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Demanding Donors and the Red Cross

January 20, 2008

Red_crossInteresting article by Stephanie Strom in today's New York Times about the big operating deficit and likelihood of staff cuts at the American Red Cross ("Here's My Check; Spend It All at Once," Week in Review, Jan. 20). The deficit ($200 million) and the cuts (as much 30 percent of the organization's headquarters staff) are the result, writes Strom, of one of the most "vexing" trends in the world of charity: donors earmarking their gifts for a specific purpose or cause -- or what Strom calls "the growing tyranny of donors."

According to the article, it's a trend that first emerged about a decade ago (during the heady days of the dot-com boom) and really got traction in the wake of the Sept. 11 attacks, when the Red Cross came a cropper for announcing "it would spend part of the roughly $1 billion it had raised after the attacks on much-needed equipment and other upgrades that would allow it to cope with future disasters."

That had been SOP for the organization, as the article makes clear. "Before 9/11," writes Strom

the Red Cross always told donors their gifts would be "used for this and other disasters," an escape clause that allowed it to put the money into a general disaster operation fund. Thus, donations inspired by major catastrophes also helped underwite the Red Cross's response to the more garden-variety disasters.

Sounds like a good idea, right? But in the months after the attacks the public balked at business as usual, ultimately forcing the Red Cross to change its procedures. Why? The article doesn't say, but certainly press coverage of the organization's post-9/11 actions contributed to the atmosphere of distrust.

As a review of PND's 9/11 Response archive shows, it only took a week for the national press to suggest that the charitable response to the attacks might create problems of its own ("Americans Donate to Disaster Relief Funds at Unprecedented Rates," Washington Post, Sept. 18, 2001). In that article -- and in others to follow in the Post, Times, and other outlets -- the concerns were the possibility of fraud and a reduction in giving to other charities. (Fraud turned out to be a negligible problem and the reduction in giving turned out to be a non-issue.)

As donations continued to pour into the Red Cross (and other organizations/funds) in the weeks that followed, the press began to raise concerns about the absence of "a unified mechanism for delivering philanthropic relief," as had been developed after Oklahoma City bombing in 1995 ("Without Centralized System, Charities Handle $850 Million in Donations," New York Times, Oct. 8, 2001).

It wasn't until October 23, however, that the Red Cross's decision to redirect a portion of the donations it had received became an issue ("Red Cross Considers Using Portion of September 11 Donations for Future Disasters"). After that, it was all bad news for the country's oldest and most important disaster-relief organization, with Congress getting into the act in early November ("Grassley Calls for Federal Oversight of September 11 Donations," "House to Hold Hearing on 9/11 Charitable Response"); the Red Cross trying to defend its decision to withhold $200 million in 9/11 donations for other purposes; and the organization finally announcing "sweeping changes" to its Liberty Fund a week later, with interim CEO Harold Decker (Bernadine Healy had resigned by then) saying:

Americans have spoken loudly and clearly that they want our relief efforts directed at the people affected by the September 11 tragedies. We deeply regret that our activities over the past eight weeks have not been as sharply focused as America wants, nor as focused as the victims of this tragedy deserve. The people affected by this terrible tragedy have been our first priority, and beginning today, they will be the only priority of the Liberty Fund.

And now here we are, seven years later, with the Red Cross $200 million in the red and trying to figure out what to do with an extra $5 million it received for Southern California wildfire relief (above and beyond the $16 million cost of that effort), while the New York Times suggests that designated gifts may be "an imperfect tool for imposing accountability on an organization."

Don't get me wrong. I'm a staunch supporter of a vigorous free press. But as long as the press continues to believe that the only story worth reporting is "Man Bites Dog," that "gotcha" journalism trumps reponsible, nuanced journalism, public distrust of institutions, good and bad, will continue to grow -- to the detriment of us all.

-- Mitch Nauffts

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Posted by Tom Durso  |   January 23, 2008 at 11:11 AM

Man Bites Dog will always be the headline that gets ink. The onus is on the nonprofits to explain explicitly and plainly why they desperately need undirected funds for operational expenses, and how those gifts are vital in helping them to fulfill their missions. Blaming the media may feel good, but it won't change anything for NPs.

Posted by Mitch Nauffts  |   January 23, 2008 at 11:23 AM

Hi Tom --

I agree, the onus is on nonprofits to explain that it costs money to run an organization, even a nonprofit organization. But decades of media consumption have convinced me the media isn't interested in that explanation. Sure, NPs today have more channels through which they can get their message out, but those channels are straws compared to the firehose wielded by the mainstream media.

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