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The Red Cross Money Pit
Published on Sunday, September 25, 2005 by the Los Angeles Times
The Red Cross Money Pit
by Richard M. Walden
 
With hurricane Rita now making news, it's time for Americans to take a more disciplined look at their tremendous generosity. As of last week, the American Red Cross reported that it had raised $826 million in private funds for Hurricane Katrina victims. The Chronicle of Philanthropy has the total figure at more than $1.2 billion for all relief groups reporting. So the Red Cross received about 70% of all giving.

This percentage was no doubt bloated by the Federal Emergency Management Agency's mystifying release to the media of the names of 19 faith-based charities (plus the Red Cross, Humane Society and three lesser-known groups) to which the public should donate — rather than the much wider group of established relief agencies.

This skewed giving to Red Cross would be justified if the organization had to pay the cost of the 300,000 people it has sheltered. But FEMA and the affected states are reimbursing the Red Cross under preexisting contracts for emergency shelter and other disaster services. The existence of these contracts is no secret to anyone but the American public. The Red Cross carefully says it functions only by the grace of the American people — but "people" includes government, national and local. What we've now come to expect from a major disaster is a Red Cross media blitz.

The national Red Cross reports it spent $111 million last year on fundraising alone. And it's hard to escape the organization's warning of Armageddon if you don't call in a credit card number or send a check or donate blood (which it resells to the tune of more than $1.5 billion annually, part of its $3 billion in income).

In Southern California, we have had the spectacle of "drive-by" drop-offs of bags of money at public places such as the Rose Bowl, massively promoted by local media. Hollywood studios and stars and corporate America compete to make huge donations.

The Red Cross brand is platinum. Its fundraising vastly outruns its programs because it does very little or nothing to rescue survivors, provide direct medical care or rebuild houses. After 9/11, the Red Cross collected more than $1 billion, a record in philanthropic fundraising after a disaster. But the Red Cross could do little more than trace missing people, help a handful of people in shelters and provide food to firefighters, police, paramedics and evacuation crews during that catastrophe.

When New York Atty. Gen. Eliot Spitzer asked for documentation of 9/11 expenditures, the Red Cross' response was that it is federally chartered and not answerable to state government regulators. The clamor rose, however, when the media began dissecting Red Cross activities in the 9/11 aftermath. This resulted in the resignation of the organization's president and chief executive, Dr. Bernadine Healy, and the appointment of ex-Sen. George Mitchell (D-Maine) to oversee its 9/11 fund and help clean up its image. Funds were then pushed out the door — including millions to New York limo drivers who said they lost income after 9/11, and to upscale residents of lower Manhattan to help pay their utility bills.

The organization also ran into trouble after the 1989 San Francisco Bay Area earthquake when it was revealed that it planned to spend only a fraction of the millions of dollars it had collected in the area damaged by the earthquake. When the Bay Area's mayors found out, they insisted that these funds be spent on housing, homeless shelters and health clinics. The Red Cross had to waive, for one time only, its long-standing policy against funding non-Red Cross groups. (Spare change — and there will be a lot of it this time — stays in a Red Cross "national disaster account." This allows it to spend funds donated for one purpose on another.)

The Red Cross expects to raise more than $2 billion before Hurricane Katrina-related giving subsides. If it takes care of 300,000 people, that's $7,000 per victim. I doubt each victim under Red Cross care will see more than a doughnut, an interview with a social worker and a short-term voucher for a cheap motel, with a few miscellaneous items such as clothes and cooking pots thrown in.

The Red Cross' 3 million unpaid volunteers, 156,000 of whom it says are deployed in Hurricane Katrina, are salt-of-the-Earth Americans. But asking where all the privately collected money will go and how much Red Cross is billing FEMA and the affected states is a legitimate question — even if posed by the president of a small relief agency.

As Hurricane Rita dissipates, let me answer my unpopular question like this: Giving so high a percentage of all donations to one agency that defines itself only as a first-responder and not a rebuilder is not the wisest choice. Americans ought to give a much larger share of their generous charity to community foundations, grass-roots nonprofit groups based in the affected communities and a large number of international "brand name" relief agencies with decades of expertise in rebuilding communities after disasters.

Richard M. Walden is president and CEO of Operation USA, a 26-year-old international disaster relief agency based in Los Angeles.

© Copyright 2005 Los Angeles Times

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