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Red Cross Has History of Diverting Donations

Not the First Time

November 19, 2001

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The recent uproar isn't the first time the American Red Cross has been in hot water for diverting funds donated for disaster relief.

Readers responding to the ConsumerAffairs.com Forum have told of incidents in their communities in which the Red Cross was criticized for collecting much more than it spent after local floods, fires and other disasters. Now a survey by The Washington Post has identified several more, including:

• The 1995 Oklahoma City bombing The agency collected $13 million for the victims and families of the federal building bombing. Its local spending was only a fourth of what it collected.
• The 1997 Red River flood The river surged through Minnesota and North Dakota, destroying homes and farms. The Red Cross collected nearly $16 million. It was only after the Minnesota Attorney General held public hearings that $4 million in unspent money was released.
• San Diego Wildfires Some of the $400,000 collected after the January fires was spent on vehicles and a new telephone system for the Red Cross offices. An audit showed that only $10,000 went directly to victims, even though donors had designated nearly $188,000 for that purpose, the Post reported.
• 1989 San Francisco earthquake The Red Cross raised about $55 million and spent $12 million on the relief effort. Then-mayor Art Agnos said it was only after he complained loudly and bitterly that the Red Cross stepped up disaster relief spending and agreed to help fund homeless shelters.

Civic leaders around the country say this has a familiar ring. Typically, they say, when a major disaster occurs, the Red Cross arrives quickly and begins soliciting donations, using emotional appeals that stress the plight of the victims. But in the end, much of the money raised is never spent on local relief efforts.

Fund-raising appeals are supposed to specify that unless the contributors specifies otherwise, donations will be used either for the local problem or for "similar disasters," but sometimes that language is omitted or simply goes unnoticed by most contributors.

In its defense, the Red Cross notes that it responds to more than 60,000 smaller emergencies each year. They do not have the emotional appeal of major disasters and don't generally result in an outpouring of contributions. The Red Cross also notes that its administrative overhead is 9 percent, much lower than many other charities -- meaning that 91 percent of the funds donated go to fund Red Cross disaster relief, health and safety programs, chronic care and community service efforts.

Nevertheless, interim CEO Harold Decker says the agency will be much more open in its explanation of how donated funds will be used in the future.

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