Red Cross Finances Called Into Question | KUOW News and Information

Red Cross Finances Called Into Question

Dec 7, 2014
Originally published on December 11, 2014 11:52 am
Copyright 2015 NPR. To see more, visit http://www.npr.org/.

Transcript

RACHEL MARTIN, HOST:

For many people the end of the year is a time to give to charity. But how do you know where your money is really going? For the past few months, NPR has been examining the American Red Cross and the organization's flawed efforts to provide disaster services in two of the last major hurricanes to hit the U.S. The charity's own documents suggest it put the appearance of serving victims ahead of actually helping them. Today, we follow the money. Red Cross officials have repeatedly said 91 cents of every dollar given to the organization goes to humanitarian services. But an investigation by NPR and ProPublica found that is not true. NPR's Laura Sullivan reports.

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LAURA SULLIVAN, BYLINE: American Red Cross CEO Gail McGovern has spelled out the Red Cross's promise to donors repeatedly in recent years.

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GAIL MCGOVERN: Ninety-one cents of every dollar that's donated goes to our services. That's world-class, obviously.

SULLIVAN: That's McGovern giving a speech at Johns Hopkins University last year.

Here she is at the City Club of Cleveland in April.

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MCGOVERN: Ninety-one cents of every dollar that's donated goes directly to the services that we provide.

SULLIVAN: The Economic Club of Indiana in June.

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MCGOVERN: Ninety-one cents on average of every dollar that is donated to the American Red Cross goes to our services.

SULLIVAN: Top Red Cross officials said the same thing in an interview recently with NPR and ProPublica. It was displayed prominently on their website. Their vice president of public affairs, Laura Howe, told a radio show in January it was one of the highest averages of any humanitarian charity.

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LAURA HOWE: When you do give during the holiday season, I think it's important that people know that and they can feel good about knowing that such a large portion of their dollar supports services.

SULLIVAN: Except the number's wrong. After questions from NPR and ProPublica, the Red Cross removed the figure from its website and said in a statement, quote, "the language used has not been as clear as it could have been and we are clarifying the language."

They declined to be interviewed on tape. The problem with the numbers stems from their own tax documents. In recent years their fundraising expenses have been as high as 26 percent, compared to what people donated. That doesn't even include management and overhead. So instead of 91 percent of people's money going to services, the real number could be in the 70s or lower. But there's no way to know precisely because Red Cross officials would not say what the new number is and would not provide a breakdown of the charity's expenses.

DANIEL BOROCHOFF: They're not going to look as good if they do, so they don't have that much incentive to do it.

SULLIVAN: Daniel Borochoff is president of Charity Watch and reviewed the Red Cross's tax documents.

BOROCHOFF: I think the Red Cross's numbers are very reasonable so I don't know why they need to exaggerate. They're the most important disaster relief responder and they control half our blood supply, so it's vital that they be as truthful as possible so we can continue to be able to support the work that they do.

SULLIVAN: In place of 91 cents of every dollar donated, the Red Cross offered a different statistic. Officials say that an average of 91 cents of every dollar they spend goes to humanitarian services, and that's what they meant to say all along. Multiple charity experts, like Professor Rob Reich at Stanford University, told NPR that's a very different number, and a confusing one.

ROB REICH: If they're not spending it, what are they doing with it? There are a bunch of possibilities, but it'd be nice to see an accounting statement that broke that material out.

SULLIVAN: While the Red Cross is known for disaster services, their main business is actually collecting and selling blood, $2 billion worth last year. And that's one reason it's hard to know just where donations go. In financial statements, expenses are lumped together and officials say they won't - or can't - separate them out. Reich says even if the combined numbers support the alternative statistic of 91 cents of every dollar spent, it's still troubling.

REICH: It seems like a very strange thing that the number has remained constant for nearly 20 years when different amounts of money are raised in different years, different disasters happen in different years, which means there should be peaks and valleys in terms of disaster relief spending.

SULLIVAN: By email, Red Cross officials said they keep their administrative and fundraising costs low and they are proud of their work and their financial transparency. They say while they are correcting some of their statements, they have never attempted to mislead the public.

Laura Sullivan, NPR News.

MARTIN: You can read more about this story on our website - npr.org - and at propublica.org. Transcript provided by NPR, Copyright NPR.