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[House Report 110-87]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     110-87

======================================================================

 
  THE AMERICAN NATIONAL RED CROSS GOVERNANCE MODERNIZATION ACT OF 2007

                                _______
                                

 April 16, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Lantos, from the Committee on Foreign Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1681]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Foreign Affairs, to whom was referred the 
bill (H.R. 1681) to amend the Congressional Charter of The 
American National Red Cross to modernize its governance 
structure, to enhance the ability of the board of governors of 
The American National Red Cross to support the critical mission 
of The American National Red Cross in the 21st century, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     1
Summary..........................................................     7
Background and Purpose...........................................     7
Hearings.........................................................     9
Committee Consideration..........................................    10
Votes of the Committee...........................................    10
Committee Oversight Findings.....................................    10
New Budget Authority and Tax Expenditures........................    10
Congressional Budget Office Cost Estimate........................    10
Intergovernmental and Private Sector Impact......................    11
Performance Goals and Objectives.................................    11
Constitutional Authority Statement...............................    11
New Advisory Committees..........................................    11
Congressional Accountability Act.................................    11
Earmark Identification...........................................    11
Section-by-Section Analysis and Discussion.......................    12
Changes in Existing Law Made by the Bill, as Reported............    14
Red Cross Report on Corporate Compliance and Accountability......    23

                             The Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``The American National Red Cross 
Governance Modernization Act of 2007''.

SEC. 2. FINDINGS; SENSE OF CONGRESS.

  (a) Findings.--Congress makes the following findings:
          (1) Substantive changes to the Congressional Charter of The 
        American National Red Cross have not been made since 1947.
          (2) In February 2006, the board of governors of The American 
        National Red Cross (the ``Board of Governors'') commissioned an 
        independent review and analysis of the Board of Governors' 
        role, composition, size, relationship with management, 
        governance relationship with chartered units of The American 
        National Red Cross, and whistleblower and audit functions.
          (3) In an October 2006 report of the Board of Governors, 
        entitled ``American Red Cross Governance for the 21st Century'' 
        (the ``Governance Report''), the Board of Governors recommended 
        changes to the Congressional Charter, bylaws, and other 
        governing documents of The American National Red Cross to 
        modernize and enhance the effectiveness of the Board of 
        Governors and governance structure of The American National Red 
        Cross.
          (4) It is in the national interest to create a more efficient 
        governance structure of The American National Red Cross and to 
        enhance the Board of Governors' ability to support the critical 
        mission of The American National Red Cross in the 21st century.
          (5) It is in the national interest to clarify the role of the 
        Board of Governors as a governance and strategic oversight 
        board and for The American National Red Cross to amend its 
        bylaws, consistent with the recommendations described in the 
        Governance Report, to clarify the role of the Board of 
        Governors and to outline the areas of its responsibility, 
        including--
                  (A) reviewing and approving the mission statement for 
                The American National Red Cross;
                  (B) approving and overseeing the corporation's 
                strategic plan and maintaining strategic oversight of 
                operational matters;
                  (C) selecting, evaluating, and determining the level 
                of compensation of the corporation's chief executive 
                officer;
                  (D) evaluating the performance and establishing the 
                compensation of the senior leadership team and 
                providing for management succession;
                  (E) overseeing the financial reporting and audit 
                process, internal controls, and legal compliance;
                  (F) holding management accountable for performance;
                  (G) providing oversight of the financial stability of 
                the corporation;
                  (H) ensuring the inclusiveness and diversity of the 
                corporation;
                  (I) ensuring the chapters of the corporation are 
                geographically and regionally diverse;
                  (J) providing oversight of the protection of the 
                brand of the corporation; and
                  (K) assisting with fundraising on behalf of the 
                corporation.
          (6)(A) The selection of members of the Board of Governors is 
        a critical component of effective governance for The American 
        National Red Cross, and, as such, it is in the national 
        interest that The American National Red Cross amend its bylaws 
        to provide a method of selection consistent with that described 
        in the Governance Report.
          (B) The new method of selection should replace the current 
        process by which--
                  (i) 30 chartered unit-elected members of the Board of 
                Governors are selected by a non-Board committee which 
                includes 2 members of the Board of Governors and other 
                individuals elected by the chartered units themselves;
                  (ii) 12 at-large members of the Board of Governors 
                are nominated by a Board committee and elected by the 
                Board of Governors; and
                  (iii) 8 members of the Board of Governors are 
                appointed by the President of the United States.
          (C) The new method of selection described in the Governance 
        Report reflects the single category of members of the Board of 
        Governors that will result from the implementation of this Act:
                  (i) All Board members (except for the chairman of the 
                Board of Governors) would be nominated by a single 
                committee of the Board of Governors taking into account 
                the criteria outlined in the Governance Report to 
                assure the expertise, skills, and experience of a 
                governing board.
                  (ii) The nominated members would be considered for 
                approval by the full Board of Governors and then 
                submitted to The American National Red Cross annual 
                meeting of delegates for election, in keeping with the 
                standard corporate practice whereby shareholders of a 
                corporation elect members of a board of directors at 
                its annual meeting.
          (7) The United States Supreme Court held The American 
        National Red Cross to be an instrumentality of the United 
        States, and it is in the national interest that the 
        Congressional Charter confirm that status and that any changes 
        to the Congressional Charter do not affect the rights and 
        obligations of The American National Red Cross to carry out its 
        purposes.
          (8) Given the role of The American National Red Cross in 
        carrying out its services, programs, and activities, and 
        meeting its various obligations, the effectiveness of The 
        American National Red Cross will be promoted by the creation of 
        an organizational ombudsman who--
                  (A) will be a neutral or impartial dispute resolution 
                practitioner whose major function will be to provide 
                confidential and informal assistance to the many 
                internal and external stakeholders of The American 
                National Red Cross;
                  (B) will report to the chief executive officer and 
                the audit committee of the Board of Governors; and
                  (C) will have access to anyone and any documents in 
                The American National Red Cross.
  (b) Sense of Congress.--It is the sense of Congress that--
          (1) charitable organizations are an indispensable part of 
        American society, but these organizations can only fulfill 
        their important roles by maintaining the trust of the American 
        public;
          (2) trust is fostered by effective governance and 
        transparency, which are the principal goals of the 
        recommendations of the Board of Governors in the Governance 
        Report and this Act;
          (3) Federal and State action play an important role in 
        ensuring effective governance and transparency by setting 
        standards, rooting out violations, and informing the public;
          (4) while The American National Red Cross is and will remain 
        a Federally chartered instrumentality of the United States, and 
        it has the rights and obligations consistent with that status, 
        The American National Red Cross nevertheless should maintain 
        appropriate communications with State regulators of charitable 
        organizations and should cooperate with them as appropriate in 
        specific matters as they arise from time to time; and
          (5) while The American National Red Cross is and will remain 
        a Federally chartered instrumentality of the United States, and 
        it has the rights and obligations consistent with that status, 
        The American National Red Cross nevertheless should maintain 
        appropriate communications and collaborations with local, 
        community, and faith-based non-profit organizations, including 
        those organizations that work within minority communities.

SEC. 3. ORGANIZATION.

  Section 300101 of title 36, United States Code, is amended--
          (1) in subsection (a), by inserting ``a Federally chartered 
        instrumentality of the United States and'' before ``a body 
        corporate and politic''; and
          (2) in subsection (b), by inserting at the end the following 
        new sentence: ``The corporation may conduct its business and 
        affairs, and otherwise hold itself out, as the `American Red 
        Cross' in any jurisdiction.''.

SEC. 4. PURPOSES.

  Section 300102 of title 36, United States Code, is amended--
          (1) by striking ``and'' at the end of paragraph (3);
          (2) by striking the period at the end of paragraph (4) and 
        inserting ``; and''; and
          (3) by adding at the end the following paragraph:
          ``(5) to conduct other activities consistent with the 
        foregoing purposes.''.

SEC. 5. MEMBERSHIP AND CHAPTERS.

  Section 300103 of title 36, United States Code, is amended--
          (1) in subsection (a), by inserting ``, or as otherwise 
        provided,'' before ``in the bylaws'';
          (2) in subsection (b)(1)--
                  (A) by striking ``board of governors'' and inserting 
                ``corporation''; and
                  (B) by inserting ``policies and'' before 
                ``regulations related''; and
          (3) in subsection (b)(2)--
                  (A) by inserting ``policies and'' before 
                ``regulations shall require''; and
                  (B) by striking ``national convention'' and inserting 
                ``annual meeting''.

SEC. 6. BOARD OF GOVERNORS.

  Section 300104 of title 36, United States Code, is amended to read as 
follows:

``Sec. 300104. Board of governors

  ``(a) Board of Governors.--
          ``(1) In general.--The board of governors is the governing 
        body of the corporation with all powers of governing and 
        directing, and of overseeing the management of the business and 
        affairs of, the corporation.
          ``(2) Number.--The board of governors shall fix by 
        resolution, from time to time, the number of members 
        constituting the entire board of governors, provided that--
                  ``(A) as of March 31, 2009, and thereafter, there 
                shall be no fewer than 12 and no more than 25 members; 
                and
                  ``(B) as of March 31, 2012, and thereafter, there 
                shall be no fewer than 12 and no more than 20 members 
                constituting the entire board.
        Procedures to implement the preceding sentence shall be 
        provided in the bylaws.
          ``(3) Appointment.--The governors shall be appointed or 
        elected in the following manner:
                  ``(A) Chairman.--
                          ``(i) In general.--The board of governors, in 
                        accordance with procedures provided in the 
                        bylaws, shall recommend to the President an 
                        individual to serve as chairman of the board of 
                        governors. If such recommendation is approved 
                        by the President, the President shall appoint 
                        such individual to serve as chairman of the 
                        board of governors.
                          ``(ii) Vacancies.--Vacancies in the office of 
                        the chairman, including vacancies resulting 
                        from the resignation, death, or removal by the 
                        President of the chairman, shall be filled in 
                        the same manner described in clause (i).
                          ``(iii) Duties.--The chairman shall be a 
                        member of the board of governors and, when 
                        present, shall preside at meetings of the board 
                        of governors and shall have such other duties 
                        and responsibilities as may be provided in the 
                        bylaws or a resolution of the board of 
                        governors.
                  ``(B) Other members.--
                          ``(i) In general.--Members of the board of 
                        governors other than the chairman shall be 
                        elected at the annual meeting of the 
                        corporation in accordance with such procedures 
                        as may be provided in the bylaws.
                          ``(ii) Vacancies.--Vacancies in any such 
                        elected board position and in any newly created 
                        board position may be filled by a vote of the 
                        remaining members of the board of governors in 
                        accordance with such procedures as may be 
                        provided in the bylaws.
  ``(b) Terms of Office.--
          ``(1) In general.--The term of office of each member of the 
        board of governors shall be 3 years, except that--
                  ``(A) the board of governors may provide under the 
                bylaws that the terms of office of members of the board 
                of governors elected to the board of governors before 
                March 31, 2012, may be less than 3 years in order to 
                implement the provisions of subparagraphs (A) and (B) 
                of subsection (a)(2); and
                  ``(B) any member of the board of governors elected by 
                the board to fill a vacancy in a board position arising 
                before the expiration of its term may, as determined by 
                the board, serve for the remainder of that term or 
                until the next annual meeting of the corporation.
          ``(2) Staggered terms.--The terms of office of members of the 
        board of governors (other than the chairman) shall be staggered 
        such that, by March 31, 2012, and thereafter, \1/3\ of the 
        entire board (or as near to \1/3\ as practicable) shall be 
        elected at each successive annual meeting of the corporation 
        with the term of office of each member of the board of 
        governors elected at an annual meeting expiring at the third 
        annual meeting following the annual meeting at which such 
        member was elected.
          ``(3) Term limits.--No person may serve as a member of the 
        board of governors for more than such number of terms of office 
        or years as may be provided in the bylaws.
  ``(c) Committees and Officers.--The board--
          ``(1) may appoint, from its own members, an executive 
        committee to exercise such powers of the board when the board 
        is not in session as may be provided in the bylaws;
          ``(2) may appoint such other committees or advisory councils 
        with such powers as may be provided in the bylaws or a 
        resolution of the board of governors;
          ``(3) shall appoint such officers of the corporation, 
        including a chief executive officer, with such duties, 
        responsibilities, and terms of office as may be provided in the 
        bylaws or a resolution of the board of governors; and
          ``(4) may remove members of the board of governors (other 
        than the chairman), officers, and employees under such 
        procedures as may be provided in the bylaws or a resolution of 
        the board of governors.
  ``(d) Advisory Council.--
          ``(1) Establishment.--There shall be an advisory council to 
        the board of governors.
          ``(2) Membership; appointment by president.--
                  ``(A) In general.--The advisory council shall be 
                composed of no fewer than 8 and no more than 10 
                members, each of whom shall be appointed by the 
                President from principal officers of the executive 
                departments and senior officers of the Armed Forces 
                whose positions and interests qualify them to 
                contribute to carrying out the programs and purposes of 
                the corporation.
                  ``(B) Members from the armed forces.--At least 1, but 
                not more than 3, of the members of the advisory council 
                shall be selected from the Armed Forces.
          ``(3) Duties.--The advisory council shall advise, report 
        directly to, and meet, at least 1 time per year with the board 
        of governors, and shall have such name, functions and be 
        subject to such procedures as may be provided in the bylaws.
  ``(e) Action Without Meeting.--Any action required or permitted to be 
taken at any meeting of the board of governors or of any committee 
thereof may be taken without a meeting if all members of the board or 
committee, as the case may be, consent thereto in writing, or by 
electronic transmission and the writing or writings or electronic 
transmission or transmissions are filed with the minutes of proceedings 
of the board or committee. Such filing shall be in paper form if the 
minutes are maintained in paper form and shall be in electronic form if 
the minutes are maintained in electronic form.
  ``(f) Voting by Proxy.--
          ``(1) In general.--Voting by proxy is not allowed at any 
        meeting of the board, at the annual meeting, or at any meeting 
        of a chapter.
          ``(2) Exception.--The board may allow the election of 
        governors by proxy during any emergency.
  ``(g) Bylaws.--
          ``(1) In general.--The board of governors may--
                  ``(A) at any time adopt bylaws; and
                  ``(B) at any time adopt bylaws to be effective only 
                in an emergency.
          ``(2) Emergency bylaws.--Any bylaws adopted pursuant to 
        paragraph (1)(B) may provide special procedures necessary for 
        managing the corporation during the emergency. All provisions 
        of the regular bylaws consistent with the emergency bylaws 
        remain effective during the emergency.
  ``(h) Definitions.--For purposes of this section--
          ``(1) the term `entire board' means the total number of 
        members of the board of governors that the corporation would 
        have if there were no vacancies; and
          ``(2) the term `emergency' shall have such meaning as may be 
        provided in the bylaws.''.

SEC. 7. POWERS.

  Subsection (a)(1) of section 300105 of title 36, United States Code, 
is amended by striking ``bylaws'' and inserting ``policies''.

SEC. 8. ANNUAL MEETING.

  Section 300107 of title 36, United States Code, is amended to read as 
follows:

``Sec. 300107. Annual meeting

  ``(a) In General.--The annual meeting of the corporation is the 
annual meeting of delegates of the chapters.
  ``(b) Time of Meeting.--The annual meeting shall be held as 
determined by the board of governors.
  ``(c) Place of Meeting.--The board of governors is authorized to 
determine that the annual meeting shall not be held at any place, but 
may instead be held solely by means of remote communication subject to 
such procedures as are provided in the bylaws.
  ``(d) Voting.--
          ``(1) In general.--In matters requiring a vote at the annual 
        meeting, each chapter is entitled to at least 1 vote, and 
        voting on all matters may be conducted by mail, telephone, 
        telegram, cablegram, electronic mail, or any other means of 
        electronic or telephone transmission, provided that the person 
        voting shall state, or submit information from which it can be 
        determined, that the method of voting chosen was authorized by 
        such person.
          ``(2) Establishment of number of votes.--
                  ``(A) In general.--The board of governors shall 
                determine on an equitable basis the number of votes 
                that each chapter is entitled to cast, taking into 
                consideration the size of the membership of the 
                chapters, the populations served by the chapters, and 
                such other factors as may be determined by the board.
                  ``(B) Periodic review.--The board of governors shall 
                review the allocation of votes at least every 5 
                years.''.

SEC. 9. ENDOWMENT FUND.

  Section 300109 of title 36, United States Code is amended--
          (1) by striking ``nine'' from the first sentence thereof; and
          (2) by striking the second sentence and inserting the 
        following: ``The corporation shall prescribe policies and 
        regulations on terms and tenure of office, accountability, and 
        expenses of the board of trustees.''.

SEC. 10. ANNUAL REPORT AND AUDIT.

  Subsection (a) of section 300110 of title 36, United States Code, is 
amended to read as follows:
  ``(a) Submission of Report.--As soon as practicable after the end of 
the corporation's fiscal year, which may be changed from time to time 
by the board of governors, the corporation shall submit a report to the 
Secretary of Defense on the activities of the corporation during such 
fiscal year, including a complete, itemized report of all receipts and 
expenditures.''.

SEC. 11. COMPTROLLER GENERAL OF THE UNITED STATES AND OFFICE OF THE 
                    OMBUDSMAN.

  (a) In General.--Chapter 3001 of title 36, United States Code, is 
amended by redesignating section 300111 as section 300113 and by 
inserting after section 300110 the following new sections:

``Sec. 300111. Authority of the Comptroller General of the United 
                    States

  ``The Comptroller General of the United States is authorized to 
review the corporation's involvement in any Federal program or activity 
the Government carries out under law.

``Sec. 300112. Office of the Ombudsman

  ``(a) Establishment.--The corporation shall establish an Office of 
the Ombudsman with such duties and responsibilities as may be provided 
in the bylaws or a resolution of the board of governors.
  ``(b) Report.--
          ``(1) In general.--The Office of the Ombudsman shall submit 
        annually to the appropriate Congressional committees a report 
        concerning any trends and systemic matters that the Office of 
        the Ombudsman has identified as confronting the corporation.
          ``(2) Appropriate congressional committees.--For purposes of 
        paragraph (1), the appropriate Congressional committees are the 
        following committees of Congress:
                  ``(A) Senate committees.--The appropriate 
                Congressional committees of the Senate are--
                          ``(i) the Committee on Finance;
                          ``(ii) the Committee on Foreign Relations;
                          ``(iii) the Committee on Health, Education, 
                        Labor, and Pensions;
                          ``(iv) the Committee on Homeland Security and 
                        Governmental Affairs; and
                          ``(v) the Committee on the Judiciary.
                  ``(B) House committees.--The appropriate 
                Congressional committees of the House of 
                Representatives are--
                          ``(i) the Committee on Energy and Commerce;
                          ``(ii) the Committee on Foreign Affairs;
                          ``(iii) the Committee on Homeland Security;
                          ``(iv) the Committee on the Judiciary; and
                          ``(v) the Committee on Ways and Means.''.
  (b) Clerical Amendment.--The table of sections for chapter 3001 of 
title 36, United States Code, is amended by striking the item relating 
to section 300111 and inserting the following:

``300111. Authority of the Comptroller General of the United States.
``300112. Office of the Ombudsman.
``300113. Reservation of right to amend or repeal.''.

                                Summary

    The ``American National Red Cross Governance Modernization 
Act of 2007'' (H.R. 1681) amends the Congressional Charter of 
the American National Red Cross (hereinafter ``the Red Cross'') 
for the purposes of modernizing its governance structure and 
enhancing the ability of the Red Cross Board of Governors to 
support the critical mission of the Red Cross in the 21st 
century. The bill explicitly delegates to Red Cross management 
the responsibilities for day-to-day operations; reduces the 
Board of Governors' size by more than half; creates a single 
category of governors, changes the process of how members are 
selected; and transitions seven of the Presidentially-appointed 
governors into a newly created Cabinet Advisory Council. 
Finally, the bill requires the Red Cross to establish an Office 
of the Ombudsman to improve the whistleblower process within 
the organization.

                         Background and Purpose

    Wherever disaster strikes, the American Red Cross responds. 
In times of crisis, its staff of 35,000 and more than a million 
volunteers take on the daunting task of translating the 
compassion of the American people into shelter, clothing, and 
food. When a fire puts a family out of its home or a tornado 
tears through a community, the Red Cross is always on the 
scene. The Red Cross addressed the needs of people in crises in 
over 75,000 incidents last year alone. But disaster relief 
organizations such as the American Red Cross have come under 
heightened scrutiny after 9/11 and the Gulf Coast hurricanes. 
Such organizations must now demonstrate as never before that 
they are acting responsibly and in the best interests of the 
American people.
    The Committee notes that Hurricanes Katrina and Rita, in 
particular, crystallized the need for reform of the Red Cross. 
The Committee understands that while the Red Cross performed 
admirably in its relief response, there were also reports of 
shortcomings in its performance. Criticisms and questions were 
raised about the practicability of the Federal Government's 
reliance on a volunteer organization to respond to mass 
disasters. The Committee notes that the Red Cross received 
numerous complaints about racial insensitivity by Red Cross 
volunteers toward disaster victims. The Red Cross was also 
criticized for miscounting the number of Hurricane Katrina 
evacuees who were residing in hotels. In addition, news reports 
stated that Red Cross relief funds were given to persons who 
did not qualify for aid.
    The Committee applauds the leadership of the American Red 
Cross for wisely undertaking a comprehensive review of its 
governance structure in the aftermath of such criticism. On 
February 17, 2006, the Red Cross established the ``Independent 
Governance Advisory Panel'' which conducted a six-month, top-
to-bottom governance audit to carefully examine Red Cross 
governance and to provide current examples of ``best 
practices'' in for-profit and nonprofit corporations. The Red 
Cross asked the Governance Panel to focus on the following 
topics: the size and composition of the Board of Governors, 
participation by and independence of governors and the process 
for selecting candidates for the board; the organization and 
functioning of the Board of Governors, including the 
composition, structure and roles of the board's committees; the 
roles and relationships of the Board of Governors and 
management; the Board of Governors' oversight of the governance 
practices of the local chapters; and the relationships and 
lines of reporting between the Audit Committee of the Board of 
Governors, the outside auditor, and the internal audit 
functions, including the whistleblower process as its applies 
to Red Cross employees and volunteers, as well as 
constituencies served by the Red Cross.
    The Committee notes that after more than 100 interviews of 
past and present Red Cross officers, volunteer chapter leaders, 
donors and others, the panel delivered to the Board of 
Governors a series of recommendations in a more than 150-page 
report, American Red Cross Governance for the 21st Century: A 
Report of the Board of Governors, calling for major reform in 
the Red Cross' governance structure. On October 30, 2006, the 
Board of Governors unanimously approved the panel's 
recommendations to reform its governance structure. The 
Committee finds that the last time the Red Cross reorganized 
itself was in 1947. At that time, local chapters gained 
influence by getting seats on the board; however, over the 
years, the board swelled to 50 members. Its unwieldy size and 
parochial nature made the CEO's job one of the least secure at 
any American charity. In the past seven years, the Red Cross 
has had three chief executives and three interim executives. 
The Committee observes that the Red Cross managers find 
themselves at odds with a board dominated by local chapter 
representatives who lack the experience required to oversee a 
large corporation and who are protective of local chapter 
interests.
    The recommendations unanimously approved by the Board of 
Governors include reducing the size of the board, simplifying 
the board's structure, eliminating appointed positions on the 
board and replacing them with a Cabinet Advisory Council, 
clarifying the board's role to focus solely on governance, 
strategic oversight and direction of the Red Cross, and 
improving the whistleblower functions in the Red Cross.
    The Committee notes that such recommendations require 
congressional action. On March 15, 2007, the Senate passed the 
companion bill, S. 655, which was spearheaded by Senator 
Grassley and Senator Kennedy. The Committee held a hearing on 
March 14, 2007 on American Red Cross Governance Reform with 
Chairwoman Bonnie McElveen-Hunter and Karen Hastie Williams who 
headed the governance panel. On March 26, 2007, Chairman Tom 
Lantos and Ranking Member Ileana Ros-Lehtinen introduced H.R. 
1681, the ``The American National Red Cross Governance 
Modernization Act of 2007''.
    The ``The American National Red Cross Governance 
Modernization Act of 2007'':
          (1) Permits the Red Cross to conduct business as the 
        ``American Red Cross'';
          (2) Reduces the Board of Governors from 50 members to 
        between 12 and 25 members by March 31, 2009, and to 
        between 12 and 20 members by March 31, 2012;
          (3) Reduces Presidential appointees to the Board of 
        Governors from eight to one, with the President 
        appointing the chairman of the board;
          (4) Abolishes local chapter selection of 30 board 
        members and board selection of 12 members;
          (5) Requires each board member, except the 
        presidential appointee, to be elected by delegates at 
        the Red Cross annual convention;
          (6) Establishes a Presidentially-appointed advisory 
        council of eight to ten members, who would be officers 
        of executive departments that work with the Red Cross;
          (7) Eliminates the requirement that the number of 
        trustees overseeing the Red Cross endowment be fixed at 
        nine;
          (8) Authorizes the Comptroller General to review the 
        Red Cross' involvement in any Federal program or 
        activity that the Government carries out by law; and
          (9) Requires the Red Cross to establish an Office of 
        the Ombudsman, which would report annually to Congress.

    The Committee passed H.R. 1681 with a voice vote with two 
amendments to the findings section offered by Congresswoman 
Sheila Jackson Lee to ensure that the local chapters of the Red 
Cross are geographically and regionally diverse and that the 
Red Cross should maintain appropriate communications and 
collaborations with local, community, and faith-based nonprofit 
organizations, including those organizations that work within 
minority communities.
    In addition, the Committee has expressed concern about Red 
Cross' transparency and accountability through accessibility 
and reporting, as reflected by Ranking Republican Member Ileana 
Ros-Lehtinen's inquiries at the March 14, 2007, hearing on this 
subject. After engaging in a dialogue with the Red Cross on 
ways to improve the transparency and accountability of the Red 
Cross, the Red Cross presented a paper on Red Cross practices 
to ensure corporate compliance and transparency through 
accessibility and reporting. The Committee is satisfied that 
the Red Cross has addressed the Committee's concerns on 
transparency and accountability.
    While the changes in H.R. 1681 would not directly affect 
the organization's disaster response, the Committee believes 
they will undoubtedly help promote the kind of leadership 
necessary to make Red Cross management and operations run more 
smoothly.

                                Hearings

    In the 110th Congress, the Committee held a hearing on 
March 14, 2007, on American Red Cross Governance Reform with 
Chairman of the Red Cross, Bonnie McElveen-Hunter, and Chair of 
the Independent Governance Advisory Panel, Karen Hastie 
Williams.

                        Committee Consideration

    The Committee marked up H.R. 1681 on March 27, 2007. The 
bill was reported favorably, as amended, by voice vote, a 
quorum being present.

                         Votes of the Committee

    Clause (3)(b) of rule XIII of the Rules of the House of 
Representatives requires that the results of each record vote 
on an amendment or motion to report, together with the names of 
those voting for or against, be printed in the Committee 
Report. There were no votes during consideration of H.R. 1681.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c) (2) of House Rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1681, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under Section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 2, 2007.
Hon. Tom Lantos, Chairman,
Committee on Foreign Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1681, the American 
National Red Cross Governance Modernization Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sarah Puro, 
who can be reached at 226-2860.
            Sincerely,
                                           Peter R. Orszag.
Enclosure.

H.R. 1681--American National Red Cross Governance Modernization Act of 
        2007

    H.R. 1681 would make amendments to the Congressional 
charter of the American National Red Cross. CBO estimates that 
enacting H.R. 1681 would have no impact on the federal budget. 
Enacting the legislation would not affect direct spending or 
revenues.
    H.R. 1681 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    H.R. 1681 would amend the charter of the American National 
Red Cross by limiting the number of members of the Board of 
Governors to no more than 20 by 2012 and changing the process 
by which the members of the Board of Governors are appointed. 
The bill also would establish an Office of the Ombudsman within 
the Red Cross and an Advisory Council composed of eight to 10 
senior federal employees. Because the operations of the Red 
Cross are not reflected in the federal budget, CBO estimates 
that enacting H.R. 1681 would have no budgetary impact.
    The CBO staff contact for this estimate is Sarah Puro, who 
can be reached at 226-2860. This estimate was approved by Peter 
H. Fontaine, Deputy Assistant Director for Budget Analysis.

              Intergovernmental and Private Sector Impact

    H.R. 1681 contains no intergovernmental or private-sector 
mandates as defined in UMRA and would not affect the budgets of 
state, local, or tribal governments.

                    Performance Goals and Objectives

    Pursuant to clause (3)(c) of House rule XIII, upon 
enactment of this legislation, the Red Cross should modernize 
its governance structure and enhancing the ability of the Red 
Cross Board of Governors to support the critical mission of the 
Red Cross in the 21st century.

                   Constitutional Authority Statement

    Pursuant to clause 3(d) (1) of rule XIII of the Rules of 
the House of Representatives, the Committee finds the authority 
for this legislation in article I, section 8 of the 
Constitution.

                        New Advisory Committees

    H.R. 1681 establishes a Federal advisory council to the 
Board of Governors composed of eight to 10 presidential 
appointees, with at least one but no more than three from the 
Armed Forces.

                    Congressional Accountability Act

    H.R. 1681 does not apply to the Legislative Branch.

                         Earmark Identification

    H.R. 1681 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9(d), 9(e), or 9(f) of rule XXI.

               Section-by-Section Analysis and Discussion

Section 1. Short title

    This section states that the act may be referred to as the 
``The American National Red Cross Governance Modernization Act 
of 2007''.

Section 2. Findings; Sense of Congress

    This section contains congressional findings describing the 
background and need for changes to the congressional charter of 
the Red Cross that would improve the governance structure of 
the organization. The findings note that substantive changes to 
the congressional charter of the Red Cross have not been made 
since 1947. It also details the results and recommendations of 
the independent governance audit that was commissioned by the 
Board of Governors of the Red Cross on the board's role, 
composition, size, and relationship with management, governance 
relationship with chartered units of the Red Cross, and 
whistleblower and audit functions.
    The findings highlight the importance of improving the 
governance structure of the Red Cross, including the governance 
and strategic oversight of the Board of Governors of the 
organization. The findings also identify the importance of 
ensuring geographically and regionally diverse chapters. In 
addition, the findings include a provision stressing the need 
for the Red Cross to maintain appropriate communications and 
collaborations with local, community, and faith-based nonprofit 
organizations, including organizations that work within 
minority communities.
    This section also contains a Sense of Congress which states 
that charitable organizations are an indispensable part of 
American society, and they must maintain the trust of the 
American public which is fostered by effective governance and 
transparency. The Sense of Congress provisions discuss the 
important role Federal and State action play in ensuring 
effective governance and transparency of the organization by 
setting standards, rooting out violations, and informing the 
public; and recommends that the Red Cross should maintain 
appropriate communications and cooperate with State regulators 
of charitable organizations to ensure effective governance and 
transparency.

Section 3. Organization

    Section 3 amends Section 300101 of title 36 of the United 
States Code by: (1) adding that the Red Cross is a Federally 
chartered instrumentality of the United States in the 
description of the organization; and (2) authorizing the 
organization to conduct its business and affairs under the name 
of the ``American Red Cross'' in any jurisdiction.

Section 4. Purposes

    Section 4 amends Section 300102 of title 36 of the United 
States Code by making technical changes and providing an 
additional purpose for the Red Cross to conduct other 
activities that are consistent with the activities the Red 
Cross has been historically authorized to carry out.

Section 5. Membership and chapters

    Section 5 amends Section 300103 of title 36 of the United 
States Code by authorizing the corporation, rather than the 
Board of Governors as previously authorized, to prescribe the 
policies and regulations relating to the Red Cross chapters. In 
addition, the section amends the charter by providing that 
delegates will be selected to the annual meeting rather than 
the national convention as previously authorized. The section 
makes additional technical changes to Section 300103 of title 
36 of the United States Code.

Section 6. Board of Governors

    Section 6 amends Section 300104 of title 36 of the United 
States Code by amending the Board of Governor's role, size, 
composition, and relationship with management. This section 
bestows on the Board of Governors ``all powers of governing and 
directing, and of overseeing the management of the business and 
affairs of the corporation.'' This section also reduces the 
size of the Board of Governors from 50 members to between 12 
and 25 members by March 31, 2009, and to between 12 and 20 
members by March 31, 2012. It provides that the chairman of the 
Board of Governors will be appointed by the President with 
recommendations from the Board of Governors and that vacancies 
in the office of the chairman must be filled in the same 
manner.
    The chairman will act as a member of the Board of Governors 
and shall preside at the board meetings. The other members of 
the Board of Governors shall be elected at the Red Cross annual 
meeting and any vacancies in any elected board position and in 
any newly created board position may be filled by a vote of the 
remaining board members. The section determines the term of 
office of each board member as 3 years, with the exception of 
board members elected under the provisions of subparagraphs (A) 
and (B) of subsection (a)(2), and those board members elected 
by the board to fill a vacancy. It also provides for staggered 
terms such that, by March 31, 2012, and thereafter, one-third 
of the entire board must be elected at each successive annual 
meeting of the Red Cross, and term limits as provided in the 
Red Cross bylaws. The Committee notes that the changes 
reflected in this section are generally consistent with the 
relationship that national societies in other countries have to 
their governments as autonomous auxiliaries to public 
authorities in each such country.
    The section provides the board with the power to appoint an 
executive committee to exercise such powers of the board when 
the board is not in session and other committees or advisory 
councils with such powers as the bylaws or a resolution by the 
Board of Governors may provide. In addition, the board is 
required to appoint officers of the corporation, including a 
chief executive officer, and has the authority to remove 
members of the Board of Governors, other than the chairman, 
officers, and employees under the bylaws or a resolution of the 
Board of Governors.
    Section 6 also establishes a Federal advisory council to 
the Board of Governors composed of eight to 10 presidential 
appointees, with at least one but no more than three from the 
Armed Forces. The section does not confer any powers to the 
council. This section provides exceptions for when action by 
the Board of Governors may be taken without a meeting; in 
addition, it does not allow voting by proxy at any meeting of 
the board or a chapter, or at the annual meeting except the 
board may allow the election of governors by proxy during an 
emergency. Finally, the section allows the Board of Governors 
to adopt bylaws at any time, including bylaws that would be 
effective in an emergency.

Section 7. Powers

    Section 7 amends Paragraph (a)(1) of section 300105 of 
title 36 of the United States Code by removing the power of the 
corporation to adopt bylaws, but instead to adopt policies.

Section 8. Annual meeting

    Section 8 amends Section 300107 of title 36 of the United 
States Code by defining the annual meeting, designating the 
time and place of the annual meeting, and determining the 
voting guidelines and requirements for the annual meeting.

Section 9. Endowment fund

    Section 9 amends Section 300109 of title 36 of the United 
States Code by eliminating the requirement that the number of 
trustees overseeing the Red Cross endowment be fixed at nine 
and gives the corporation, rather than the Board of Governors, 
the authority of prescribing the policies and regulations on 
the terms and tenure of office, accountability, and expenses of 
the board of trustees.

Section 10. Annual report and audit

    Section 10 amends section 300110(a) of title 36 of the 
United States Code by requiring the corporation to submit a 
report at the end of the corporation's fiscal year, which may 
be changed by the Board of Governors, to the Secretary of 
Defense on the activities of the corporation during such fiscal 
year.

Section 11. Comptroller General of the United States and the Office of 
        the Ombudsman

    Section 11 amends Chapter 3001 of title 36 of the United 
States Code by adding new sections 300111 and 300112.
    Section 300111 authorizes the Comptroller General of the 
United States to review the Red Cross' involvement in any 
Federal program or activity the U.S. Government carries out 
under law.
    Section 300112 establishes an Office of the Ombudsman which 
reports annually to Congress on any trends and systemic matters 
that the Office of the Ombudsman identifies as confronting the 
Red Cross. The report would be submitted to the Senate 
Committee on Finance, the Senate Committee on Foreign 
Relations, the Senate Committee on Health, Education, Labor, 
and Pensions, the Senate Committee on Homeland Security and 
Governmental Affairs, and the Senate Committee on the 
Judiciary. The report would also be submitted to the House 
Committee on Energy and Commerce, the House Committee on 
Foreign Affairs, the House Committee on Homeland Security, the 
House Committee on the Judiciary, and the House Committee on 
Ways and Means.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 36, UNITED STATES CODE

           *       *       *       *       *       *       *

             SUBTITLE III--TREATY OBLIGATION ORGANIZATIONS

             CHAPTER 3001--THE AMERICAN NATIONAL RED CROSS

Sec.
300101.  Organization.
     * * * * * * *
[300111.  Reservation of right to amend or repeal.]
300111.  Authority of the Comptroller General of the United States.
300112.  Office of the Ombudsman.
300113.  Reservation of right to amend or repeal.

           *       *       *       *       *       *       *

Sec. 300101. Organization

  (a) Federal Charter.--The American National Red Cross (in 
this chapter, the ``corporation'') is a Federally chartered 
instrumentality of the United States and a body corporate and 
politic in the District of Columbia.
  (b) Name.--The name of the corporation is ``The American 
National Red Cross''. The corporation may conduct its business 
and affairs, and otherwise hold itself out, as the ``American 
Red Cross'' in any jurisdiction.

           *       *       *       *       *       *       *

Sec. 300102. Purposes

   The purposes of the corporation are--
          (1) * * *

           *       *       *       *       *       *       *

          (3) to act in matters of voluntary relief and in 
        accordance with the military authorities as a medium of 
        communication between the people of the United States 
        and the Armed Forces of the United States and to act in 
        those matters between similar national societies of 
        governments of other countries through the 
        International Committee of the Red Cross and the 
        Government, the people, and the Armed Forces of the 
        United States; [and]
          (4) to carry out a system of national and 
        international relief in time of peace, and to apply 
        that system in mitigating the suffering caused by 
        pestilence, famine, fire, floods, and other great 
        national calamities, and to devise and carry out 
        measures for preventing those calamities[.]; and
          (5) to conduct other activities consistent with the 
        foregoing purposes.

Sec. 300103. Membership and chapters

  (a) Membership.--Membership in the corporation is open to all 
the people of the United States and its territories and 
possessions, on payment of an amount specified, or as otherwise 
provided, in the bylaws.
  (b) Chapters.--(1) The chapters of the corporation are the 
local units of the corporation. The [board of governors] 
corporation shall prescribe policies and regulations related 
to--
          (A) * * *

           *       *       *       *       *       *       *

  (2) The policies and regulations shall require that each 
chapter adhere to the democratic principles of election 
specified in the bylaws in electing the governing body of the 
chapter and selecting delegates to the [national convention] 
annual meeting of the corporation.

[Sec. 300104. Board of governors

  [(a) Board of Governors.--(1) The board of governors is the 
governing body of the corporation with all powers of governing 
and managing the corporation. The board has 50 members. The 
governors shall be appointed or elected in the following 
manner:
          [(A) The President shall appoint eight governors, one 
        of whom the President shall designate to act as the 
        principal officer of the corporation with the title and 
        functions provided in the bylaws. The other governors 
        appointed by the President shall be officials of 
        departments and agencies of the United States 
        Government, whose positions and interests qualify them 
        to contribute to carrying out the programs and purposes 
        of the corporation. At least one, but not more than 
        three, of those officials shall be selected from the 
        Armed Forces.
          [(B) The chapters shall elect 30 governors at the 
        national convention under procedures for nomination and 
        election that ensure equitable representation of all 
        chapters, with regard to geographical considerations, 
        the size of the chapters, and the size of the 
        populations served by the chapters.
          [(C) The board shall elect 12 governors as members-
        at-large. Those governors shall be individuals who are 
        representative of the national interests that the 
        corporation serves, and with which it is desirable that 
        the corporation have close association.
  [(2) One-third of the members elected to the board shall be 
elected at each national convention, and take office at that 
time or as soon as practicable after the convention.
  [(b) Term of Office and Vacancies.--(1) The term of office of 
each governor is 3 years. However, the term of office of a 
governor appointed by the President (except the principal 
officer of the corporation) expires if, before the end of the 
3-year term, the governor retires from the official position 
held at the time of appointment as a governor.
  [(2) The President shall fill as soon as practicable a 
vacancy in the office of the principal officer of the 
corporation or in the position of another governor appointed by 
the President. The board shall make a temporary appointment to 
fill a vacancy occurring in an elected position on the board. 
An individual appointed by the board to fill a vacancy serves 
until the next national convention.
  [(c) Executive Committee.--The board may--
          [(1) appoint, from its own members, an executive 
        committee of at least 11 individuals to exercise the 
        powers of the board when the board is not in session; 
        and
          [(2) appoint and remove, or provide for the 
        appointment and removal of, officers and employees of 
        the corporation, except the principal officer of the 
        corporation.
  [(d) Voting by Proxy.--Voting by proxy is not allowed at any 
meeting of the board, at the national convention, or at any 
meeting of a chapter. However, the board may allow the election 
of governors by proxy at the national convention if the board 
believes a national emergency makes attendance at the national 
convention impossible.]

Sec. 300104. Board of governors

  (a) Board of Governors.--
          (1) In general.--The board of governors is the 
        governing body of the corporation with all powers of 
        governing and directing, and of overseeing the 
        management of the business and affairs of, the 
        corporation.
          (2) Number.--The board of governors shall fix by 
        resolution, from time to time, the number of members 
        constituting the entire board of governors, provided 
        that--
                  (A) as of March 31, 2009, and thereafter, 
                there shall be no fewer than 12 and no more 
                than 25 members; and
                  (B) as of March 31, 2012, and thereafter, 
                there shall be no fewer than 12 and no more 
                than 20 members constituting the entire board.
        Procedures to implement the preceding sentence shall be 
        provided in the bylaws.
          (3) Appointment.--The governors shall be appointed or 
        elected in the following manner:
                  (A) Chairman.--
                          (i) In general.--The board of 
                        governors, in accordance with 
                        procedures provided in the bylaws, 
                        shall recommend to the President an 
                        individual to serve as chairman of the 
                        board of governors. If such 
                        recommendation is approved by the 
                        President, the President shall appoint 
                        such individual to serve as chairman of 
                        the board of governors.
                          (ii) Vacancies.--Vacancies in the 
                        office of the chairman, including 
                        vacancies resulting from the 
                        resignation, death, or removal by the 
                        President of the chairman, shall be 
                        filled in the same manner described in 
                        clause (i).
                          (iii) Duties.--The chairman shall be 
                        a member of the board of governors and, 
                        when present, shall preside at meetings 
                        of the board of governors and shall 
                        have such other duties and 
                        responsibilities as may be provided in 
                        the bylaws or a resolution of the board 
                        of governors.
                  (B) Other members.--
                          (i) In general.--Members of the board 
                        of governors other than the chairman 
                        shall be elected at the annual meeting 
                        of the corporation in accordance with 
                        such procedures as may be provided in 
                        the bylaws.
                          (ii) Vacancies.--Vacancies in any 
                        such elected board position and in any 
                        newly created board position may be 
                        filled by a vote of the remaining 
                        members of the board of governors in 
                        accordance with such procedures as may 
                        be provided in the bylaws.
  (b) Terms of Office.--
          (1) In general.--The term of office of each member of 
        the board of governors shall be 3 years, except that--
                  (A) the board of governors may provide under 
                the bylaws that the terms of office of members 
                of the board of governors elected to the board 
                of governors before March 31, 2012, may be less 
                than 3 years in order to implement the 
                provisions of subparagraphs (A) and (B) of 
                subsection (a)(2); and
                  (B) any member of the board of governors 
                elected by the board to fill a vacancy in a 
                board position arising before the expiration of 
                its term may, as determined by the board, serve 
                for the remainder of that term or until the 
                next annual meeting of the corporation.
          (2) Staggered terms.--The terms of office of members 
        of the board of governors (other than the chairman) 
        shall be staggered such that, by March 31, 2012, and 
        thereafter, \1/3\ of the entire board (or as near to 
        \1/3\ as practicable) shall be elected at each 
        successive annual meeting of the corporation with the 
        term of office of each member of the board of governors 
        elected at an annual meeting expiring at the third 
        annual meeting following the annual meeting at which 
        such member was elected.
          (3) Term limits.--No person may serve as a member of 
        the board of governors for more than such number of 
        terms of office or years as may be provided in the 
        bylaws.
  (c) Committees and Officers.--The board--
          (1) may appoint, from its own members, an executive 
        committee to exercise such powers of the board when the 
        board is not in session as may be provided in the 
        bylaws;
          (2) may appoint such other committees or advisory 
        councils with such powers as may be provided in the 
        bylaws or a resolution of the board of governors;
          (3) shall appoint such officers of the corporation, 
        including a chief executive officer, with such duties, 
        responsibilities, and terms of office as may be 
        provided in the bylaws or a resolution of the board of 
        governors; and
          (4) may remove members of the board of governors 
        (other than the chairman), officers, and employees 
        under such procedures as may be provided in the bylaws 
        or a resolution of the board of governors.
  (d) Advisory Council.--
          (1) Establishment.--There shall be an advisory 
        council to the board of governors.
          (2) Membership; appointment by president.--
                  (A) In general.--The advisory council shall 
                be composed of no fewer than 8 and no more than 
                10 members, each of whom shall be appointed by 
                the President from principal officers of the 
                executive departments and senior officers of 
                the Armed Forces whose positions and interests 
                qualify them to contribute to carrying out the 
                programs and purposes of the corporation.
                  (B) Members from the armed forces.--At least 
                1, but not more than 3, of the members of the 
                advisory council shall be selected from the 
                Armed Forces.
          (3) Duties.--The advisory council shall advise, 
        report directly to, and meet, at least 1 time per year 
        with the board of governors, and shall have such name, 
        functions and be subject to such procedures as may be 
        provided in the bylaws.
  (e) Action Without Meeting.--Any action required or permitted 
to be taken at any meeting of the board of governors or of any 
committee thereof may be taken without a meeting if all members 
of the board or committee, as the case may be, consent thereto 
in writing, or by electronic transmission and the writing or 
writings or electronic transmission or transmissions are filed 
with the minutes of proceedings of the board or committee. Such 
filing shall be in paper form if the minutes are maintained in 
paper form and shall be in electronic form if the minutes are 
maintained in electronic form.
  (f) Voting by Proxy.--
          (1) In general.--Voting by proxy is not allowed at 
        any meeting of the board, at the annual meeting, or at 
        any meeting of a chapter.
          (2) Exception.--The board may allow the election of 
        governors by proxy during any emergency.
  (g) Bylaws.--
          (1) In general.--The board of governors may--
                  (A) at any time adopt bylaws; and
                  (B) at any time adopt bylaws to be effective 
                only in an emergency.
          (2) Emergency bylaws.--Any bylaws adopted pursuant to 
        paragraph (1)(B) may provide special procedures 
        necessary for managing the corporation during the 
        emergency. All provisions of the regular bylaws 
        consistent with the emergency bylaws remain effective 
        during the emergency.
  (h) Definitions.--For purposes of this section--
          (1) the term ``entire board'' means the total number 
        of members of the board of governors that the 
        corporation would have if there were no vacancies; and
          (2) the term ``emergency'' shall have such meaning as 
        may be provided in the bylaws.

Sec. 300105. Powers

  (a) General.--The corporation may--
          (1) adopt [bylaws] policies and regulations;

           *       *       *       *       *       *       *

[Sec. 300107. Annual meeting

  [The annual meeting of the corporation is the national 
convention of delegates of the chapters. The national 
convention shall be held annually on a date and at a place 
specified by the board of governors. In matters requiring a 
vote at the national convention, each chapter is entitled to at 
least one vote. The board shall determine on an equitable basis 
the number of votes that each chapter is entitled to cast, 
taking into consideration the size of the membership of the 
chapters and of the populations served by the chapters. The 
board shall review the allocation of votes at least every 5 
years.]

Sec. 300107. Annual meeting

  (a) In General.--The annual meeting of the corporation is the 
annual meeting of delegates of the chapters.
  (b) Time of Meeting.--The annual meeting shall be held as 
determined by the board of governors.
  (c) Place of Meeting.--The board of governors is authorized 
to determine that the annual meeting shall not be held at any 
place, but may instead be held solely by means of remote 
communication subject to such procedures as are provided in the 
bylaws.
  (d) Voting.--
          (1) In general.--In matters requiring a vote at the 
        annual meeting, each chapter is entitled to at least 1 
        vote, and voting on all matters may be conducted by 
        mail, telephone, telegram, cablegram, electronic mail, 
        or any other means of electronic or telephone 
        transmission, provided that the person voting shall 
        state, or submit information from which it can be 
        determined, that the method of voting chosen was 
        authorized by such person.
          (2) Establishment of number of votes.--
                  (A) In general.--The board of governors shall 
                determine on an equitable basis the number of 
                votes that each chapter is entitled to cast, 
                taking into consideration the size of the 
                membership of the chapters, the populations 
                served by the chapters, and such other factors 
                as may be determined by the board.
                  (B) Periodic review.--The board of governors 
                shall review the allocation of votes at least 
                every 5 years.

           *       *       *       *       *       *       *

Sec. 300109. Endowment fund

  The endowment fund of the corporation shall be kept and 
invested under the management and control of a board of [nine] 
trustees elected by the board of governors. [The board of 
governors shall prescribe regulations on terms and tenure of 
office, accountability, and expenses of the board of trustees.] 
The corporation shall prescribe policies and regulations on 
terms and tenure of office, accountability, and expenses of the 
board of trustees.

Sec. 300110. Annual report and audit

  [(a) Submission of Report.--As soon as practicable after July 
1 of each year, the corporation shall submit a report to the 
Secretary of Defense on the activities of the corporation 
during the fiscal year ending June 30, including a complete, 
itemized report of all receipts and expenditures.]
  (a) Submission of Report.--As soon as practicable after the 
end of the corporation's fiscal year, which may be changed from 
time to time by the board of governors, the corporation shall 
submit a report to the Secretary of Defense on the activities 
of the corporation during such fiscal year, including a 
complete, itemized report of all receipts and expenditures.

           *       *       *       *       *       *       *

Sec. 300111. Authority of the Comptroller General of the United States

  The Comptroller General of the United States is authorized to 
review the corporation's involvement in any Federal program or 
activity the Government carries out under law.

Sec. 300112. Office of the Ombudsman

  (a) Establishment.--The corporation shall establish an Office 
of the Ombudsman with such duties and responsibilities as may 
be provided in the bylaws or a resolution of the board of 
governors.
  (b) Report.--
          (1) In general.--The Office of the Ombudsman shall 
        submit annually to the appropriate Congressional 
        committees a report concerning any trends and systemic 
        matters that the Office of the Ombudsman has identified 
        as confronting the corporation.
          (2) Appropriate congressional committees.--For 
        purposes of paragraph (1), the appropriate 
        Congressional committees are the following committees 
        of Congress:
                  (A) Senate committees.--The appropriate 
                Congressional committees of the Senate are--
                          (i) the Committee on Finance;
                          (ii) the Committee on Foreign 
                        Relations;
                          (iii) the Committee on Health, 
                        Education, Labor, and Pensions;
                          (iv) the Committee on Homeland 
                        Security and Governmental Affairs; and
                          (v) the Committee on the Judiciary.
                  (B) House committees.--The appropriate 
                Congressional committees of the House of 
                Representatives are--
                          (i) the Committee on Energy and 
                        Commerce;
                          (ii) the Committee on Foreign 
                        Affairs;
                          (iii) the Committee on Homeland 
                        Security;
                          (iv) the Committee on the Judiciary; 
                        and
                          (v) the Committee on Ways and Means.

Sec. [300111.] 300113. Reservation of right to amend or repeal

  Congress reserves the right to amend or repeal the provisions 
of this chapter.

           *       *       *       *       *       *       *

           American Red Cross Corporate Compliance and Ethics

     A REPORT TO THE HOUSE COMMITTEE ON FOREIGN AFFAIRS--MARCH 2007

    Over the past several years, and particular since passage 
of the Sarbanes Oxley Act in 2002 (Pub. L. No. 107-204, 116 
Stat. 745), the American National Red Cross has taken a 
holistic approach to voluntarily implement corporate ethics and 
compliance practices.
    To achieve this, the American Red Cross has incorporated 
some of the best practices from the corporate and nonprofit 
sectors, which include the refinement of its internal and 
independent external audits, whistleblower reporting and 
protections, enterprise risk management, a unit focused on 
Investigations, Compliance and Ethics (ICE), and most recently, 
the creation of the Office of the Ombudsman.
    At the center of corporate compliance is the Board of 
Governor's Audit and Risk Management Committee, which receives 
and reviews reports presented by these independent units.
    Through these internal and external functions, the American 
Red Cross endeavors to achieve system-wide corporate 
compliance. In addition, the organization strives to meet the 
expectations of transparency and accountability of the United 
States Congress, internal employee and volunteer stakeholders, 
and external stakeholders such as clients, donors, suppliers, 
partners, and the American public. As an independent 501(c)(3) 
nonprofit organization, the American Red Cross relies on the 
generosity of the American public to fulfill its mission. The 
American Red Cross takes seriously all allegations of waste, 
fraud and abuse as well as other complaints against the 
organization. Allegations of illegal and unethical activities 
are fully investigated and, if necessary, reported to 
appropriate authorities for further action. Fostering such 
faith, trust and confidence with the American public is an 
imperative.
    This document will identify the various aspects of 
corporate compliance, as well Red Cross practices to ensure 
transparency through accessibility and reporting.
Red Cross Board of Governor's Audit and Risk Management Committee
    The Audit and Risk Management Committee of the American Red 
Cross Board of Governors oversees the integrity of the 
financial statements of the organization, the qualifications 
and independence of the organization's independent auditors, 
the performance of the external and internal auditors, 
investigations, the organization's enterprise risk management 
functions, the organization's compliance with legal and 
regulatory requirements, and the Ombudsman. It is composed of 
entirely independent directors of the Red Cross, and members of 
the Committee must possess qualifications and financial 
knowledge that enable them to discharge the responsibilities of 
the committee. At least one member is required to be a 
``financial expert.''
Audits
    Both internal and external audit functions of the American 
Red Cross report directly to the Audit and Risk Management 
Committee of the Board of Governors.
    The internal audit services, led by a Chief Audit 
Executive, is authorized to examine all aspects of the American 
Red Cross including but not limited to national headquarters, 
blood services and chapters. During their review, the auditors 
are given complete access to manual and electronic records, 
properties and personnel. Moreover, to ensure impartial and 
unbiased actions, they are fully independent of the activities 
they audit. The Chief Audit Executive has direct access to the 
Audit and Risk Management Committee and reports functionally 
and directly to the Committee and administratively to the CEO.
    The external audit services, conducted by KPMG LLP, review 
the financial statements and related financial controls of the 
American Red Cross. To ensure impartiality, the lead partner 
rotates every five years.
Investigations, Compliance and Ethics (ICE)
    The Investigations, Compliance and Ethics (ICE) Unit at the 
American Red Cross is the central investigatory unit charged 
with investigating allegations of waste, fraud and abuse. The 
ICE unit is led by a Vice President, who reports to the 
organization's General Counsel, and consists of more than 40 
investigators and compliance and ethics specialists.
    The American Red Cross encourages all employees and 
volunteers to alert their supervisors directly if they suspect 
a dishonest act. If employees or volunteers are not comfortable 
contacting management, they may call the 24-hour, toll-free 
Concern Connection Line (CCL), which is overseen by ICE. 
Through this toll-free number, the CCL allows any employee or 
volunteer to report confidentially and anonymously any 
allegation of waste, fraud or abuse. The Red Cross provides 
whistleblower protections and a ``no retaliation'' policy to 
all Red Cross employees and volunteers.\1\
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    \1\ The Red Cross also has a Biomedical Response Line (BRL), which 
allows individuals to report anonymously and confidentially any issues 
involving biomedical services or FDA compliance issues. These issues 
are addressed by the Biomedical Services Quality and Regulatory Affairs 
group.
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    The American Red Cross is committed to the highest 
standards of ethics and workplace conduct. All staff and 
volunteers are required to read and sign the Code of Business 
Ethics and Conduct, which provides the guidance necessary for 
Red Cross employees and volunteers to maintain an environment 
of integrity. In that regard, ICE oversees Red Cross ethics 
policy and training programs, including the aforementioned Code 
of Business Ethics and Conduct. Through training, volunteers 
and employees will be more familiar with a culture of values 
and ethics and will know how to report instances of unethical 
behavior.
    The ICE unit also manages the Office of Corporate 
Compliance (which handles grants compliance). In conducting 
investigations, the unit has unfettered access to all 
organizational records, physical properties, and individuals. 
The Vice President of ICE reports regularly to the President 
and Chief Executive Officer, senior management, and the Audit 
and Risk Management Committee of the Board of Governors.
Enterprise risk management
    In an effort to mitigate risk by the corporation, the 
American Red Cross has appointed a Chief Risk Officer who is 
charged with developing an enterprise risk management (ERM) 
program for the entire organization. Modeled on the best 
practices of corporate America as a means to better protect 
corporate assets, enterprise risk establishes a disciplined 
approach for the organization's various business units to 
identify, evaluate, manage and report risks and opportunities.
    The Red Cross ERM Unit provides counsel to business units 
to identify, evaluate, and mitigate risk; enhance decision-
making at all levels by requiring a clear articulation between 
business objectives and risk versus reward; assist in 
identifying insufficient internal controls (particularly in the 
areas of waste, fraud and abuse); and provide the Board's Audit 
and Risk Management Committee with information regarding the 
corporate level risks and mitigation.
Office of the Ombudsman
    Most recently, the American Red Cross has created an Office 
of the Ombudsman. This office will act as a neutral and 
impartial dispute resolution center whose major function will 
be to provide confidential and informal assistance to the many 
internal and external constituents with concerns or complaints 
about the American Red Cross. The Office of the Ombudsman will 
have unfettered access to the entire corporation and all 
personnel, corporate reports, documents, and will report 
directly to the organization's Chief Executive Officer and on a 
regular basis to the Audit and Risk Management Committee of the 
Board of Governors.
    In addition to conflict resolution, the Office of the 
Ombudsman will report annually to the U.S. Congressional 
Committees of jurisdiction, areas and types of concerns, 
including trends and systemic matters that the Ombudsman 
determines to be confronting the organization. As a practice, 
these reports will also be made available to the public through 
the Red Cross external website, www.redcross.org.
American Red Cross transparency
    The American Red Cross endeavors to achieve enhanced 
corporate transparency and accountability to internal and 
external stakeholders. One mechanism is the public website, 
www.redcross.org. The American Red Cross will make available on 
that public website detailed information of the programs 
described above explaining the Red Cross corporate compliance 
and ethics programs, including audits, investigations (ICE), 
the Office of the Ombudsman, the Concerned Connection Line 
(CCL) and Biomedical Response Line (BRL), and Enterprise Risk 
Management (ERM), as well as contact information for each of 
these units.
    Additionally, the Red Cross will fulfill reporting 
requirements to the U.S. Congress and regulatory agencies and 
will make these reports available to the American public 
through its external website, www.redcross.org.\2\
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    \2\ To protect the confidentiality and integrity of clients to the 
Ombudsman and ICE investigations, the American Red Cross will redact 
any confidential, identifying, or proprietary information as necessary.
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    The American Red Cross is committed to be transparent and 
accountable to the American public. As such, the American Red 
Cross already makes available, in its entirety, the annual IRS 
Form 990, external independent audit, and consolidated 
financial statements on its external website, www.redcross.org. 
In addition, the Red Cross requires chapters to share copies of 
their annual audit and/or annual report in response to any 
public inquiries about local Red Cross activities. The Red 
Cross will continue to provide this information on its public 
website.

                                  
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