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EXHIBIT IV.-Membership, adult and junior-American National Red Cross

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5, 113, 090 4, 483, 845 4, 827, 261 5, 596, 663 5, 738, 648 5, 549, 428 5,822, 757 6, 529, 252 6,878, 423 6,930, 849 7, 106, 288 6, 775, 508 6, 629, 866 6, 968, 405 7, 752, 243 8, 351, 298 8, 577, 198 9, 070, 758 7,556, 306 8, 558, 398 9, 749, 035

1917. 1917 to 1918 1918 to 1919 1919 to 1920

298 (?) 633

3, 337 9, 262 5, 842 11, 861 11, 618 16, 886 12, 777 12, 685 14, 678 16, 708

22, 500 1, 805, 832

6, 385, 000 20, 390, 173 19, 848, 920 8, 988, 140

8, 293, 114 11,000,000 6, 542, 579

Source: Annual reports, American National Red Cross.

HOUSE OF REPRESENTATIVES,
COMMITTEE ON FOREIGN AFFAIRS,

Washington, June 2, 1942. Mr. H. J. HUGHES,

American Red Cross, Washington, D. C. MY DEAR MR. HUGHES: I am enclosing herewith the statements which Mr. Crawford spoke to you about today and I should appreciate your having them checked for accuracy as soon as possible. Sincerely yours,

SoL BLOOM.

HOUSE OF REPRESENTATIVES,
COMMITTEE ON FOREIGN AFFAIRS,

Washington, June 4, 1942. Mr. H. J. HUGHES,

American Red Cross, Washington, D. C. MY DEAR MR. HUGHES: With reference to your conversation today with Mr. Crawford at the Foreign Affairs Committee rooms, permit me to state that on June 2 I forwarded the statements to you which had been submitted by Johnson & Johnson for the record and asked that you have these statements checked for accuracy before I had them inserted in the record.

You were also told that you are permitted to make any explanation with reference to these statements and whatever explanation you make, the same will be inserted in the record following the Johnson & Johnson statements concerning the Red Cross.

If these statements are not correct, they should not be permitted to be placed in the record, but if they are correct, there can be no reason why they should be kept out of the record of the hearings. But, whatever you want to say, if you will put it in writing, it will go into the record. But the record of the hearings should be printed for the members of the committee so they can have it by next Tuesday morning. I am trying to facilitate hearings on this bill and to have everything ready so that the Foreign Affairs Committee can act without further delay. Sincerely yours,

SoL BLOOM.

!

AMERICAN RED CROSS,

Washington, D. C., June 5, 1942. The Honorable SoL BLOOM, Chairman, Committee on Foreign Affairs,

House of Representatives, Washington, D. C. MY DEAR MR. BLOOM: Thank you for your letter of Jụne 4.

The financial compilations and graphs submitted for inclusion in the record of the hearings by Johnson & Johnson have been commented upon by Mr. James K. McClintock, our vice chairman in charge of finance, in the enclosed statement which is intended for the record.

The Johnson & Johnson tabulations which you kindly allowed us to review are returned herewith. Sincerely yours,

H. J. HUGHES, General Counsel.

STATEMENT PREPARED BY JAMES K. MOCLINTOCK, VICE CHAIRMAN IN CHARGE OF

FINANCE, AMERICAN RED CROSS

There has been presented by Johnson & Johnson for inclusion in the record of the hearings on H. R. No. 6911, certain tabulations and charts which, for identification, are referred to as follows:

“Total reserves,” with accompanying chart; exhibit I.

"Receipts, resources, expenditures, and unexpended balances," with accompanying chart; exhibit II.

"Resale supply operations," with accompanying chart; exhibit III. "Membership,” with accompanying chart; exhibit IV.

These statements are said to be taken from the annual reports of the Red Cross, although, in some instances, the figures shown do not seem entirely to agree with the printed reports. While the purpose of presenting these statements in connection with the legislation now under consideration by your committee is not clear, the statements as submitted are quite inadequate as reflecting the financial situation of the Red Cross in that they fail to show the purposes for which the funds were collected and are being expended.

For example, exhibit I purports to show the total reserves of the Red Cross on June 30, 1941, as follows: Reserves (unexpended operating)

$28, 292, 714. 00 Reserve (endowments)

15, 151, 873. 21

Total --

43, 444, 587. 21 Of course, it serves no useful purpose to add together operating balances and permanent endowments and call the result total reserves. Operating funds are for expenditure; permanent endowments must be held intact.

Finances of the whole Red Cross organization, 'national and chapters, are administered in two ways: The national organization receives and expends certain funds for the national and international program, while the chapters with wide local autonomy receive and expend certain funds for the local aspects of the Red Cross program.

The balance sheet of the national organization operating funds on June 30, 1941, was as follows: Appropriations for 1941–42: From the general fund.

$11, 378, 000.00 From the war relief fund.

11, 356, 909. 09 From restricted funds_

45, 360. S9

Total appropriation for 1941–42_-
Disaster revolving fund_-
Restricted fund balances

22, 780, 269. 98 4, 685, 895. 15

64, 580. 27

Less general-fund book deficit--

27, 530, 745. 40 (2, 505, 231. 35)

Total national organization operating funds----

25, 025, 514. 05 It will be seen that the foregoing funds are not in any sense “reserves” but were committed and appropriated for specific activities of the Red Cross during

1941-42 to such an extent that a book deficit was shown in the general fund. Of course, it was anticipated that additional funds would be collected during 1941-42 which would cover this book deficit and provide for anticipated expansion of the work. Actually during this fiscal year war was declared and a large war fund was raised.

In another part of the annual report for June 30, 1941, a statement is made that "it is estimated that the 3,735 chapters with their 6,131 branches received $15,078,700 and expended $11,811,500." This estimated excess for that year of chapter receipts over expenditures of $3,267,200 has been added to the operating funds of the national organization in exhibit I as filed with your committee.

This analysis of the figures for 1940-41, as presented in exhibit I designated “Total reserves,” is placed before you to show how inadequately that statement reflects the actual financial commitments of the Red Cross. It should be stated that in the aggregate the chapters had operating balances on June 30, 1941, in excess of the amount resulting only from that one fiscal year. It should be understood that chapters have wide autonomy in the management of their local. finances, and a complete statement of their financial condition could only be made by tabulating the annual report of each chapter and branch. The national organization has not deemed it necessary, in view of the great expense which would be involved, to attempt to do all of the chapter bookkeeping at national headquarters. We have found that our chapters are entirely capable and most careful in the management of their financial affairs within the autonomy which they are authorized to exercise.

Similar analyses could and should be made for each year shown on exhibit I and for each year shown an exhibit II, if these statements are to be considered as reflecting the financial situation of the Red Cross. In my judgment, as the extent and importance of the Red Cross program has grown and the responsibility for the collection and expenditure of funds throughout the country has increased, it has become essential that the name and emblem of the Red Cross be fully protected for the proper safeguarding of these large trust funds.

With regard to the resale-supply operations, reference is made to the letter of the chairman addressed to you under date of May 27, 1942. However, in view of the filing of the above tabulation (exhibit III), some supplementary comment may be in order in addition to the chairman's statement on this subject.

The exhibit filed with your committee designates the book excess of receipts. from resale supplies over the cost of such supplies and certain direct handling charges as “net profit.” The words “net profit" are not used in the Annual Report of the Red Cross, and the term is completely misleading with respect to these operations.

The Red Cross does not manufacture any supplies for resale. Certain items, principally textbooks for first-aid and home-nursing courses, insignia for those taking these courses, and some first-aid kits and other miscellaneous supplies were purchased by the national organization of the Red Cross on bids from printers and manufacturers of such supplies and resold to the chapters for their use in conducting these programs. None of the cost of the general exective and accounting services of the Red Cross nor of the first-aid and nursing departments and general chapter service is charged against these supplies operations. The resale supplies account is maintained on the financial records as a method of control of the distribution of these supplies and not in any sense as a record of their cost and the real cost of their distribution in a commercial sense. The resulting excess of receipts over charges in this account is purely a bookkeeping entry as between the national organization and the chapters. Any such book excess is transferred annually to the general fund of the Red Cross and expended for the relief and service activities of the organization.

The Red Cross has never sought to raise funds from the public by purchasing or manufacturing supplies for sale. Friends of the Red Cross have often présented attractive proposals of this sort which they believed would result in raising large sums of money for the Red Cross, but as a matter of policy such fund-raising methods have never been adopted by the Red Cross.

Practically all of the resale supplies operations result from the sales of textbooks and supplies in connection with first-aid and home-nursing courses of instruction. For the year 1940–41 the cost of these two services to the national organization was $724,754.49 and no part of this cost was charged to these supplies. Nor was any part of the expense of the general executive, accounting, and chapter service of the Red Cross, as shown in the annual report, charged to this:

72688-42-18

account. Yet these are the services and activities which brought about the use of these supplies. In other words, there is nothing in this account comparable to promotion and advertising charges in a commercial sense. It is, therefore, wholly inaccurate and misleading to designate the resulting book figure as “net profit."

During 1940–41, 753,578 first-aid and nursing textbooks were sold and 3,680 firstaid kits. It will be seen that this account is largely concerned with the distribu · tion of instruction books, the copyrights of which are owned by the Red Cross, and not with supplies; indeed, less than one first-aid kit per chapter was sold during the year. It would be interesting, if pertinent and if the figures were available, to know how many first-aid kits and contents for such kits have been sold by manufacturers, and with what profit, because of the Red Cross stimulation of these activities over the years.

As stated in the chairman's letter of May 27, if anything like a commercial charge for the promotion and advertising of the sales of our textbooks and miscellaneous articles were included in this account, the account would show a deficit and not a surplus.

With reference to exhibit IV, Membership, the figures submitted by Johnson & Johnson are in accord with those shown in the annual reports of our organization.

JUNE 5, 1942.

Summary statement of revenues and expenditures compiled from annual reports

for the national organization and chapters from July 1, 1921, to June 30,

1941 1

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1 National figures are based on War Department audit; chapter figures comprise financial reports submitted by chapters and estimates for those chapters from which no detailed financial reports were received.

2 Until 1930 the accounting practice was to state figures in nearest thousands. After 1930 exact figures are shown.

3 Expenditure in excess of receipts were accomplished by use of available treasury balances. 4 The foregoing receipts do not include contributions to the permanent endowment fund, the principal of which cannot be expended. In certain years large special funds have been raised for disaster relief, war relief, and other purposes all of which funds were not expended during the year in which they were received.

Adult and junior Red Cross memberships for the years indicated

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Fiscal year

Number of
chapters

Adult Junior Total enrollment enrollment enrollment

18 30 33 33 35 35

1905 (State branches) 1906 (State branches) 1907 (State branches) 1908 (State branches) 1909 (State branches) 1910 State board. 1911. 1912 1913 to Dec. 1.. 1914.. 1915 to Dec. 1. 1916 Dec. 1917

June

(Nov. 1917-18. 1918-19 1919-20 1920-21. 1921-22

60 60 107 145

250 1, 534 3, 287 3, 864 3,700 3, 575 3, 643 3,627

3, 337 9, 262 5, 842 11, 861 11, 618 16, 886 12, 777 12, 685 14, 678 16, 708 22, 499 286, 461 1.805, 852 6, 385, 000 18, 644, 429 20, 660, 163 8, 996, 729 6,014, 862 3,955, 454

3,337 9, 262 5, 842 11, 861 11, 618 16, 886 12, 777 12, 685 14, 678 16, 708 22, 499 286, 461 1,805, 852 6, 385, 000 26, 644, 429 31, 660, 163 15, 516, 729 11, 173, 946 8, 265, 535

8,000,000 11, 000, 000 6, 520, 000 5, 159, 084 4, 310, 081

Adult and junior Red Cross memberships for the years indicatedContinued

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1 American Junior Red Cross statistics for the fiscal year ending June 30, 1939, and thereafter were adjusted to credit only those schools, classrooms, and pupils where all membership requirements had been met. They do not include classrooms and pupils where there was participation in American Junior Red Cross activities but where the requirements of enrollment had not been completed.

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