The Red Cross Has Some Ethical Explaining to Do

I have donated money to the American Red Cross from time to time, and I’m sure you have as well. I probably will again, but maybe this time with an ethical wink.

The American Red Cross regularly touts how responsible it is with donors’ money. Writers Jesse Eisinger and Justin Elliott for ProPublica (December 4, 2014) reported some disturbing findings in an article entitled: “The Red Cross CEO Has Been Misleading About Where Donors’ Dollars Are Going.” It is a well-written piece covering several topics, but let us start with the most important finding:

“The American Red Cross regularly touts how responsible it is with donors’ money. ‘We’re very proud of the fact that 91 cents of every dollar that’s donated goes to our services,’ Red Cross CEO Gail McGovern said in a speech in Baltimore last year. ‘That’s world class, obviously…’”

However, the writers and their research staff found some very different accounting outcomes when they opened the books (please note that the italics are mine):

“But the charity’s own financial statements show that overhead expenses are significantly more than what McGovern and other Red Cross officials have claimed. In recent years, the Red Cross’ fundraising expenses alone have been as high as 26 cents of every donated dollar, nearly three times the nine cents in overhead claimed by McGovern.

In the past five years, fundraising expenses have averaged 17 cents per donated dollar. But even that understates matters. Once donated dollars are in Red Cross hands, the charity spends additional money on “management and general” expenses, which includes things like back office accounting. That means the portion of donated dollars going to overhead is even higher.”

While the American Red Cross isn’t admitting to anything, they have removed the often stated “91 cents per dollar” from their website and it has been modified to be just a little more truthful, but more disturbing they refuse to tell us what the actual number may be. However the article does give us the following quote by Daniel Borochoff of CharityWatch:

“The difference between the real number and the one the Red Cross has been repeating “would be very stark, they don’t want to be embarrassed.”

Maybe I don’t want to be embarrassed either

It is stated in the article that on at least four occasions Red Cross CEO Gail McGovern has quoted the 91 cents per dollar as gospel. Ms. McGovern is a former Harvard Business School marketing professor. Oh those marketing people! Within the organization she has been criticized for diverting funds ear-marked for major disasters to public relations campaigns. It would almost be embarrassing if many of these organizations believed as passionately in the truth as they do in their causes.

Here is something else I found disturbing:

“Most of what the Red Cross does is take donated blood and sell it to health care providers. Of the more than $3 billion that the Red Cross spent last year, two-thirds was spent not on disaster relief but rather on the group’s blood business…The charity spent $2.2 billion on the blood business, most of which went to employee wages and benefits. By contrast, the charity spent $467 million, or 14 percent of total spending, on its famous domestic disaster response programs, including the expensive Sandy relief effort.”

Please let me catch my breath. All these years I thought my donated blood went to disasters and people who were badly injured in hurricanes, tornados and such. Now you are telling me it is being sold to hospitals?

The article also explains that not only does a relatively small percentage go to disaster relief (about 15 percent), but because of mismanagement, a lot of that relief (such as meals) goes wasted!

Should I be embarrassed that I am being played for a sucker? Unbelievably, the Red Cross fares better than a lot of other charities!

So I am not accused of being hard-hearted, by advising anyone to stop donating to a cause they like, I think I have come up with an ethical solution for the American Red Cross and all other charities: the truth.

I am all grown up and I understand business. I think I would like Ms. McGovern to tell me something like this:

Chuck, for every dollar you send us when there’s a big emergency, about 55 cents will go to the victims in some form of aid. The other 45 cents goes to our staff, expenses, transportation and supplies. OK, I can accept that. Chuck, when you donate blood if we don’t immediately need it, we’re going to sell it to a hospital. In fact Chuck, we’re in the blood business much more than we’re in the disaster relief business. Oh. I see.

I like transparency and I like the truth. With the truth, I can make a decision about where I want my donations to go. But please don’t try to pull the wool over my eyes any longer. Please…let me make an informed decision.