The American Red Cross ran a deficit of $159 million last fiscal year, battered by a steep drop in fundraising and its struggling blood banking division, according to newly released financial statements.
Former AT&T executive Gail McGovern, who was hired as CEO in 2008 with a brief to stabilize the charity’s finances, has spent the last eight years making deep cuts in the Red Cross’ workforce and trying to bring in more donations with an increased focus on branding.
But the new financial statements show contributions to the Red Cross fell to $604 million, about $120 million less than the previous year. It is the worst fundraising result the Red Cross has had since at least 2000, the last year for which we could find financial records.
The Red Cross’ fundraising can swing wildly, spiking when there’s a major disaster and dropping in years with no big televised catastrophe. But there have been no signature disasters in either of the past two years, raising the question of why donations dropped so much.
A Red Cross spokesperson declined to comment in response to questions about its financial results.
In a letter to a congressman last month, McGovern says she presided over “Turnaround I” after inheriting financial problems at the charity in 2008 and that she is now in the midst of “Turnaround II” as a result of a drop in demand for blood.
The Red Cross’ large blood banking division, which has been struggling amid industry-wide declines and other issues, lost $71 million in 2015.
McGovern also wrote in the letter that fundraising is actually improving, but the charity has not provided data to substantiate the claim.
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McGovern wrote that donations have increased “14 percent since 2008" if major disasters are excluded. It’s not clear how the group is arriving at the figure. It declined our request for details on the calculation.
The group’s revenue in 2015 was also hurt by a decline in contributions from the United Way and other federated sources, which fell from $104 million to $77 million. A United Way spokesperson told us it has cut contributions to the Red Cross in recent years because it has shifted to a “community impact funding model.”
While the Red Cross’ audited financial statements show a $159 million deficit for last fiscal year, McGovern last month cited an “operating deficit” of just $36 million for the year. The charity previously said that it created a concept of “operating” surpluses or deficits that “reflect Red Cross performance in managing our day-to-day revenues and expenses.” But it’s impossible to tell where that figure comes from because the group has declined to show its calculations.
