Analyzing the Financial Data of the American Red Cross- Financial Year 2019

The American Red Cross financial data for the fiscal year 2019 provides in-depth information regarding the organization’s financial structure and the balance between the sources of revenue and expenses. This essay aims to illustrate the significant segments of the financial report by providing a better understanding of the organization’s fiscal allocations, strengths, and areas of weakness that may need further improvement.

Revenue Overview

In the fiscal year 2019, the American Red Cross recorded an overall revenue of $2,868,791,000, with different sources adding up to enhance its economic sustainability. The following are the revenue components as highlighted by Guide Star (2023):

1. Contributions, Grants, Gifts ($809,308,000): Contributions, grants, and gifts are the largest segment of revenue in the organization. This segment shows the philanthropic actions of other corporations, governmental bodies, and people. A deeper look into this category can reveal how these contributions were made, offering information about the organization’s donors and the effectiveness of the fundraising procedures.
2. Program Services ($1,935,273,000): The second segmentation of revenue allocation, as reported by the American Red Cross, is the program services. This section highlights the nonprofit’s dedication to its fundamental humanitarian objective. As much as this data does not provide a comprehensive breakdown of the amount of funds allocated to each service, one can conclude that it goes to initiatives that include blood services, responding to disaster emergencies, and safety training.
3. Membership Dues ($0) and Special Events ($0): The fact that the membership dues and special events have nil revenues suggests that the American Red Cross heavily depends on program services and contributions for its economic viability. Nonetheless, events should be acknowledged for community participation and awareness rather than for fundraising alone.
4. Other revenue ($124,210,000): This category shows the organization’s ability to raise funds through unconventional income streams. Such sources of income may include non-operational revenue, investment returns, and income on interest. However, an in-depth analysis may reveal the actual sources of other revenue.

Expenditures

In the fiscal year 2019, the American Red Cross distributed significant resources to help fulfill the humanitarian mission. The following are the expense allocations as highlighted by Guide Star (2023):

1. Program Services ($2,711,950,000): According to the report presented, the most significant section of the allocated budget is the program services, which emphasizes the organization’s duties towards humanitarian activities. Such activities include accident response, blood donations and other services, safety, and wellness training.
2. Administration ($103,527,000): As an organization, administrative expenses are essential to succeed in the charity missions. Administrative expenses should be minimal to ensure sensible financial practices and allocate resources toward the nonprofit’s primary objective.
3. Fundraising ($177,041,000): Fundraises are essential to maintain a healthy financial structure in the organization. Allocating funds for fundraising activities guarantees a constant flow of funds in the organization, enabling projects and services to move forward. Proper control of expenses in this category is vital in maximizing the efficiency of fundraising efforts.
4. Payments to Affiliates ($0) and Other Expenses ($0): The lack of displayed expense disbursements on the payments to affiliates and other costs prompts questions regarding the financial obligations that may not have been given or described.

Strengths and Areas of Improvement

The American Red Cross demonstrates its financial strengths in three significant ways. First, the American Red Cross shows its financial competence by attracting various revenue streams. The profits from program services and contributions demonstrate its capacity to attract various revenue sources. Additionally, the large amount of cash on the revenue from contributions, grants, and gifts shows that the nonprofit has profound support from other companies, people, and government corporations (Guide Star, 2023). Second, being dedicated to humanitarian missions. The fact that a considerable amount has been dedicated to the program services indicates how the organization is dedicated to humanitarian contributions. Lastly, the reasonable balance between fundraising and administrative expenses shows that the organization is efficient in its operations.

The presented data presents several areas of improvement regarding the American Red Cross financial reporting system. First, a more detailed expense category of the program services and fundraising section would enhance transparency by offering stakeholders a clearer view of operational efficiency and allocation of resources. Second, a detailed examination of the financial year’s deficit is paramount to determine the root cause of the organization’s financial concern. Finally, offering a more transparent breakdown of the “other revenue” category and disclosing other financial commitments helps promote trust between the stakeholders and potential donors (Guide Star, 2023). Such reporting techniques can help affirm the organization’s dedication to careful financial oversight. Addressing the shortcomings will help the American Red Cross’ reporting system and set up the organization for future success in humanitarian activities.

Reference

Guide Star. (2023). American Red Cross. Candid. https://www.guidestar.org/profile/53-0196605