WATERLOO - The executive director and three board members of the Red Cross' Hawkeye chapter resigned Wednesday over a long-running dispute with its regional partner in Cedar Rapids about local control and budget problems.

Alan McKean, the former executive director, discussed a looming $156,000 budget shortfall with officials from the Cedar Rapids-based Grant Wood chapter of the Red Cross Wednesday morning before he resigned.

"The decision was driven by budgetary concerns," McKean said.

Cedar Rapids officials declined to comment on McKean's departure, though a board member said McKean was asked to leave.

McKean's resignation comes days after the Courier reported the Red Cross failed to meet the application deadline for Cedar Valley United Way funding. The administrative error likely resulted in the loss of about $35,000 in funds, or about 9 percent of its annual income.

However, McKean and some board members said the budget shortfall is so severe that even gaining United Way funding this year would do nothing to resolve the Red Cross' systemic financial problems, which they said are not unique to Waterloo.

Records show financial problems at Red Cross in Waterloo go back more than 10 years, before McKean's arrival in 2002.

Paige Thomas, a Red Cross staff person from Cedar Rapids, took over as interim executive director. She served in a similar position for the Red Cross in Council Bluffs.

Red Cross officials said the staff upheaval will not affect any community services.

Red Cross reorganization

So far, three board members have resigned, and several others have not made a final decision on their futures. Courier publisher David Braton is a board member. He said he still serves on the board.

Among the resignations is board chairwoman Susan Vallem, a social work professor at Wartburg College. She will remain a Red Cross mental health volunteer. Vallem said changes at the national level redefining the role of Red Cross boards loomed large in her decision.

"It's not like we absconded with funds. We're doing good work. I just want out of the politics," she said.

After a national meeting in February in California, Vallem said, local Red Cross boards across the country were instructed to focus primarily on fundraising. Gone were traditional board duties like policy and fiscal responsibilities, which now fall on regional chapters like Cedar Rapids.

Revoking local control did not sit well with many chapters, including Waterloo's, Vallem said.

"What's the purpose now of the board in Waterloo?" Vallem said. "We're supposed to be strictly fundraisers now. That's not how you run an organization."

Board member Frank Darrah said he may stay on to shore up morale among local staff. However, he does not plan to serve another term.

"It was our responsibility to evaluate Alan (McKean) the past couple of years, and his job was satisfactory as far as the board was concerned. I also know there's some major changes afoot in the national organization, and I'm thinking that had something to do with (McKean's resignation) ," said Darrah, who also is a Cedar Falls City Council member.

In recent years, the Red Cross shifted to a more hierarchical structure. As a result, the Waterloo chapter has gradually moved under the administrative umbrella of the larger Cedar Rapids organization.

The streamlined organization will, in theory, lead to cost savings through fewer staff, said Jennifer Pickar, Red Cross regional spokeswoman. However, despite a large deficit in Waterloo, no staff cuts are planned, she said.

Financial problems

Systemic fiscal problems exist in Red Cross chapters across the country, a situation exacerbated by a prolonged economic recession, McKean and board members said. That reality played a role in a national order last year for Red Cross chapters to submit a balanced budget without using reserves, McKean said.

The order proved difficult to comply with for many chapters, including in Waterloo, which possesses several hundred thousands of dollars in reserve, records show.

In the last decade, the Waterloo chapter has lost several revenue streams, including blood bank revenue and a drastic cut in United Way funding. The United Way funding decrease came when the organization changed its focus to areas the Red Cross does not specialize in, such as poverty reduction programs.

The revenue losses have left the Red Cross operating at about a $150,000 deficit for several years. Even annual budget cuts could not outpace falling revenues, McKean said.

In response to the balanced budget mandate, McKean said, last year the Red Cross closed its branch in Oelwein and eliminated one full-time and several part-time positions. Out of options, McKean also presented a budget which eliminated his position, a $65,000 savings, which the board rejected.

Despite the moves, the Red Cross operated at about a $140,000 deficit in 2008 - a persistent problem a new leadership team now inherits.

"I really do wish everyone at the Red Cross the best of luck. But the economic realities are there's no place left to cut," McKean said.

Contact Jens Manuel Krogstad at (319) 291-1580 or jens.krogstad@wcfcourier.com.