Red Cross's Claim of Grant Contract Nondisclosure Raises Eyebrows

The claim by the American Red Cross that it is contractually prohibited from publicly releasing information about its work with grantees in Haiti has drawn criticism from some quarters, the Chronicle of Philanthropy reports.

In response last week to questions from Sen. Chuck Grassley (R-IA) about how it has spent nearly half a billion dollars donated for relief efforts following the devastating 2010 earthquake in Haiti, the Red Cross asked that information it provided about various projects and overhead costs not be released, stating, "our contracts with the great majority of our partners, while permitting us to disclose this information to Congress, do not permit us to disclose the information to the media or donors." However, the organization has asked certain grantees for approval to release some of the information — "about work carried out by partners, the costs associated with the MG&F rate (sometimes referred to as 'overhead' or 'indirect costs) under our Grant Agreement" — more broadly, including to other members of Congress, the public, and the media.

"It's unclear why the Red Cross enters into contracts with other organizations stipulating that details of grants can't be disclosed to the media or donors," said Grassley in a statement. "Who's driving the lack of disclosure, the Red Cross or the grant recipients? What's the rationale for it? It's hard to see how disclosing the dollar amounts given from the Red Cross to the individual organizations and how those organizations spent the money would harm anyone. I look forward to an explanation."

The practice of including nondisclosure language in contracts for services between nonprofits has become more common since 2008, when changes to nonprofit reporting rules eliminated the requirement to disclose the recipients of international grants, CharityWatch president Daniel Borochoff told the Chronicle. "Hiding basic information about international grants and distributions has unfortunately become part of the culture of the nonprofit field," he added.

While contractual confidentiality may be reasonable in some cases, said GuideStar president Jacob Harold, nonprofits need to keep in mind the importance of transparency in building and maintaining the public's trust. "The broader issue is: Can we have faith in nonprofit managers to manage the best they can and be willing to hand over some of that control to nonprofit managers while still holding them accountable for ethical behavior?"

Grassley's office released twelve of the seventy-two pages the Red Cross submitted in response to his questions, which include a breakdown of spending on different types of shelter and an explanation of how the organization calculates the number of beneficiaries. The Red Cross did not, however, provide detailed answers regarding how many permanent homes have been built with Red Cross funding or how much it spent on managing projects that it outsourced to other groups, while its statement that it requires "careful reviews of financial and narrative reporting, detailing how partners spend our funds" seemed to contradict internal documents obtained by ProPublica and National Public Radio.

Grassley, for his part, is not satisfied with the organization's responses. "I still have a lot more questions for the Red Cross," he said. "I have other questions about the spending numbers and how they add up and the overhead costs for both the Red Cross and the grantee organizations. Also, I'd like to see more details of the results achieved from each of the partner organizations."

Rebecca Koenig. "Some Nonprofits Misuse Contracts to Hide Activities, Say Experts." Chronicle of Philanthropy Justin Elliott. "Senator to Red Cross: Where’s the Transparency on Haiti?." ProPublica 07/23/2015.