support in the form of mental health care, health care, family support and referrals to the groups previously described above, for an estimated period of three to five years, or longer in special situations. A key aspect of the Red Cross program will be leveraging Liberty Fund monies with community resources, public funds, private insurance and other charitable assistance to the maximum extent possible, seeking to fill in the gaps where insurance, workers' compensation, and other resources fall short. The program will not only provide financial assistance, but also help clients assess and plan for their long term needs. The Red Cross anticipates that most of the remaining $246 million in Liberty Disaster Relief Funds will be spent in this area.

IMMEDIATE DISASTER RELIEF (Amount spent through 3/28/03: $139.9 Million)
The purpose of this program was to provide direct response assistance and services to people directly impacted at the disaster sites (victims, their families, responders and relief workers.) Services were provided in Washington, DC, New York City, Shanksville, PA, and various airports around the country in the days and weeks immediately following the attacks. Examples of types of assistance include: (1) Food, shelter, mental health and other services for rescue workers, firemen and police; (2) Mental health, spiritual and grief and bereavement counseling for victims' families; (3) On site services delivery support costs such as food, lodging, travel and supply costs for Red Cross relief workers; (4) On site logistical support; and (4) Administering direct assistance programs in the months following September 11, 2001 to those who were directly impacted.

FUND STEWARDSHIP: (Amount spent through 3/28/03: $58.3 Million)
This includes donation processing, acknowledgements, auditing of receipts, equipment and set up costs for various call centers, Disaster Operation Center expenses, and costs of accounting services to pay assistance checks to families and vendor payments. The Red Cross reports that future investment income earned on unspent funds will be applied against these direct support costs.
AMERICAN RED CROSS PROGRAM ACTIVITIES

Biomedical - More than 4.2 million blood donors helped the Red Cross provide about half the nation's blood supply in 2002. Operating 36 regional blood service centers, the Red Cross supplies 3,000 hospitals and other facilities with blood and products for transfusion. In addition, the Red Cross reports it provides more than one-quarter of the nation's plasma products and nearly one-fifth of the nation's tissue for transplantation. The Red Cross also operates a national research program that conducts research in biomedical science, blood safety, plasma-derived therapeutics, and transfusion technology. The Jerome H. Holland Laboratory, a blood research facility operated by the Red Cross, is located in Rockville, Maryland.

Disaster - The Red Cross responded to more than 70,000 disasters in 2002, including house or apartment fires (the majority of disaster responses), hurricanes, floods, earthquakes, tornadoes, hazardous material spills, transportation accidents, explosions, and other natural and man-made disasters. Red Cross disaster relief focuses on meeting people's immediate emergency disaster-caused needs such as shelter, food, and health and mental health services. In addition, the Red Cross indicates it provides assistance to help individuals and families affected by disaster to resume their normal daily activities independently.

Health and safety - The Red Cross provides a variety of courses including, but not limited to: first aid, CPR, how to use AED (automated external defibrillators), babysitter's training, swimming and life guarding, and HIV/AIDS education. In 2002, about 12 million people enrolled in Red Cross health and safety courses. In addition, the Red Cross provides other first aid, health and safety, and accident prevention services. Examples include a nurse assistance program, blood pressure and cholesterol screening, health fairs, AIDS prevention presentations, and first aid stations at local events.

Community Services - Red Cross chapters provide humanitarian services that seek to help people within the community to be safer, healthier and more self-reliant. Chapters determine which programs to offer based on community needs. A variety of different types of programs are offered including home delivered meals, food pantries, rides to medical appointments, homeless shelters, transitional housing, caregiver education and support groups, friendly visitors, personal emergency response service, hospital/nursing home volunteers, fuel assistance, children's educational programs, latchkey programs, and language books. The Red Cross reports almost 22 million services were provided to individuals in 2002.

Armed forces emergency - Using computer and telecommunications technology, the Red Cross enables military members stationed all over the world to send messages to loved ones back home during emergency or other important events. The Red Cross also provides military members and their families with access to emergency financial aid and other services at U.S. military installations worldwide. The Red Cross indicates it also serves 1.4 million active duty personnel as well as 1.5 million members of the National Guard and the Reserves located throughout the country.

International - The Red Cross works with a global network of Red Cross, Red Crescent and equivalent societies to bring emergency relief to disaster victims and improve basic living conditions of those in chronically deprived areas of the world. The organization responds to requests, inquiries, or referrals for information related to persons separated from relatives overseas, U.S. embassy verifications, international disaster welfare, as well as other family, health, or safety concerns. The Red Cross also supports relief activities in some 40 countries and educates the public about international humanitarian law.

For the fiscal year ended June 30, 2002, the Red Cross' program expenses were:
Biomedical $1,872,967,000
September 11 Response 617,960,000
Disaster 308,156,000
Health and safety 213,614,000
Community 152,902,000
Armed forces emergency 61,513,000
International 32,736,000

Total Program Expenses $3,259,848,000

Governance

Chief Executive Officer: Marsha Johnson Evans, President (began position on August 5, 2002)
Compensation*:Marsha Johnson Evans' base salary is $450,000 annually.

(* During the fiscal year ended June 30, 2002, Dr. Bernadine Healy, the former American Red Cross CEO, had a total compensation of $1,921,913. This compensation amount includes $352,283 for the six-month period ended 12/31/01, her last day in the position, plus $1,569,630 for severance.)

Chair of the Board: David T. McLaughlin

Chair's Profession / Business Affiliation: Chair, Orion Safety Products

Board Size: 46 members

Paid Staff Size: 37,018 employees (33,054 at branches and 3,964 at national headquarters.)

Fund Raising

METHOD(S) USED: direct mail, telemarketing, Internet, grant proposals, special events, cause-related marketing, and television, radio, and print advertising.

Fund raising costs were 7% of related contributions. (Related contributions, which totaled $1,863,965,000, are donations received as a result of fund raising activities.)

For the fiscal year ended June 30, 2002, the Red Cross incurred joint costs of $4.4 million for informational material and activities that included fund raising appeals. Of this amount, $2 million was allocated to fund raising expenses, $2.4 million was allocated to program services expenses.
Tax Status

The American Red Cross is tax-exempt under section 501(c)(3) of the Internal Revenue Code. It is eligible to receive contributions deductible as charitable donations for federal income tax purposes.
Financial

The following is based on the Red Cross' audited consolidated financial statements for the fiscal year ended June 30, 2002:
Source of Funds
Biomedical products and services $1,924,077,000
Liberty Disaster Relief - September 11 989,060,000
Contributions 250,909,000
United Way and other federated 188,068,000
Program materials 137,488,000
Disaster relief 133,376,000
Services and materials 118,256,000
Legacies and bequests 95,855,000
Grants 88,411,000
Investment income 82,463,000
Contracts 58,171,000
Other revenues 51,097,000
Nonoperating losses (135,195,000)

Total Income $3,982,066,000

Uses of Funds as a % of Total Income
The following pie chart reflects the CBBB Standards addressing the use of funds which, in part, seek to identify how total income from all sources was applied by the charity. The item titled Increase in Net Assets shows the portion of income remaining after expenses, all of which is associated with the September 11 response.

Total income $3,982,066,000
Program expenses 3,259,848,000
Fund raising expenses 136,901,000
Administrative expenses 174,182,000

Total expenses (3,570,931,000)
Income in excess of expenses 411,435,000

Beginning net assets 2,164,137,000

Ending net assets 2,575,272,000
Total liabilities 950,354,000

Total assets $3,526,626,000