Can Donors Trust the American Red Cross?

Crossposted from Philanthropy Daily — article is dated January 4, 2018

The past year, with major hurricanes in Puerto Rico, Florida, and Texas, has once again cast light on the activities of the American Red Cross. As in the past, there are questions one needs to know about the Red Cross that are hard to answer. Is the organization doing a good job? How could the Red Cross do a better job? Should donors feel confident that their gifts are being used effectively?

This year, the Red Cross has been subject to a barrage of criticism. But that criticism ultimately springs from one source: a series of articles that ProPublica has been writing on the Red Cross’s effectiveness, sometimes in collaboration with National Public Radio. I wrote about these articles at Philanthropy Daily three years ago. But ProPublica has continued their work and it is long past time for an update.

For what it’s worth, I should note that ProPublica is a left-wing outfit. In fact, Justin Elliott, who is the lead reporter on Red Cross stories does other things: his most recent piece, about getting the logs for people who met with Office of Management and Budget director Mick Mulvaney, manages to mention two groups the left can’t stand—Opus Dei and the Koch brothers—in the same headline.

But I don’t know what the difference is between the “left-wing” or the “right-wing” position on the Red Cross. Surely everyone who gives to that organization, regardless of their politics, wants their donations to be used effectively and their money used to help victims, not pay high salaries for bureaucrats in Red Cross headquarters or expensive public relations campaigns.

In addition, the American Red Cross is not a completely private organization. It is quasi-governmental. I think the term of art is that the group is “a congressionally chartered instrumentality of the United States.” I’m willing to accept that the nonprofit is 85-90 percent private. But because it is quasi-governmental, and the only nonprofit that has a place at the table in national disaster planning, it deserves as much scrutiny as any other government agency.

ProPublica has done many stories on the Red Cross since 2014. Their longest one, by Justin Elliott and NPR reporter Laura Sullivan, was a 2015 piece about the Red Cross’s efforts rebuilding Haiti after a 2010 earthquake.

They found that the Red Cross had collected hundreds of millions for earthquake—and used the money to build six homes.

Parachuting into Haiti, the American Red Cross had many problems. They didn’t have enough workers fluent in French or Creole. Haiti has an archaic system of land registration that makes it hard to know who owns a particular piece of property.

But the Red Cross claimed that it helped 4.5 million people—in a nation that has a population of ten million. Jean-Max Belleville, prime minister at the time of the earthquake, said that it was “not possible” that the Red Cross had helped so many Haitians.

Many Red Cross projects backfired.

One home-building effort in the town of Campeche resulted in no homes built and many complaints from Haitians about the high salaries paid expatriates. Another $30 million home-building project, in collaboration with the U.S. Agency for International Development, failed, in part because the groups couldn’t buy land.

Finally, the Red Cross said it would take nine percent for overhead and spend 91 percent of every donor dollar on Haiti. But much of the money went to other nonprofits, such as the International Federation of the Red Cross, and these nonprofits took their own overhead bite. Elliott and Sullivan calculate that only 60 percent of donor dollars actually went to Haitian projects.

Most recently, Elliott, Jessica Huseman, and Decca Muldowney say that emergency management officials in some Texas counties have complained about the Red Cross’s sluggish response to Hurricane Harvey. In DeWitt County, Emergency Management Coordinator Cyndi Smith emailed a Red Cross official on September 9, saying “Red Cross was not there as they were suppose(d) to be with the shelter.”

Officials in other small counties said that the Red Cross’s response was late and sluggish. A contractor who was supposed to direct people to the nearest available shelter didn’t do a good job because of technical glitches. Finally, a Red Cross program where they were supposed to give $400 to every disaster victim via a website was delayed for some time because of various problems, while another website to accept donations functioned flawlessly.

Houston City Councilman Dave Martin told ProPublica that he ran into American Red Cross CEO Gail McGovern in a parking lot several days after the hurricane and said he had gotten many complaints about the Red Cross’s performance. He said that McGovern told him, “Do you know how much we raised with Katrina? $2 billion. We won’t even raise hundreds of millions here.”

Martin responded, “Really, Gail? That’s your response to me?”

The Red Cross issued a lengthy response that said it had 2,100 Red Cross employees on the ground in the Houston area, and had distributed 3.7 million meals. It said that it “had authorized” distribution of $148 million via the $400 payments, but did not say that the funds had been distributed. It said the fluctuating opening and closing of shelters made it hard for its contractor to steer people to the nearest shelter.

Finally, the Red Cross said it understood Councilman Martin’s frustration, but they did not dispute what Gail McGovern said.

In the Weekly Standard, Grant Wishard offers a defense of the Red Cross. He notes that the organization is the only one mandated to “prepare for and respond to disasters everywhere” and that it is frequently the framework by which smaller, nimbler organizations can give relief. He quotes Indiana University philanthropy professor Leslie Lenkowsky, who headed the Corporation for National and Community Service during the George W. Bush Administration, as saying “the Red Cross will create the framework which those other groups of first responders are working in.” Lenkowsky adds that “if we didn’t have an organization like the Red Cross we’d have to invent it.”

Of course, the American Red Cross will always be the largest and most important charity dealing with disasters. But it shouldn’t be the only one. A staff-written piece ProPublica produced in 2015 about how to give to groups that help in disasters offers sensible suggestions: do your research. Give locally. If you are so inclined, give cash to groups like GiveDirectly.

The Red Cross can do better. One way it can improve is if there was more of a competition for donor dollars for disaster relief.

Martin Morse Wooster†

Wooster was a senior fellow at the Capital Research Center. He is the author of three books: Angry Classrooms, Vacant Minds (Pacific Research Institute, 1994), The Great Philanthropists and the Problem of ‘Donor…
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