From Charity Watchdog to Charity CEO

Selection of the IRS head to lead the Red Cross draws both praise and criticism from nonprofit experts

The American Red Cross’s decision to hire the head of the Internal Revenue Service as its next leader — after a year-long search — is drawing praise from many charity and government officials, including some of the organization’s most vocal critics, who see the move as a significant step forward in improving Red Cross governance and bolstering the group’s public image.

But other charity observers question Mark W. Everson’s lack of nonprofit experience, adding that his previous roles in Republican administrations could taint the Red Cross’s nonpartisan reputation.

What’s more, Mr. Everson’s departure from the IRS could have implications for the rest of the charity world.

During his four years at the Internal Revenue Service, Mr. Everson increased the amount of money going to the IRS unit that oversees charities. Under his leadership, the IRS cracked down on tax scams that involve nonprofit organizations, charities that engage in partisan politicking, and excessive pay and improper perquisites that some organizations paid to their top executives.

In the future, some observers say, the IRS division that oversees nonprofit organizations might not enjoy the same high profile and increased budget, for example, that it has had under Mr. Everson.

And he leaves office with several issues unresolved, including an inquiry into tax-exempt hospitals and a planned revision of the Form 990 federal informational tax return, which charities and foundations file each year.

“Mark Everson, from the time he came into the service, had exempt organizations as one of his four top priorities,” says Suzanne Ross McDowell, a Washington lawyer who represents charities.

Congress may prod the next commissioner into continuing to ensure that nonprofit groups follow the law, she says, but such efforts might not have such high priority under a new leader. Compared with other commissioners, Mr. Everson was “intimately involved” in the monitoring of tax-exempt organizations, she says.

Mr. Everson declined to be interviewed for this article.

Executive Turnover

Observers say the search for the latest Red Cross leader was made difficult by the fact that three chief executives have left the organization since 1999, including its past president, Marsha J. Evans, who resigned in 2005 amid criticisms of the charity’s response to Hurricane Katrina.

Mr. Everson takes the helm of the organization on May 29. His Red Cross salary will be $500,000, more than triple his current $154,600 annual IRS pay but on a par with the salary paid to Ms. Evans.

A Red Cross board member says Mr. Everson was chosen in large part for his management skills.

“He’s a strong leader, running a very complex organization,” says César A. Aristeiguieta, a Red Cross board member and director of California Emergency Medical Services Authority. “He’s a great manager,” he said, and someone who “brings an understanding of the regulatory and statutory environment that the Red Cross functions in.”

At about the same time that the Red Cross announced Mr. Everson’s appointment, Congress passed legislation to reduce the size of the Red Cross board and clarify the authority of its chief executive within the organization. The Red Cross, which operates under a federal charter, last year asked Congress for the legislation.

New Role

Some charity officials say the choice of a charity watchdog as chief executive, coupled with the passage of legislation that will give him new power, sends a message that the Red Cross is serious about fixing the internal problems that have dogged it over the past several years.

Others in the nonprofit world, however, are less enthusiastic about Mr. Everson, who in addition to his IRS job has held other high-level positions in the George W. Bush and Reagan administrations, and had a successful career as an international businessman.

They say Mr. Everson’s lack of charity experience may hamper him at the Red Cross, which is facing criticism over its failure to follow adequate safeguards while collecting blood, as well as criticism of its stewardship of funds collected for the tsunamis in Southeast Asia in December 2004. (A January report by InterAction, a coalition of international charities, found that by the end of last year, the Red Cross had yet to spend some $370-million it collected for tsunami relief.)

In addition, the charity’s role in managing disaster relief has come under question after Hurricane Katrina.

Just as Mr. Everson was appointed to his new role, the Federal Emergency Management Agency announced it would take over the Red Cross’s role in managing the distribution of first aid, food, and shelter during disasters.

Some nonprofit experts say Mr. Everson’s government record, such as his role in forming a new federal department — the Department of Homeland Security, which among other things is supposed to respond to disasters — is not necessarily a sign he is the best person to deal with those issues.

Paul C. Light, a professor of public service and nonprofit management at New York University who has studied the Red Cross and federal personnel issues, says the Department of Homeland Security has been widely criticized for its poor coordination and inadequate response to Hurricane Katrina.

“Hiring a guy who helped create one of the most dysfunctional departments in history is not a good way to proceed,” Mr. Light says.

Some of the charity’s officials say they would rather have an expert on the ways of Washington than an expert on disaster relief or blood collection, however.

Leslie Schaffer, executive director of the Central Iowa chapter of the Red Cross, in Des Moines, says Mr. Everson’s understanding of politics “may be what we need to calm the waters in D.C., if he can handle the politics and not have it bubble up in our business,” she says.

Already the selection has drawn praise from two lawmakers who were taking a tough look at the charity after it was criticized for its work in Hurricane Katrina: Sen. Max Baucus, a Montana Democrat who chairs the Senate Finance Committee, and Sen. Charles E. Grassley of Iowa, its ranking Republican.

Political Involvement

While many people concerned about charity abuses were impressed by Mr. Everson’s actions at the IRS, not everybody agreed with the way he pursued nonprofit organizations. Some of the concerns raised at the tax agency could cause trouble for him in his new job, and challenges for his successor at the IRS.

Many nonprofit organizations were especially troubled by the IRS audits under Mr. Everson of All Saints Episcopal Church, in Pasadena, Calif., and the National Association for the Advancement of Colored People, in Baltimore, Md. At issue was whether the church or the civil-rights group had illegally engaged in partisan politics during the 2004 presidential election.

Some nonprofit tax experts said the cases were weak, and critics accused the IRS of using the audits to intimidate voters and suppress free speech. An investigation by the Treasury Department acquitted the tax agency of political bias in those and other audits, although it criticized the audit process as slow and poorly timed.

The IRS dropped the NAACP audit last year without charges. The All Saints case has not yet been resolved.

Daniel Kurtz, a New York lawyer and former state regulator, says the question for the Red Cross is whether Mr. Everson’s close ties to Republican administrations will cause charges of partisanship to stick to the nonprofit organization.

“For the same reason you want government’s management of disasters to be nonpartisan, you want the Red Cross to have that unblemished reputation,” Mr. Kurtz says.

Others who know Mr. Everson say concerns about partisanship are overblown.

Says William Josephson, a New York lawyer who was head of the New York State Attorney General’s Charities Bureau and is a critic of the Red Cross: “Mark came to a very difficult-to-manage agency and he’s done a damn fine job. He’s got the right orientation for the Red Cross.”

In the end, Mr. Everson’s success at the Red Cross may depend on how well he works with its local chapters, which traditionally have held strong sway in the organization.

Sam Tidwell, chief executive of the Greater Miami and the Keys chapter, says Mr. Everson should make a point of getting to know local volunteers, as well as chapter employees.

“I hope he understands that the people who make the Red Cross successful are the volunteers and the donors in each chapter,” he says. “No matter where you are, all the money and all the volunteers come from chapters.”