Friday, September 08, 2006

Blood Money

The FDA has slapped the Red Cross with a $4.2 million fine for violations of blood-safety regulations.
The Red Cross will not use donated money to pay the fine, but instead will rely on operating funds, including revenue from the sales of blood products, [Red Cross spokesman Ryland] Dodge said.
I can't see how it matters whether the fine is taken from operating or non-operating (i.e., donated) revenues. Money is fungible. Any expenses that would have been covered by operating revenues diverted to fine payment will have to be covered by non-operating revenues instead. One way or another, the Red Cross is out $4.2 million. Sounds to me like the Red Cross is being disingenuous to make its donors feel like their money is being spent on good deeds instead of fines. It's like a kid saying he paid his library fine with his allowance money instead of his birthday gift check from Grandma.

(I confess I've had almost zero training in accounting, so maybe the distinction between operating and non-operating revenues affects the Red Cross's management decisions in some way -- though I don't see why it should in this case, given that the fine is presumably a one-time fixed cost, and thus should affect no marginal decisions. Maybe someone with an accounting background will enlighten me.)

1 comment:

Anonymous said...

Once upon a time I work in a Las Vegas casino as a slot machine cashier. On one bad day, I was short at the end of my graveyard shift. My paycheck was docked for the missing money, so I effectively worked for nothing that day.

The point is that the responsible people should fork over part of their paycheck to cover their goofs. Tainted blood and blood products are no joke in this age of rampant hepatitis and AIDS. The hemophiliac community was virtually wiped out at the start of the AIDS epidemic by contaminated clotting factor.

The Arthur Anderson accounting firm was dissolved as a result of misdeeds in the Enron scandal. What does it mean to punish a firm anyway? Why drive it out of business and hurt stockholders, innocent employees, etc.? The bad and irresponsible managers and auditors are the ones who did it and they are the ones who should be held to account. When THEY are made to work for nothing is when they'll get the same message I got many moons ago as a young struggling bumpkin just trying to pay my rent and survive.