Bob McDonald, The American Red Cross

A former investment banker, McDonald worries less about which way the regulatory winds are blowing than which way the actual wind is blowing.

Estimates are that it will take $2 billion to provide relief to the Gulf Coast. What elements go into such forecasts?

We’ve been at this for 125 years, so we have a very good forecasting capability that is based on historical trends regarding where storms, wildfires, and tornadoes hit. We take into consideration everything from aerial views of damage to demographics. Nationally, for example, the average family size is 2.5 people, but in the Katrina disaster area the average family size is 3.5 people, so that became an important assumption in the expense forecast.

Did you do anything differently regarding Katrina, from a finance point of view?

This time we actually put finance staff out in local chapters to assist in accounting because the scope of the disaster was so large. The expense associated with the Florida hurricanes, for example, was about $125 million, But that was 5 to 6 percent of what Katrina and Wilma will be. In addition, we’ve gone to debit cards and client systems cards, some of them cash-enabled, [so victims can] go to a Wal-Mart or a cash machine. That’s much easier to account for than the dispersal orders we’ve relied on in the past, and it gets money into the hands of victims more quickly.

Congress wants to bring more transparency to nonprofits, akin to what Sarbanes-Oxley did to for-profits. Is legislation necessary?

I would not want to say whether it should be legislated or not. But I can tell you that we decided even before Sarbanes-Oxley was on the books that we would follow its spirit. And many of the things we are doing — for example, our external auditors actually report to the audit committee — were implemented well before Sarbanes-Oxley.

But should there be a greater level of scrutiny for the Red Cross because of your ties to the government?

We are, in a sense, a national response plan, so we have a role with FEMA, Homeland Security, and Health and Human Services. But we’ve got so much oversight. Not only do we have an internal audit department and an external auditor, but we’re also audited by the Army as part of a congressional oversight system, and congressional committees sometimes request hearings.

So how do you respond to those who advocate for independent monitors for charities?

Trust me: in a world where the CFO is in the hot seat for just about everything, if I didn’t feel there was sufficient scrutiny I would be leading the charge for an additional layer. But between the Better Business Bureau, congressional oversight, the auditors, and the various constituencies that have an interest in not-for-profits, another layer would just take time away from our mission.

—Interview by Lori Calabro


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