American Red Cross FY09 Financial Results

The American Red Cross ended its fiscal year 2009 with net assets of $1.7 billion, posting total operating revenues of $3.3 billion and total operating expenses of $3.4 billion. Behind these indicators of size and activity are four key numbers that help explain the organization’s positive trajectory – and the challenges ahead. 

• Red Cross day-to-day operating revenues and expenses, or profit and loss, are captured by the $33.5 deficit figure.
• Slashed from $209 million in FY08 and projected to be eliminated by fiscal year-end, the $33.5 million reflects the most progress toward financial recovery.

• This number is fueled by donations for international and domestic disasters made in years past and being spent today.
• Non-profit accounting rules say that we must book donations during the year in which they are received. However, we often spend those donations across subsequent years, and so they appear as losses on our books in those years. This is what is happened with our tsunami and Hurricane Katrina funds, for example. 

• This figure also shows our change in net assets, because if you add last year’s economic impact on our investments and endowment, plus the federal pension fund requirement, this financial hit boosts the deficit significantly, to the $887 million that appears in our audited financial statements.
• Our combined market losses are around $359 million, but our performance tends to exceed that of other not-for-profits.
• Our pension fund requirement of $547 million represents our obligation to our employees.
• Pension fund and investment results are projected to improve significantly for FY10.

• While we have put the Red Cross on the path to financial sustainability, our large debt is a challenge.
• Over the past year, we’ve made great strides in responding to disasters and other emergencies without taking on new debt. Our successful $100 million fundraising campaign essentially enabled us to cover the costs of last year’s devastating hurricanes.
• We’ve gone to our bankers and have outlined our financial management strategy. They have responded that our credit is still good and we remain able to borrow additional working capital, should a major disaster strike.
• Largely made up of low-interest lines of credit and bonds, the bulk of Red Cross debt is due after 2011. However, $116 million is current, or due back in 2010.