Red Cross Program-Allocation Claims Questioned

The American Red Cross's assertion that it spends 91 cents of every donated dollar on disaster relief and humanitarian programs and services are misleading, ProPublica and National Public Radio report.

According to the ProPublica/NPR report, the Red Cross's own financial statements show that its overhead expenses are significantly higher than what, until recently, it said they were on its website — and what CEO Gail McGovern and other Red Cross officials have for many years claimed they are. Over the past five years, for example, the organization's fundraising expenses alone have averaged 17 cents per donated dollar, ranging from 12.3 cents in 2010 to 25.7 cents in 2012. While 17 percent is below the level recommended by nonprofit watchdogs such as the Better Business Bureau Wise Giving Alliance, the Red Cross spends additional dollars on "management and general" expenses, ProPublica and NPR report, which means the portion of donations going to overhead is higher than the number reported by the organization.

Following questions from ProPublica and NPR last week, the Red Cross changed the wording on its website to another formulation it has often used — namely, that 91 cents of every dollar it spends, rather than every donated dollar it receives, goes to disaster relief and humanitarian programs and services. However, the ProPublica/NPR report calls this formulation misleading as well, given that of the more than $3 billion the Red Cross spent last year, $2.2 billion was incurred by its blood division — which collects donated blood and sells it to healthcare providers — primarily for wages and benefits, while only $467 million, or 14 percent of the organization's total spending, went to domestic disaster response programs. Nonprofit experts told ProPublica/NPR that in combining spending by the blood division with disaster relief spending, the Red Cross is painting a deliberately confusing picture of its operations for donors. "It probably has the effect of making the Red Cross look better than it actually is," said Jack Siegel, a lawyer who runs the consulting firm Charity Governance.

In a statement and a blog post, the Red Cross said it stands by the 91 percent figure, which is arrived at "by comparing our overall spending each year to our overall spending on management, general, and fundraising. The Red Cross receives contributions from many sources, including financial contributions, donations of blood, or in-kind donation of other goods." The statement also labels ProPublica/NPR's claim that the organization is attempting to mislead the public "absolutely and unequivocally untrue." According to figures from the organization's audited financial statements, which are cited in the blog post, the percentage of its supporting services to total expenses for the past five years ranges between 7.84 percent in 2011 to 9.63 percent in 2013. In her blog post, Laura Howe, vice president of public relations at the Red Cross, also countered what the charity considers "myths" in the ProPublica/NPR article.

"We are not declining to say what percentage of a dollar is accurate," wrote Howe. "The Red Cross receives contributions from many different sources — not just fundraising — so whether you support the Red Cross through a financial contribution, or a donation of blood, or an in-kind donation of clothing or other goods, an average of 91 cents of those donations are invested in our humanitarian programs and services. All of these are important donations to the Red Cross, and we do not track management, general, and fundraising to each separately."

"Red Cross Counters Most Recent Media Stories Regarding Spending." American Red Cross Blog Post 12/04/2014. Justin Elliott, Jesse Eisinger. "The Red Cross CEO Has Been Serially Misleading About Where Donors' Dollars Are Going." ProPublica and National Public Radio 12/04/2014.