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From Watchdog To Monitored

The American Red Cross (ARC) didn’t go very far to find its new chief executive, reaching across town to grab Mark Everson, the commissioner of the Internal Revenue Service (IRS). While the federal regulator is lauded for his modernization of the massive, revenue-collecting agency, some sector observers question whether his management experience will offset his lack of experience in the nonprofit sector.

Everson’s appointment, announced this past Wednesday, comes while legislation seeking to revamp the relief charity’s 60-year-old governance structure awaits Congressional decision. The move ends a 16-month search that began after the forced resignation of Marsha J. Evans on Dec. 13, 2005, amid public criticism of the organization’s response to Hurricane Katrina. Evans’ departure was reportedly due to tension with the charity’s board and its chairwoman, Bonnie McElveen-Hunter.

Everson has not been made available for interview. In an email to IRS staff, Everson said he would look back on his four years as commissioner with great pride and satisfaction at having made significant strides in modernizing the agency. "It has been a singular honor to lead this organization," he said. "I will always regard being Commissioner of the Internal Revenue as the highlight of my career."

Jack McGuire, who served as interim president and CEO during the search for new leadership, will return to his post as executive vice president for biomedical services.

Everson’s "proven experience and leadership skills will bring valuable expertise to better prepare the American Red Cross to prevent, prepare and respond to the nation’s critical needs," McElveen-Hunter said in a statement. The statement went on to note Everson’s "accomplished management record in both the public and private sectors." The charity declined further comment.

The appointment was even lauded by the organization’s loudest critic in Congress, Sen. Chuck Grassley (R-Iowa). The ranking member of the Senate Finance Committee, who was chairman during the Katrina disaster, said Everson "gets good marks for his leadership in reforming the tax-exempt community. … His sense of accountability, his energy, and his respect for institutions while being reform-minded are all attributes the Red Cross needs."

But it’s the commissioner’s lack of experience in the independent sector that has some sector observers raising a cautionary flag.

Gene Dyson, interim president at the Red Cross from 1996 to 1997, expressed concern at the notion of hiring someone from outside the sector to oversee the nation’s third largest charity, according to last year’s NPT 100, let alone any charity. "I think somebody who runs a nonprofit of this scope, or almost any nonprofit, should have some experience dealing with volunteers," said Dyson, who said it requires "just a different management style than dealing with a corporate or even a government structure."

Gary Bass, executive director of OMB Watch, in Washington, D.C., said he agrees that a lack of any third sector experience could hinder the leadership at a nonprofit. "But I also think that the Red Cross is a bit of a hybrid," Bass said of the charity’s duality as a federal government-chartered nonprofit. "I think his experiences of understanding accountability within the tax-exempt community will help him in doing his job." Bass noted the many Red Cross leaders who have been there before Everson, "and some very fine people have had hard times in managing this tough organization."

On May 5, 2003, Everson became the 46th commissioner of another tough organization, the embattled $10-billion, 100,000-person Internal Revenue Service. At the time. IRS was criticized for its low enforcement numbers, described in a 2003 internal report as "staggering." Prior to that, Everson worked in various financial and operating positions within the private sector. He also served in the administration of President Ronald Reagan at the United States Information Agency and the Department of Justice.

During his four years at the IRS, Everson worked to increase its oversight of the nation’s tax-exempt organizations, modernize the agency’s antiquated computer systems, and improve the tax agency’s low enforcement statistics. Everson was twice among the Power & Influence Top 50, The NonProfit Times’ annual listing of the most influential leaders in the sector.

"Mark Everson has run a large government organization with more employees than even the American Red Cross has," said Diana Aviv, president and CEO of Independent Sector. "He’s had to deal with many publics, and sometimes very irate publics, at the IRS. He’s had to deal with government officials. He’s had to deal with many different communities. And with all that, he’s managed to both remain popular on the one hand, and on the other hand also carve a very clear path of a set or priorities that one wouldn’t have thought he’d seem popular for."

Added Aviv: "Yes, he doesn’t bring to the position a lot of experience in the nonprofit world, and anybody who came to that position would not have every single quality in every single way that would make them the perfect candidate."

This past Tuesday, the House of Representatives approved H.R. 1681, legislation that will modernize the Red Cross’ governance structure. The bill will now be sent to the Senate for expedited consideration, and seeks the following governance changes at the Red Cross:

To downsize the 50-member board to 12-25 members by 2009 and to 12-20 members by 2012.

To clarify the role of the board to focus solely on governance and strategic oversight.

To streamline the three categories of board members into a single category; these individuals will be elected by the full board.

To establish a new Office of the Ombudsman that will address whistle-blower complaints and provide annual reports to Congress.

To redefine and better delineate the roles of the chairman and the president and CEO.

To transition seven of the presidentially-appointed governors into a new Cabinet Council that will serve in an advisory role.

The appointment raises several more questions, said Bass: Who will replace Everson at the IRS? And how will that affect the nonprofit sector?

"I think what’s critical there is a question of whether whoever comes in can strengthen enforcement policy and create the right priorities," said Bass, who said while enforcement numbers at the agency have gone up, much remains to be desired from the agency. He noted in particular that the audits of low-income earners are disproportionately higher than the audits of high-income earners, and that relates wholly to the nonprofit sector. "I think all of us care about that."

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